PRC (P45508): XINJIANG INTEGRATED URBAN DEVELOPMENT PROJECT

INSTITUTIONAL ANALYSIS AND CAPACITY BUILDING ASSESSMENT

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TABLE OF CONTENTS 1. Introduction 2. PRC Sector Level Analysis 2.1 National Arrangements for Urban Environmental Management 2.2 Interface between National and Local Governments 3 Sector Analysis and Institutional Arrangements in Xinjiang 3.1 Overview of Project Related Institutional Arrangements in Xinjiang 3.2 Institutional Arrangements in Kelamayi 3.3 Institutional Arrangements in Kuitun 4. Project Management and Implementation Arrangements 4.1 Proposed Implementation Arrangements (Construction Phase) 4.2 Proposed Operation and Maintenance Arrangements 4.3 Summary of Proposed Arrangements 5. Analysis of Proposed Implementation Arrangements 5.1 Design and Construction Phase Implementation 5.2 Operations Phase 5.2.1 Current Arrangements for the Provision of Urban Services 5.2.2 Suitability of Nominated O&M Units 5.2.3 Institutional due Diligence of Nominated O&M units 5.2.4 Existing O&M capacity and impact of the Project 5.2.5 Overall Assessment of O&M Capacity 5.3 Arrangements for Water Sector Management 5.4 A Framework for Timely and Successful Project Implementation 6. Assessment of Capacity Building Needs 6.1 Lessons Learned from Previous Capacity Building 6.2 Previous XPMO Capacity Building 6.3 Assessment of XPMO Capacity Building Needs 6.4 Assessment of Project City Government & PMO Capacity Building Needs 6.5 Assessment of O&M Agency Capacity Building Needs 6.6 Other Capacity Building Needs 7. Assessment of Procurement Capacity 7.1. Introduction 7.2. General Arrangements 7.3. Previous ADB Procurement Experience 7.4. Proposed Arrangements for Procurement for the Implementation of XIUDP. 7.5. Proposed Safeguards on the Project’s Procurement 7.6. Overall Assessment of Procurement Capacity 8 Proposed Project Capacity Building 8.1 Objectives of the Capacity Building 8.2 Overview of the Proposed Capacity Building Program 8.3 Initial Assessment of Training Needs 8.4 Detailed Scope of Work 8.5 Reporting and Timetable

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8.6 Indicative Consulting Resource Requirements 8.7 Facilities to be provided as part of the capacity building 8.8 Requirements for Capacity Building Providers 9. Risk Assessment and Risk Management 9.1 Scope and methodology of the assessment 9.2 Summary of proposed mitigation measures. 10 Initial Conclusions and Recommendations Annexes Annex 1: Procurement Capacity Assessment – Completed Questionnaires Annex 2: Draft Assurances Annex 3: Draft Training Plan for Project Implementation Annex 4 Detailed Scope of Work for the Capacity Building Provider(s) Annex 5: Detailed Capacity Building Budget (with Assumptions)

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1. Introduction 1. This appendix describes and analyzes the institutional setup for the Xinjiang Integrated Urban Development Project (XIUDP) to be implemented under the direction of the Xinjiang Uygur Autonomous Region Government (XUARG). The objectives of the analysis are to ensure that

(i) the project is institutionally sound and adequate capacity exists for a successful implementation, and

(ii) the institutional arrangements facilitate effective and sustainable operations and maintenance of the project facilities.

2. This appendix has been set out following the structure that it is intended be used for the loan fact-finding and final reports. The main institutional and capacity building work undertaken in the PPTA to date has been as follows

(i) planning of the required analysis (including the identification of information and data needs) to facilitate compliance with the terms of reference (TOR) and Asian Development Bank (ADB) loan processing needs;

(ii) discussions with regional and city level project management offices to clarify the proposed implementation arrangements for the project implementation (for both construction and operations phases), together with the comprehensive documentation of these arrangements;

(iii) completion of procurement assessment for each of the two city PMOs who will be responsible for project implementation coordination, as well as for Xinjiang project management office (XPMO) who will be responsible for project procurement;

(iv) completion of due diligence and capacity building needs questionnaires for each relevant agency;

(v) completion of capacity building needs assessment and discussions on required capacity building measures;

(vi) completion of analysis of responsibilities for flood management in Kuitun; (vii) completion of draft list of loan assurance; (viii) completion of risk assessment and preparation of the risk management plan; and (ix) preparation of draft capacity building program and institution and capacity

building plans for each implementing agency. 3. In order for the project to be implemented in a successful manner, ADB and XUARG need to agree upon suitable institutional and project management arrangements. These arrangements need to provide for

(i) ease of project preparation and approval by both ADB and relevant domestic authorities;

(ii) strong project management during the implementation by Kelamayi and Kuitun City; PMOs supported as necessary by XPMO, as the representative of XUARG;

(iii) ensuring the implementing agencies have the capability to effectively discharge their responsibilities for the implementation of the components for which they are responsible;

(iv) a clear definition of the implementing agencies' responsibilities and their relationships with city PMOs, XPMO, and other agencies involved in project implementation;

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(v) the efficient future operation and management of the project facilities, so that the project is fully sustainable in terms of finance and service provision; and

(vi) capacity building based on the specific features of the project, and especially recognition of the local situation under which the project will be implemented and the project facilities operated—small towns in a relatively remote and under developed area of the People’s Republic of China (PRC).

4. With these objectives in mind, this appendix contains the following analysis

(i) sector level analysis in respect of urban water and environmental management in the PRC (Section 2);

(ii) institutional arrangements in Xinjiang relevant to the project (Section 3); (iii) description and analysis of the proposed project management arrangements for

both the construction and operations phases of the project (Sections 4 and 5) ; (iv) the identification of capacity building needs (Section 6); (v) procurement capacity assessment (Section 7); (vi) proposals for the institutional development and capacity building component of

the project (Section 8); (vii) the identification, assessment, and management of project risk, (Section 9); and (viii) a summary of conclusions drawn from the analysis (Section 10).

5. Detailed annexes that provide supporting information or analysis to the main appendix are as follows

Annex 1: Procurement Capacity Assessment – Completed Questionnaires Annex 2: Draft Assurances Annex 3: Draft Training Plan for Project Implementation Annex 4: Detailed Scope of Work for the Capacity Building Provider(s) Annex 5: Detailed Capacity Building Budget (with Assumptions)

6. It is intended that the various Annexes be used as follows

a. Annex 1 is source material to support the conclusions drawn in the procurement assessment (see Section 7 of this Appendix).

b. Annex 2 is a linked report and recommendation of the President (RRP) document, used to draft the legal documents and then included in the project administration manual (PAM).

c. Annexes 3, 4, and 5 will be used to procure the loan consulting services contract. Annexes 3 and 4 will also go into the PAM.

2. PRC Sector Level Analysis

2.1 National arrangements for urban environmental management 7. A consolidated urban water environmental management system operates according to the scope of duties of the ministries as determined by the State Council. The Ministry of Environmental Protection (MOEP) supervises water quality of industrial discharge and municipal sewage discharge. The Ministry of Housing and Urban-Rural Development (MOHURD), formerly the Ministry of Construction, has regulatory responsibilities for urban management and public utility services, including roads, water supply, urban drainage, environmental sanitation, district heating, and wastewater treatment but most of these responsibilities are delegated to

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local governments at various levels. MOHURD is only directly responsible for developing urban development strategies, medium, and long-term development planning, and providing guidance for urban management and the provision of the related public utility services. The Ministry of Water Resources (MWR) has overall responsibilities for flood control, river pollution control, and water conservation. The Ministry of Health (MOH) is responsible for supervising public health, drinking water safety, and prevention of epidemics. The National Development and Reform Commission (NDRC), as a multifunctional administration department of the State Council, is responsible for overall coordination of economic policy implementation, including energy saving and resource utilization. NDRC has two responsibilities that directly impact on the project. First, all major capital investment projects must be approved by NDRC (or by local DRCs in accordance with procedures stipulated by NDRC), which examines project feasibility, technical viability, and financing before giving project approval. The second very important role of NDRC is in economic regulation and price management. Basically, NDRC acts as the senior national pricing regulator although in practice pricing decisions for local urban services are delegated to the provincial or municipal level and NDRC restricts itself to major pricing decisions of national significance and providing regulatory guidelines for local governments to follow with respect to their pricing decisions, and in respect of preferential taxation policies to promote efficient resource utilization. The Ministry of Finance, along with NDRC and MOHURD, plays a key role in the establishment of financing and cost recovery strategies for urban management. 8. It can be seen from this regulatory framework that several agencies at national level get involved in urban development and environmental improvements. Figure 1 indicates the relationships between the state level agencies with key responsibilities relating to urban development and the provision of public services to urban residents.

2.2 Interface between national and local governments 9. As determined by the PRC Constitution, the government is divided into central and local levels, with the relevant ministry at the national level supervising the various departments and functions performed at local level. These supervisory arrangements have traditionally led to the establishment of lower level agencies in local governments that mirror and report to respective higher level central government agencies. For urban management the relevant levels of government are: provinces (including autonomous regions such as Xinjiang, and the four directly-managed municipalities of Beijing, Shanghai, Tianjin, and Chongqing); municipalities (or prefectures); urban districts, counties, and county level cities, and the lowest level is the town or township. 10. At the provincial/autonomous regional level, government structures closely replicate the national level structure, and the duties of relevant departments concerned with the urban environment are also similar to those of their national-level counterparts. At city level the allocation of responsibilities between the different levels of government depends on the size of the city, with smaller cities and towns having simpler, more rationalized arrangements than in medium-sized or larger cities. It is at the city or county level that almost all urban services and infrastructure provision is planned and implemented. Figure 2 illustrates the relationships between the different levels of government and distinguishes between the line of direct accountability and functional supervision.

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3. Sector Analysis and Institutional Arrangements in Xinjiang

3.1 Overview of project-related institutional arrangements in Xinjiang 11. XUARG is a provincial level government directly accountable to the State Council of the national PRC Government. 12. XUARG is divided into 13 main administrative areas, of which Kelamayi and Kuitun are two. However, whilst Kelamayi is directly accountable to XUARG, Kuitun is part of the Ili Kazakh Autonomous Area (IKAA), which is a loose association of administrative areas with a high proportion of indigenous Kazakh nationality amongst the population and which has its own government, with a status between that of prefecture and autonomous region. This is quite unique within the PRC. However, the IKAA government does not exercise a full range of administrative functions and for most matters (including project management) the different agencies of Kuitun Municipal Government are functionally accountable direct to their XUARG equivalents. Figure 3 provides an overview of project related-institutional arrangements within Xinjiang region. 13. Although XUARG through XPMO will oversee the project preparations and implementation, giving regional level support as needed, it is Kelamayi and Kuitun city governments who will be primarily responsible for project implementation. In this situation it is therefore necessary to focus institutional analysis and assess project management capacity at the city level. 14. At the regional level XUARG departments with key roles in the implementation of XUIDP are as follows: 15. Xinjiang Development and Reform Commission (XDRC). Functionally accountable to NDRC at the national level, XDRC is responsible for the planning of major investment projects and obtaining project approvals from higher authorities where these are required for all government investment in Xinjiang. Important roles played by XDRC in the preparatory phase of the XUIDP will be the approval of the domestic feasibility studies and making the formal application to NDRC for permission to use foreign funds to partly finance the project. 16. Xinjiang Housing and Urban-Rural Development (XHURD). Functionally accountable to MOHURD, XHURD is responsible to XUARG for overseeing all urban construction. However, its role is essentially a regulatory one and XHURD will not be directly involved in construction activity, although it is important as it will exercise functional supervision over the city level construction bureaus. Compliance with design and construction standards, accreditation of design institutes, and construction supervision companies all come within the remit of the XHURB. It is also closely involved in urban master planning and in emergency response planning.

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Figure 1: Overview of State Level Government with Emphasis on Urban Management NDRC = National Development and Reform Commission, MWR = Ministry of Water Resources, MOEP = Ministry of Environmental Protection, MOHURD = Ministry of Housing and Urban-Rural Development, MOH = Ministry of Health, MOF = Ministry of Finance.

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Figure 2: Overview of PRC Government Organization and Relationships

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Figure 3: Overview of Local Institutional Arrangements for the Project

Line key

Colour Key

Direct accountability Key officials Project Supervision and reporting Governments at different levels Functional supervision Government Bureau with functional responsibility Semi autonomous relationship Government office with coordinating responsibilities Direct and/or regulatory supervision

PRC = People’s Republic of China, HURDB = Housing and Urban-Rural Development Bureau, O&M = operation and maintenance, DRC = development and reform commission, TND = Tianbei New District.

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17. Xinjiang Finance Bureau (XFB). Functionally accountable to MOF at national level, the XFB prepares and administers the overall XUARG budget. XFB will look after MOF interests throughout the project lifecycle, including ensuring the availability of counterpart funding and local debt servicing capacity. During the implementation phase of the XUIDP, XFB will administer the project special account and oversee the loan disbursement process. 18. Xinjiang Environmental Protection Bureau (XEPB). Functionally accountable to the MOEP at national level, the XEPB is responsible for environmental protection within XUAR and is the principal environmental regulator. It has responsibilities that cover air, noise, solid waste, and water pollution and has affiliated environmental monitoring stations that operate across the region. XEPB also administers the procedures for environmental impact assessments required under Chinese environmental law, and is the regional enforcement agency for compliance with approved assessments. XEPB’s involvement in the project will include review and approval of the domestic environmental impact statements (EIS) and will also sign off on the content of the initial environmental examination and environmental management plan in advance of their website posting. It is anticipated that XEPB will delegate responsibilities for project environmental monitoring during projection implementation to the city level of environmental protection bureaus in Kelamayi and Kuitun. 19. Xinjiang Project Management Office (XPMO). Was originally established in 2007 as part of the project management organization for the earlier Xinjiang municipal infrastructure and environment improvement project. XPMO is accountable to the Xinjiang project leading group, but for administrative purposes is located within XHURD. XPMO will be closely involved in the preparatory and implementation phases of the project, and will coordinate and supervise the activities of the city level PMOs. XPMO’s previous involvement in ADB projects is likely to prove most valuable and it has acquired extensive knowledge and experience in ADB procurement and safeguard policies, as well as project monitoring and reporting procedures. 3.2 Institutional Arrangements in Kelamayi (a) Overview 20. The overall institutional arrangements in Kelamayi, as relevant to the XIUDP preparations and implementation are shown in Figure 4 below.

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Figure 4: Overall Institutional Arrangements for Project Management in Kelamayi

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21. The key department for the project implementation is the Kelamayi Construction Bureau which will be the local implementing agency for the Kelamayi component of the project. 22. The full responsibilities of the construction bureau are specified in the Kelamayi government document [2012] No. 58. There are 10 divisions: general office, policy and regulation, planning, building management, urban and town construction, reconnaissance and design (city earthquake office), tendering and bidding management office, discipline and supervision office, finance, and human resources. 23. The construction bureau will undertake an overall coordinating role throughout the project preparations and implementation. It will also assume lead responsibility for construction management. 24. The planning division is primarily responsible for overseeing the XIUDP and its specific responsibilities relevant to the project include

(i) responsible for preparation of development strategy, mid-term and long term planning and annual plan for construction sectors;

(ii) responsible for submission the proposal of urban infrastructure construction projects;

(iii) management of special funds for the projects managed by the construction bureau for construction organization;

(iv) responsible for planning, project selection, project proposal preparation, project proposal submission for approval, preliminary appraisal and submission for approval on feasibility study and project designs for the projects managed by the construction bureau;

(v) responsible for preparation of budget and final cost settlement for the projects managed by the Construction Bureau;

(vi) responsible for fund application and allocation for the projects managed by the construction bureau;

(vii) responsible for the implementation and management for the infrastructure projects allocated by the Kelamayi Government to the construction bureau;

(viii) responsible for provision of requirements on detail designs and organization of review and evaluations on detail designs;

(ix) preparations of implementation schedule, check of design quality and responsible for implementation organization and supervision; and

(x) responsible for organization, implementation and management of the projects according to the basic construction procedures.

(b) Water sector management arrangements 25. Institutional arrangements for water managements in Kelamayi have been documented and are summarized in Figure 5 below. An analysis of these arrangements is provided in Section 5 below.

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Figure 5: Institutional Arrangements for Water Management in Kelamayi

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26. The arrangements for urban water supply in Kelamayi are somewhat unusual and are related to the history of the city as an oil production centre. In October 1955, the first big oilfield of China-Kelamayi Oilfield was established. From then, water supply in the oilfield was developed and grew with the development and construction of Kelamayi Oilfield. 27. Initially a combined water supply and power station was established by the oil company. The Water Supply Brigade was established in June 1964 by separating water supply and power. The Water Supply Management Department was established in June 1973 and renamed as a Water Supply Company in April 2000. The water supply company of PetroChina Xinjiang Oilfield Company remains the only water supply enterprise in Kelamayi to produce, supply and sell potable water, and is responsible for water supply for industries, agriculture, residences, city construction, greening, etc. 28. The total fixed asset under the company is about 2.04 billion RMB. There are 5 reservoirs, 3 main canals, 3 ground water facilities, 4 WTPs, and 10 pumping stations under its management. The daily production capacity is about 300,000m3. It employs some 850 staff. 3.3 Institutional Arrangements in Kuitun (a) Overview

29. The overall institutional arrangements in Kuitun, as relevant to the XIUDP preparations and implementation are shown in Figure 6 below. An analysis of these arrangements is provided in Section 5 below. 30. The key department for the project implementation is the Kuitun Housing and Urban-Rural Development Bureau (KuHURDB) which will be the local implementing agency for the Kuitun component of the project. 31. The responsibilities of KuHURDB include: guiding urban and village/township construction, responsible for sector administrations of urban water supply and drainage, water conservation, gas, heating, municipal facilities, urban public passenger transport, city appearance and sanitation, etc.

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Figure 6: Overall Institutional Arrangements for the Project Management in Kuitun

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32. The Kuitun water supply and wastewater companies, which are responsible for water supply and wastewater services for urban areas respectively, are also under the administration of KuHURDB.

33. The main divisions of KuHURDB are: general office, planning and finance division, construction sector management division, urban construction division (sector administrations for urban water supply and drainage, gas, heating, municipal facilities, public passenger transport, city appearance, and sanitation, guidance of supervision on city comprehensive environment management and urban construction, guidance of city water planning, water conservation, development, utilization and protection of groundwater in the urban built-up area) , real estate division. 34. There is one institutional complexity in Kuitun which is potentially relevant to the successful implementation of the Kuitun component of the XUIDP and which relates to land required for the project which is under the control of the Xinjiang Army Construction Corps (XACC). XACC is a very powerful organization in political terms and is directly accountable to the PRC State Council at national level. It has control over large areas of land within the XUAR and operates in parallel with XUARG rather than fully under its jurisdiction. This means local governments within XUAR have only limited influence and control over any XACC land that falls within their administrative area. Such is the situation in Kuitun, where a significant proportion of the land required to implement the XIUDP is under the control of a subsidiary division of XACC (referred to locally as the No.7 State Farm). Historically, Kuitun City Government and No.7 State Farm have had conflicting interests and priorities in relation to the development of the city, and especially over plans for the use of local land. 35. Recognizing this situation was potentially a serious impediment to the economic development of Kuitun, in 2002, the Government of Yili Autonomous Prefecture (to whom Kuitun City Government is directly accountable) in consultation with XACC and XUARG established the Tianbei New District (TND) within the administrative area of Kuitun City Government.1

36. TND is intended to be an area of integration between XACC and Kuitun City government and its development must be compatible with the urban master plan of Kuitun City. The master plan of the TND has to be submitted progressively to upper government for approval in accordance with XUARG provisions. In addition the document contains provisions that

(i) made the No.7 State Farm responsible for implementation of the TND master plan. According to relevant laws, regulations, and legal procedures;

(ii) entrusted No. 7 State Farm to be fully responsible for investment, construction, management, internal justice, administrative affairs, and community services of the TND;

(iii) stipulated the industry and commerce and taxation arrangements of TND are to be managed by the Kuitun City industrial and commercial and taxation systems;

(iv) defined tax revenue sharing arrangements between the City and TND intended to promote the development of TND;

(v) defined respective responsibilities for land registration and permitting ; and (vi) established a high level leading group involving the top leadership of Yili

Prefecture, No 7 State Farm and Kuitun City to coordinate and solve the relevant important issues of TND.

1 Document Yizhoudangfa [2002] No. 34 issued by the Government of Yili Autonomous Prefecture on 16 July 2002.

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37. In summary the issue of Yizhoudangfa [2002] No. 34 document formally recognizes TND as an area within the Kuitun city administrative area that will be administered on a largely autonomous basis by XACC but also established mechanisms for coordination and issues resolution in order to promote economic development in both TND and Kuitun city. 38. The main implication for the implementation of the XIUDP that results from this complex institutional arrangement is that Kuitun requires the willing cooperation of TND in order that the resettlement plans (RP) for the Kuitun component of XIUDP can be smoothly implemented. Consequently, a suitable assurance from TND that they agree with the provisions of the RP and are willing to release the land required for the project in a timely manner, is required to give a reasonable degree of comfort that the Kuitun RP is implementable. Therefore such written assurance was sought and duly obtained from TND and is included as a supporting document in the RP. (b) Water Sector Management Arrangements 39. Institutional arrangements for water management in Kuitun have been documented and are summarized in Figure 7 below. An analysis of these arrangements is provided in Section 5 below. The main responsibilities are vested in the Kuitun Housing and Urban-Rural Development Bureau and the Kuitun Agriculture, Livestock and Water Affairs Bureau as set out below 40. Kuitun Housing and Urban-Rural Development Bureau (KuHURDB). KuHURB is responsible for sector administrations of urban water supply and drainage, water conservation, city appearance and sanitation, etc. The water supply and wastewater companies, which are responsible for water supply and wastewater services provided in the urban areas, are also under the administration of KuHURDB. 41. Divisions: Office, planning and finance division, construction sector management division, urban construction division (sector administrations for urban water supply and drainage, gas, heating, municipal facilities, public passenger transport, city appearance and sanitation, guidance of supervision on city comprehensive environment management and urban construction, guidance of city water planning, water conservation, development, utilization and protection of groundwater in urban built area), real estate division. 42. Kuitun Agriculture, Livestock and Water Affairs Bureau. The relevant responsibilities of this bureau include

(i) management of surface water and ground water resources, (ii) water conservation, (iii) overall water resource planning, (iv) responsible for farm and greening area irrigation, (v) preparation and implementation of flood control and drought prevention plan, and (vi) weather services for the city.

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Figure 7: Institutional Arrangements for Water Management in Kuitun

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(c) Flood Control Arrangements

43. The prevention and control of urban flooding principally involves the following activities: Kuitun City Government has established the Kuitun Flood Control and Drought Relief Headquarters (FCDRH) with the Mayor of Kuitun as the general commander and members from 23 different agencies, namely: office of the city party committee, the government office, propaganda department, DRC, agriculture, livestock, water affair bureau, housing and urban & rural development bureau, finance bureau, transportation bureau, civil affairs bureau, meteorological bureau, power bureau, public security bureau, sanitation bureau, broadcast and television bureau, local army units residing in Kuitun, food bureau, netcom company, China mobile, and china unicom, etc. 44. A “Flood Control Emergency Preparedness Plan” has been prepared by the Agriculture Livestock and water affairs bureau and approved by relevant agencies, and this plan is reviewed and updated every 2 or 3 years. This plan specifies the general principles adopted in preparing the plan and summarizes general conditions of Kuitun in respect of population, economy, geological conditions, rivers and channels, as well as historical flood events. In this plan, the features of flood events that have occurred in Kuitun are also briefly analyzed. 45. Under the Kuitun FCDRH, a flood control office (also referred to as the headquarters office) has been established as a permanent agency within the Agriculture, Livestock and Water Affairs Bureau (ALWAB). The office director is the director of the ALWAB and within the ALWAB an emergency response team has also been established, with the team members drawn from the Water Management Department of ALWAB. The responsibilities of the FCDRH, the headquarter office, and individual member units of FCDRH are defined in the Flood Control Emergency Preparedness Plan. An overview of the responsibilities for flood control management is provided in Figure 8 below.

Figure 8: Institutional Arrangements for Flood Control in Kuitun

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46. The agency with the prime responsibility for flood control management in Kuitun is the Agriculture, Livestock and Water Affairs Bureau (ALWAB). 47. The flood control office under the ALWAB has the following responsibilities (document of Kuitun Government [2008] No. 36)

(i) preparation of flood control plan and the flood preparedness plan; (ii) review of plans and designs for flood control works; (iii) to establish a disaster relief organization and mobile disaster relief team; (iv) promotion of the use of new technologies and new materials for flood control; (v) material reserves and their allocation for flood control and disaster relief; (vi) keeping of flood records and statistics; and (vii) other relevant works assigned by higher levels of government.

48. In addition the Water Management Department under ALWAB has responsibility for

(i) inspections of structural integrity of water conservancy infrastructure. (ii) inspections of flood channels for blockages and obstructions (iii) operation and maintenance of water conservancy facilities; (iv) forming ALWAB’s emergency response team in the event of a flood emergency; (v) management of irrigation water in Kuitun irrigated area; and (vi) water tariff collection in Kuitun irrigated area.

49. A flood control master plan has also been prepared and approved by upper levels of government. This was last formally revised in 2005. Since 1990, six flood control facilities have been constructed according to this master plan. Generally, the new flood control works can meet the design standard of protecting the city from a 1 in 50-year flood event however, some of the older pre-1990 infrastructure can currently only meet the significantly lower standard of protection against a 1 in 10 year flood. The XIUDP river rehabilitation subcomponent is designed to upgrade the standard of flood protection to the higher 1 in 50 year level. 50. Flood events are divided into three levels namely normal flood, major flood, and extreme flood. Response actions for different levels of flood events are defined in the preparedness plan. The main activities include organization and command, disaster relief and assistance, information release (including warning), forecast, operation of water conservancy works, transfer of materials and vehicles, evacuation, and news-gathering, etc. 51. In the event of an extreme flood, the city party committee and city government will establish a flood control and disaster relief leading group. Under the leading group, there are decision making and commanding team, expert and operation team, discipline and supervision team, flood fighting and emergency relief team, comprehensive statistics team, communication and reporting team, and logistical safeguards team. The responsibilities of each team are defined in the preparedness plan. 52. In order to ensure the smooth implementation of the preparedness plan, safeguard mechanisms of a chief executive accountability system, a departmental flood control accountability system, a personal responsibility system, and a technical responsibility system (advice from key experts) have been established.

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4. Project Management and Implementation Arrangements 53. The designated executing agency for the project is the XUARG, which was previously the designated executing agency for the ADB supported Xinjiang Municipal Infrastructure and Environment Improvement Project and Xinjiang Urban Transport and Environment Improvement Project, and is also currently overseeing the implementation of the Xinjiang Altay Urban Infrastructure and Environment Improvement Project. XUARG therefore propose that the XIUDP be implemented under similar arrangements to these earlier projects, which provides for continuity, whilst also learning lessons from these earlier implementations. 4.1 Proposed Implementation Arrangements (Construction Phase) (a) Regional Leadership and Direction 54. A Project Leading Group (PLG) has been formally established by XUARG and has been assigned the role of overseeing the preparation and implementation of this new ADB project. A Vice Governor of XUARG leads the PLG. The PLG members, who are listed in Table 4.1 below, include high level officials from the Xinjiang finance bureau, development and reform commission, housing and urban-rural development bureau.

Table 4.1: Membership of the Leading Group

Xinjiang Uygur Autonomous Region Government Vice-Chairman of the XUAR Government

Xinjiang Uygur Autonomous Region Government Deputy Secretary-General Xinjiang Housing and Urban-Rural Construction Department Director General

Xinjiang DRC Deputy Director General Xinjiang Finance Department Deputy Director General Xinjiang Environmental Protection Department Deputy Director General Xinjiang Land Resources Department Deputy Director General Xinjiang Tourism Bureau Deputy Director General 55. The PLG has delegated responsibility for day to day project oversight to the Xinjiang project management office (XPMO), whose composition is contained in Table 4.2 below.

Table 4.2: Membership of Xinjiang PMO

Director of PMO Xinjiang Housing and Urban-Rural Construction Department Director General

Deputy Director of PMO

Xinjiang DRC Deputy Director General

Xinjiang Finance Department Deputy Director General

Staff

Xinjiang Housing and Urban-Rural Construction Department Section Director

Foreign Investment Division of the Xinjiang DRC Section Director

Xinjiang Finance Department of Central Asia Section Director

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Staff

Foreign Investment Division of the Xinjiang Vice Section Director

DRC

Xinjiang Finance Department of Central Asia

Vice Section Director

Xinjiang Housing and Urban-Rural Construction Department Staff

Xinjiang Housing and Urban-Rural Construction Department

Staff

Xinjiang Housing and Urban-Rural Construction Department

Staff

Foreign Investment Division of the Xinjiang DRC

Staff

Staff

Foreign Investment Division of the Xinjiang DRC

Staff

Foreign Investment Division of the Xinjiang DRC

Staff

Foreign Investment Division of the Xinjiang DRC

Staff

Foreign Investment Division of the Xinjiang DRC

Staff

56. XPMO is an administrative office under the day to day leadership of the XHURD that has successfully implemented several past ADB projects. XPMO therefore has the capacity and experience to provide guidance and support to the project agencies in Kelamayi and Kuitun cities, and will potentially play an important oversight role throughout the project implementation. Figure 9 indicates the XPMO organization and staffing.

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Figure 9: Organization and Staffing of Xinjiang Regional PMO

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(b) Kelamayi 57. As indicated in figure 4 above, Kelamayi have set up a project management structure that parallels the arrangements at Xinjiang regional level and comprises a project leading group and a full time PMO. The composition of the Kelamayi PLG is as follows

(i) PLG leader: Song Youli (Executive Mayor) (ii) PLG deputy leader: Liu Botao (Vice Mayor) (iii) Members:

(a) Jia Qingchang, Director of Finance Bureau; (b) Gao Ruihong, Director of DRC; (c) Chen Lu, Director of Planning Bureau; (d) Minawaer. Sulaiman, Vice President of Women's Federation; (e) Wu Xinhua, Director of Bureau of Civil Affairs; (f) Wang Xijun, Director of Human Resources and Social Security

Bureau; (g) Wang Chenggong, Director of Land Resource Bureau; (h) Wang Yuebin, Director of Construction Bureau; (i) Huang Junping, Director of Environmental Protection Bureau; (j) Xiejun, Director of Transport Bureau; (k) Fang Yanjun, Director of Water Affair Bureau; (l) Tang Yang, Director of Agriculture, Forestry and Livestock Bureau; (m) Jiang Deping Director of Audit Bureau; (n) Cai Dezhong, Director of Ethic and Religious Affairs Commission (o) Wang Zhishen, General Manager of Urban Investment and

Construction Company (p) Jiang Yi, Director of Production and Operation Department of

PetroChina Xinjiang Oilfield Company (q) Zhang Youming, Director of Safety and Environmental Protection

Department of PetroChina Xinjiang Oilfield Company; and (r) Liang Jianpeng, General Manager of Water Supply Company of

PetroChina Xinjiang Oilfield Company. 58. The main responsibilities of the leading group are to: approve the loan amount of the ADB project and the annual debt servicing plan; coordinate relevant issues, provide guidance and supervision on ADB project. To do this the PLG will meet regularly as needed to deal with project issues. 59. A project management office (PMO) has been established under the leading group. This office situated in the construction bureau. Wang Yuebin is the PMO Director (Part time), who is also Director of construction bureau and a member of the PLG. There are three deputy directors from other key departments. Office staffs are from DRC, bureau of civil affairs, finance bureau, construction bureau, planning bureau, ethnic, and religious affairs commission, women's federation. The structure and staffing of the PMO is shown in Figure 10 below

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Figure 10: Organization and Staffing of Kelamayi PMO

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(c) Kuitun 60. As indicated in figure 6 above, Kuitun have set up a project management structure that parallels the arrangements at Xinjiang regional level and comprises a project leading group and a full time PMO. The composition of the Kuitun PLG is as follows

(i) PLG Leader: Lu Gang (Deputy Secretariat of Party Committee) (ii) Deputy PLG Leaders: Shi Guanzhong & Tao Ping (Vice Mayors) (iii) Members:

(a) Jiang Xinhai, Director of Tianbei New Area Administrative Committee (b) Zhang Ti’an, Director of City Construction Bureau (c) Chen Gang, Director of Construction (Environmental Protection) of No. 7

Agricultural Division (d) Guo Jie, Director of DRC (e) Zheng Yujun, Director of Finance Bureau (f) Ding Hongjun, Director of Planning and Management Bureau (g) Gao Hongwei, Director of Environmental Protection (h) Jia Zhili, Director of Agriculture, Forestry, and Water Affair Bureau (i) Wang Zhicheng, Director of Water Resource Bureau of No. 7 Agricultural

Division (j) Luo Yongge, Director of State Land Resource Bureau (k) Guo Qihua, Director of State Land Resource Bureau of No. 7 Agricultural

Division (l) Zhang Tao, Director of Tuanjie Sub-district Office (m) Zhang Weijun, Director of Beijing Road Sub-district Office (n) Zhang Tiping, Director of Urumqi East Road Sub-district Office (o) Liu Subin, Director of Urumqi West Road Sub-district Office (p) Zhang Guoshu, Director of Railway Station Sub-district Office (q) Xu Xiaobo, Director of Planning, Construction, Environmental Protection

Bureau of Kuitun-Dushanzi Economic Development Area Administrative Committee

(r) Kou Yuxin, Deputy Director of Development and Planning Commission (s) Wang Liangmin, Deputy Director of Construction Bureau (t) Han Xinhua, Deputy Director of Construction Bureau of Tianbei New Area

Administrative Committee (u) Xu Gongcheng, Director of Community Office of Tianbei New Area

Administrative Committee (v) Liu Jianmei, Staff of Construction (Environmental Protection) Bureau of

No. 7 Agricultural Division 61. The Office of Leading Group (i.e., Kuitun PMO) has been established and is situated within the Housing and Urban-Rural Development Bureau. The PMO Director is Mr. Zhang Ti’an (part time), whilst, Ding Hongjun, Luo Yongge, Xu Xiaobo, Kou Yuxin, Wang Liangming, Han Xinhua, Liu Jianmei (all PLG members), and Lu Heng (Deputy Chief Accountant of Finance Bureau) are all part time deputy directors of the PMO. The structure and staffing of the PMO is shown in figure 11 below:

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Figure 11: Organization and Staffing of Kuitun PMO

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4.2 Proposed Operation and Maintenance Arrangements (a) Kelamayi 62. The proposed O&M arrangements for each of the Kelamayi subprojects are as follows: 63. Road subproject: Engineering Construction Management Bureau. The Engineering Construction Management Bureau (also known as Kelamayi Urban Construction & Investment Limited Company), is a division level government agency, established on Nov. 8, 2011, by government document “[2011] No. 75”, responsibility No. 4: “Responsible for management and maintenance of existing municipal public utilities (roads, bridges, road lights, and public squares) to ensure normal operation”. 64. There are 13 divisions. Administrative office, divisions of project preparation, project management, municipal engineering, real estate development, engineering technology, quality and safety, material supply, planning and operation, financial, audit, project documentation, human resources. 65. The Municipal Engineering Division is responsible for management and maintenance of existing municipal public utilities (roads, bridges, road lights, and public squares) to ensure normal operation. It is wholly funded from the government budget. 66. Wetland and reuse water pipelines: Landscaping Bureau of Kelamayi District. The District Landscaping Bureau is under the district government. The City Landscaping Bureau is the sector administrative agency, which gives functional guidance to the district landscaping bureau. 67. The bureau is responsible for O&M for all urban green spaces, irrigation pipes and 6 pumping stations, parks, and plant protection stations of Kelamayi District, which is also the asset owner. O&M is outsourced to Kelamayi District Ronghui Landscaping Limited Co. (an SOE) through a management contract (renewed every year). 68. Upgrade of Nanjiao WWTP: Kelamayi City Drainage Management Department. The Drainage Management Department is a department of the Kelamayi Construction Bureau. Although the government document on the establishment of Drainage Management Department was issued on Oct. 21, 2010 it was not actually formed until November 2011 and all the staff are still not fully in place yet. 69. The department comprises: an administrative office, finance office, safety and production division, maintenance center, water quality testing center, pipeline inspection and maintenance center. The Petrochemical Industrial Park WWTP, Jiugongli WWTP and Nanjiao WWTP are all under the jurisdiction of the department whose responsibilities include:

(i) preparation and implementation of midterm and long term development plan and annual work plan for drainage sector of Kelamayi City;

(ii) preparation and implementation of fund utilization plan for wastewater treatment and management;

(iii) collection, treatment and discharge of sewage from Kelamayi district and Baijiantan district and wastewater from Petrochemical Industrial Park;

(iv) operation and management and facilities maintenance for petrochemical

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Industrial Park WWTP, Jiugongli WWTP Nanjiao WWTP, and all associated pumping stations; and

(v) O &M for public drainage pipes. 70. Officially 162 staffs are allocated and the department is funded from the government budgetary fund. 71. Water Management: Water Supply Company of PetroChina Xinjiang Oilfield Company. Although named as a “company”, this organization is not an independent legal entity, but actually a department of PetroChina Xinjiang Oilfield Company. The history to this was described in Section 3.2 above (b) Kuitun River rehabilitation: (Water Management Department under Agriculture, Livestock and Water Affairs Bureau)

72. Agriculture, Livestock and Water Affairs Bureau. The responsibilities of this bureau include:

(i) services for development of agriculture and livestock; (ii) management of surface water and ground water resources; (iii) responsible for greening irrigation; (iv) inspection and quarantine for meat products, fruits and vegetables;

flood control, including the preparation and implementation of the flood control and emergency response plans (see section 3.3c above);

(v) protection of forestry and wild plants and animals in the jurisdiction of the city; (vi) weather services for the city; and (vii) safety inspection and training for farm machine and persons in the jurisdiction of

the city.

73. The bureau comprises the following divisions and subordinate institutions—divisions: (1) water administration and management division, (2) forestry division, (3) agricultural and livestock division, (4) general office. Institutions: (1) flood control office; (2) water administration and water resource management office, (3) water management department, (4) animal epidemic prevention and supervision station, (5) weather station.

74. The water management department will assume responsibility for the management of the flood channels once these are completed. The responsibilities of this department include:

(i) maintenance, repair and management of water conservancy works in Kuitun irrigated area;

(ii) management of irrigation water in Kuitun irrigated area; (iii) water tariff collection in Kuitun irrigated area; (iv) assist prevention and emergency responses for flood control and drought relief;

and (v) other works allocated by higher level government agency.

75. Protective trees (Landscaping Department). The landscaping department is a subsidiary unit of the Kuitun Forestry and Landscaping Bureau, and its relevant responsibilities are as follows:

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(i) research to prepare development strategy, mid-term and long term plan and annual plan for landscaping and greening development, organize and implement landscape construction according to plans;

(ii) responsible for cultivation and maintenance for public greening areas and flowers;

(iii) control of occupation of greening areas and removal of trees for construction projects to protect greening areas of the city, and review and approval of acquisition and occupation of greening areas according to laws;

(iv) organize tenders of important construction and maintenance of landscaping projects and supervise implementation, review qualifications of landscaping design, construction and maintenance enterprises, prepare and implement sector standards and technical specifications;

(v) responsible for scientific and technological research of landscape and greening, organize and implement research on important landscape greening scientific and technological projects and applications of outcomes;

(vi) responsible for propaganda and training of landscape and greening; and (vii) other tasks assigned by higher level agencies and forestry and landscaping

bureau.

76. Water management: Kuitun Water Supply Company. Kuitun Water Supply Company is a wholly State owned company under the supervision of Kuitun HURDB. It is responsible for the production and supply of tap water within the urban area of Kuitun. 77. MSW management and public toilets: The sanitation bureau. The Sanitation Bureau is a subordinate unit of the Kuitun HURDB whose responsibilities include responsibility for municipal solid waste management, the management of public toilets and street cleaning within the urban area of Kuitun, but excluding the TND and other areas under the control of the XACC (see Section 3.1 above). However, it has been agreed that even though some of the MSW collection facilities and public toilets to be provided under the project lie in the TND the Kuitun Sanitation Bureau will nevertheless manage these. 4.3 Summary of proposed arrangements 78. The proposed project implementation arrangements during the construction phase are similar to those adopted by most ADB projects in the PRC and are therefore well proven. They are compatible with the hierarchical structure of government in the PRC and are similar to those used for the earlier ADB financed urban development projects in XUAR. The main difference in the implementation arrangements from many similar projects is that responsibility for infrastructure construction has been separated from the O&M responsibility. The reason for this is that the O&M units currently have little or no infrastructure construction experience or capacity and are therefore not well-equipped to undertake the physical construction of the project assets. 79. It is therefore proposed that the local construction department in each city assumes the responsibility for the required infrastructure construction. This is the arrangement that has traditionally operated for the construction of domestically financed urban infrastructure and will make best use of the existing technical capacity that exists in the cities. It is also the approach that was adopted for the ADB funded Xinjiang Altay Urban Infrastructure and Environment Improvement Project. 80. In order to ensure that O&M considerations are properly taken into account in the project design, each O&M agency has been involved in the project preparations and the specification of

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the required infrastructure. It is proposed they will be similarly involved in detailed design review and in asset commissioning. 81. In each case, the choice of nominated O&M units is the agency that is currently responsible for the provision of the relevant urban service and thus the proposed arrangements give both continuity and utilize existing O&M capacity.

82. Therefore, conceptually at least, the proposed implementation arrangements are considered suitable and make best use of the existing local expertise. The overall project management arrangements are summarized in diagrammatic form in Figure 12 below.

Figure 12: Overview of Project Management Arrangements for the XIUDP

Line key Colour Key Direct accountability Government stakeholder Provision of services, advice or

audit review Project management & Implementation

Exercises project supervision Designated operators of project facilities Advice, Monitoring and Implementation

support

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5. Analysis of Proposed Implementation Arrangements 5.1 Design and construction phase implementation

5.1.1 Review of general implementation arrangements 83. As stated in paragraph 4.3, the proposed implementation arrangements for the project are similar to those of the previous ADB projects, in Xinjiang, and very similar indeed to those established for the Xinjiang Altay project (Xinjiang III) approved by the ADB Board in 2011 and now under implementation. As with Xinjiang III the city construction bureau (or equivalent) will assume the role of a project coordination agency (PCA)2

and manage the construction phase of all the components via a dedicated multi-disciplinary PMO established for that purpose. The agencies, who will eventually assume responsibility for O&M, will therefore not be directly responsible for design and construction phase implementation, but they will be closely involved in their capacity as the future project owners of the constructed facilities. This proposed arrangement undoubtedly makes best use of existing urban construction experience and capacity in each of the two cities. In addition, by having one single experienced agency in each city involved in managing the construction phase leads to reduced governance and possible corruption risk, as each PCA already has established governance and anti-corruption procedures.

84. In addition, many of the nominated O&M units are functionally aligned and/or directly supervised by the PCA. This gives the PCA a natural incentive to ensure the operability of constructed infrastructure and also makes it easy for O&M unit staff to become involved in project preparations and design review activities as the need arises. This could be on either a formal (seconded to PMO) or informal (consultative/advisory) basis. 85. Discussions with city government officials indicate that there is strong support for the project and this has also been confirmed in broader stakeholder consultations and the PPTA socio-economic survey. Both PCAs can cite extensive past experience in the construction of urban infrastructure, although mostly domestically funded, and not necessarily in the type of facilities being constructed under the proposed XIUDP. However, risks potentially created by a lack of capacity or experience in specific technical areas can be mitigated by the appointment of suitably experienced design institutes and construction supervision companies. This will be important. Similarly, the lack of experience in ADB and other foreign funded projects can be mitigated through the use of suitably experienced tendering companies and the provision of consulting services to support project implementation.

2 The term “project coordination agency(PCA)” is used in this appendix for descriptive purposes only recognizing

these two city construction departments have been assigned an oversight/coordinating role in relation to project implementation by their respective city governments. The term is therefore not used in the PAM.

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5.1.2 Review of Project Leadership Arrangements 86. Projects can encounter delays and implementation delays for a number of reasons. Strong and effective institutional arrangements for project implementation can help reduce the risk of delay especially if the institutional arrangements facilitate the resolution of implementation issues. Whilst personalities and the leadership ability of key officials will be very important (and is not easy to analyze in an objective way) the political status and composition of the project management organization has also been shown to be a critical factor when major implementation difficulties arise. 87. As stated in section 4.1 of this appendix, a project leading group (PLG) has been established at both XUARG and implementing agency, or city government level. In each case the political status of the PLG leadership and the broad and senior representation on each PLG is considered adequate to resolve interdepartmental and cross-functional issues, with all key government stakeholders involved. 88. Specific points of note in respect of PLG composition include:

(i) In Kelamayi, the PLG includes senior representation from PetroChina, the national level state-owned oil industry conglomerate, whose presence and oil exploration/extraction operations in the city dominates the local economy and employment prospects.

(ii) In Kuitun, the PLG includes representation from the administration committee of

Tianbei New District, the semi-autonomous government body that administers a significant part of the local project area.

89. In both cases this representation, together with the active cooperation of these powerful stakeholders is judged to be of vital importance for the smooth implementation of the project in the respective cities. 5.1.3 Review of Project Coordination Agency and Project Management Office Capacity 90. The PCA in Kelamayi is the Kelamayi Construction Bureau (KeCB), whilst in Kuitun it is the Kuitun Housing and Urban-Rural Development Bureau (KuHURDB). In each case the PCA is the lead government department for overseeing urban construction and each city has established its multi-functional city PMO within the PCA and under the leadership of the PCA Director. The organizational structures of the two city coordinating agencies are summarized in figures 13 & 14 below for Kelamayi and Kuitun respectively. The organization and staffing in of the PMOs at regional and city government levels were shown in figures 9, 10, and 11 in Section 4 above.

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Figure 13: Organization of Kelamayi Construction Bureau

36

Figure 14: Organization of Kuitun Housing and Urban-Rural Development Bureau

37

91. Tables 5.1 and 5.2 give summary staffing details for each of the PCAs and PMOs with a broad functional analysis and a staffing education level analysis provided respectively.

Table 5.1: Functional Analysis of PCA and PMO Staffing

Function Kuitun HURDB

Kuitun PMO

Kelamayi CB

Kelamayi PMO

Xinjiang PMO

Managers 20 4 88 9 7 Technical 0 13 54 11 6 Finance 0 2 11 2 2 Others 5 1 150 1 2 Total 25 20 293 23 17

Table 5.2: Analysis of the Education Level of PCA and PMO Staff

Education Level Kuitun HURDB

Kuitun PMO

Kelamayi CB

Kelamayi PMO

Xinjiang PMO

Post Graduate 0 2 2 0 0 Graduates 25 13 125 23 17 Technically Qualified 0 5 74 0 0 High School 0 0 59 0 0 Lower levels 0 0 33 0 0 Total 25 20 293 23 17

92. In presenting this information reader attention is drawn to the following:

(i) All PCA staff are permanent full-time staff.

(ii) PCA staff numbers shown for Kelamayi and Kuitun are not comparable because Kelamayi have prepared their analysis to include all their subsidiary units, whilst Kuitun have provided an analysis just restricted to the main bureau.

(iii) Senior PCA officials believe they have adequate staffing resources to undertake

their role of project PCA. They base this judgment on past experience in the implementation of local urban infrastructure, and in the case of Kuitun their experience in implementing part of the Xinjiang urban transport and environment improvement project and also the JBIC funded Kuitun City integrated environment project.

(iv) PMO staff are shown as currently assigned. All are permanent staff of various

government departments who are seconded to the PMOs on either a full time or part-time basis. This approach is adopted because the PMOs are temporary rather than permanent government offices. As documented in section 4 above, each PMO includes staff seconded from a number of key departments whose active involvement is judged critical to successful project preparations and implementation. This approach to PMO staffing is common place in China. And is not an undue concern - indeed it facilitates flexibility in staffing over the project lifecycle as detailed staffing needs change (i.e., early emphasis on resettlement and procurement gives way to increased construction management activity as the implementation progresses).

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93. Amongst the PMOs, the XPMO has gained project preparatory, loan processing and implementation experience on three earlier ADB projects. As stated above the Kuitun PMO has been involved in two recent foreign funded projects, including one ADB project. In contrast Kelamayi PMO has no relevant experience of foreign funded projects, but does have strong capacity for implementing domestic funded projects for urban infrastructure construction. 5.2 Operations Phase 5.2.1 Current Arrangements for the Provision of Urban Services 94. Urban services in the project cite are currently provided by a mix of government departments, public institutions, and state owned enterprises. Institutional and corporate governance arrangements therefore depend on the type of institution providing the O&M service. 95. Currently for the services being improved or benefiting under the project:

(i) road maintenance and WWTP operations in Kelamayi are provided by public institutions;

(ii) the management of the “carbon sink” forest in Kelamayi is undertaken by Water Supply Department of PetroChina Xinjiang Oilfield Company;

(iii) water supply services in both cities are provided by SOEs; and (iv) flood control operations and maintenance, public sanitation and urban tree

irrigation and maintenance in Kuitun are undertaken by government departments.

96. The responsibility for the future operations and maintenance of the Jiugongli wetland in Kelamayi has been assigned to the Kelamayi District Landscaping Bureau. 5.2.2 Suitability of Nominated O&M Units 97. In each case the selection of nominated units to manage, operated and maintain the facilities to be constructed under the project (as identified in Section 4.2 above) is a logical choice that makes maximum use of existing O&M expertise and capacity. In each case the impact of the increased responsibilities on the nominated unit will vary and various different approaches are being considered by units in planning and considering options on how to discharge their new responsibilities. This is discussed further in Section 5.2.4 below on a case by case basis. Needless to say, some units are better equipped than others to discharge their enhanced responsibilities. 5.2.3 Institutional due Diligence of Nominated PCAs and O&M Units 98. General due diligence covering financial and governance arrangements for each of the nominated O&M units has been performed and the findings are summarized in table 5.3 below. Specific points of interest or concern are then identified and where necessary, discussed:

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Table 5.3 Summary of Institutional Due Diligence Findings Unit Type Supervision Accounting Audit Formal

Regulations3 KeCB Govt. Department City Government Government Government M, F,S KeDMD Govt. Department KeCB Government Government M, T,F, S, KeECMB Govt. Department City Government Government Government M, F,S, KeDLB Govt. Department District Government Government Government M, F,S, KeWSC SOE2 PetroChina Cash Private M, F,S, KuHURDB Govt. Department City Govt Government Government M,F,S KuWMD Govt. Department Ku ALWAB Government Government M, T, F,S, KuLB Govt. Department Ku F&LB Government Government M, T, F,S KuWSC SOE Ku HURDB Enterprise Government M, T, F,S, Ku Sanitation Bureau

Govt. Institution Ku HURDB Government Government Not known

KeCB = Kelamayi Construction Bureau (the PCA) KeDMD = Kelamayi Drainage Management Department KeECMB = Kelamayi Engineering Construction Management Bureau KeDistrict LB = Kelamayi District Landscaping Bureau KWSC = Kelamayi Water Supply Company of PetroChina Xinjiang Oilfield Company Notes:

(1) KeECMB presents itself as both a government department and as an enterprise company (the Kelamayi Urban Construction & Investment Company Limited) but the organizations are mirror images of each other. In effect it operates as a government department.

(2) KeWSC is not a separate legal entity in its own right but is a department of the PetroChina Xinjiang Oilfield Company.

(3) These are the formal internal control regulations issued by management or the supervisory body where M=management regulation, T=technical regulations, F= financial regulations, S = staffing regulations and O= other regulations.

99. Kuitun Water Supply Company is the only enterprise company. It is a traditional Chinese Water Company without a board of directors, with the General Manager (who is also the legal person) reporting to KuHURDB. The company was formed in October 1977. Its business license was issued by Kuitun industrial and commercial bureau (no 654003000000151), the amount of paid up capital is CNY24.16 million, and the licensed scope of business is tap water production and supply. The general manager occupies no government or other external positions. 100. Kelamayi water supply department of the PetroChina Xinjiang Oilfield Company operates in a similar way to a government department, and is under the functional regulation/supervision of Kelamayi Water Affairs Bureau. 5.2.4 Existing O&M Capacity and Impact of the Project

101. Summary Statistics on Kelamayi O&M Units. Tables 5.4, 5.5 and 5.6 summarize the staffing resources and the educations levels of the permanent and temporary staff respectively in each of the O&M units.

Table 5.4: Current Staffing of O&M Units in Kelamayi

O&M Unit Managers Technical

Staff Financial Staff

Other Staff

Total Staff Permanent Temporary

DMD 15 34 2 155* 236 150 86

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O&M Unit Managers Technical Staff

Financial Staff

Other Staff

Total Staff Permanent Temporary

ECMB 5 20* 1 30* 56 43 13 District LB 15 15 2 128* 160 110 50 KWSC 210 71 16 896 1193 1193 0

Table 5.5: Analysis of the Education Level of Kelamayi O&M Units Permanent Staffing

Education Level DMD ECMB DLB KWSC Post Graduate 0 3 3 Graduates 55 11 26 166 Technically Qualified 47 19 26 117 High School 37 2 27 297 Lower levels 11 11 28 610 Total 150 43 110 1193

Table 5.6: Analysis of the Education Level of Kelamayi O&M Units Temporary Staffing

Education Level DMD ECMB DLB KWSC Post Graduate 0 0 0 Graduates 4 0 0 Technically Qualified 34 1 0 0 High School 17 0 0 Lower levels 31 12 50 0 Total 86 50 0 DMD = Drainage Management Department (O&M of Nanjiao WWTP) ECMB = Engineering Construction Management Bureau (O&M of roads subcomponent) District LB = Kelamayi District Landscaping Bureau (O&M of wetland and reuse pipelines) KWSC = Kelamayi Water Supply Company of PetroChina Xinjiang Oilfield Company (O&M for water management subcomponent). * Includes all the temporary staffing. 102. In each case, with the exception of the engineering construction management bureau, the respective units all consider they have sufficient budget and staffing resources for their current responsibilities, although discussions and visits by the PPTA specialists did reveal some cause to doubt whether this high level of confidence was justified. 103. Such concerns are documented in the capacity assessments made for each individual O&M unit (see below). 104. Kelamayi Drainage Management Department (KeDMD). Figure 15 shows the organization chart of this O&M Unit which is responsible to the KeCB for the management of 3 WWTP (Nanjiao, Jiugongli and the Petrochemical Industrial Park) and other drainage infrastructure.

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Figure 15: Organization Chart of Kelamayi Drainage Management Department

105. Among 150 permanent staff of DMD mentioned in the Table 5.5, there are 38, 36, and 37 permanent staff in Petrochemical Industrial Park WWTP, Jiugongli WWTP and Nanjiao WWTP respectively. 106. Given the additional O&M needs of the upgraded Nanjiao WWTP, the claim DMD have sufficient staffing and budget for the operation of the upgraded facility cannot be taken seriously. 107. Visits to both Nanjiao and Jiugongli WWTP indicated shortcomings in treatment operations, the institutional strengthening and training questionnaire identified a need for both training and consulting support to improve operational performance. 108. Kelamayi Engineering Construction Management Bureau (KeECB). Figure 16 shows the organization chart of this O&M Unit. The municipal engineering division within KeECB is responsible for management and maintenance of existing municipal public utilities (roads, bridges, road lights, public squares) to ensure their normal operation.

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Figure 16: Organization Chart of Kelamayi Engineering Construction Management Bureau

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Figure 17: Organization Chart of Kelamayi District Landscaping Bureau

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109. The IST questionnaire completed by this unit indicated it considers itself to be under-resourced at the present time with an additional 15 staff being needed to discharge its current responsibilities and a further 8 staff to meet its new responsibilities under the XIUDP. Consulting support in the areas of project implementation support, financial management, human resources management, road safety and asset management was also indicated as being needed as well as certain training needs (as documented in Section 6). 110. Kelamayi District Landscaping Bureau. Figure 17 shows the organization chart of this O&M Unit which is responsible for O&M for all green spaces, irrigation pipes and 6 pumping stations, parks, and plant protection stations of Kelamayi District. The bureau is accountable to Kelamayi District Government, whilst being under the functional supervision of the Kelamayi City Landscaping Bureau (see figure 4 – Kelamayi institutional overview). 111. Whilst KeDLB is the natural choice amongst existing government agencies to assume the responsibility for management and operation of the new wetland facility it has no previous experience in the management of wetlands, with its closest relevant experience being in the management of four municipal parks. 112. To date, KeDLB have only given some preliminary thought on how they may discharge their future responsibilities and the strategic options they have identified are to either do this themselves in-house or to outsource to a private contractor. They stated they plan to closely investigate the alternatives for management and operations, but the natural inclination would be to outsource. In any event they realize they will need to acquire the knowledge and experience to successfully manage and supervise operations whether these are conducted in-house or outsourced. 113. Currently some operations and maintenance activities are outsourced to Kelamayi District Ronghui Landscaping Limited Company (an SOE) through a management contract which is renewed every year, so there is some basic experience in contracting out. However, by its name, it appears the contractor is simply a captive company of KeDLB itself – hence it is likely the current arrangement is one of convenience only, rather than a means to benefit from any competitive edge that may exist in the private sector. 114. KeDLB currently have no idea how many staff and the mix of skills that will be needed to manage and operate the wetland facility along with the reuse pipelines, and no discussions have been held with them on either the operational regime or the commercial arrangements (i.e. does KeDLB need to buy treated WWTP effluent and at what price can it be resold). 115. The KeDLB have a small landscape science and research station and also a plant protection station. However, these do not currently have the expertise or experience to design a comprehensive O&M arrangement for the wetland. 116. Kelamayi Water Supply Department of PetroChina Xinjiang Oilfield Co. Figure 18 shows the organization chart of this O&M Unit which is the sole supplier of municipal water supply services in the urban areas of Kelamayi and Baijiantan Districts of Kelamayi city.

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Figure 18: Organization Chart of Kelamayi Water Supply Dept of PetroChina Xinjiang Oilfield

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117. As evidenced from its organization chart and from discussions held during the KeWSC appears to be a generally well managed water utility and is adequately resourced in terms of finance and staffing, despite the fact the current water supply tariff is wholly inadequate relative to the financing needs of water supply operations. The unit also has a modern GIS system for recoding asset information. Levels of nonrevenue water (NRW) are low, assessed by the KeWSC themselves as being between 5 to 8% in each of the last 3 years. 118. In this situation technical capacity weaknesses are mainly limited to specific specialist needs which include management of NRW, and the application of network modeling. In addition the KeWSC have recently assumed responsibility for local supply pipes and individual customer meters and need to develop a strategy for managing this extended responsibility in a cost effective manner. 119. More fundamental capacity and sustainability concerns exist in the medium to longer term, however, in relation to the high reliance on financial subsidies and the institutional arrangement. There is an overwhelming case to increase water tariffs and also it would be desirable to establish KeWSC as separate legal entity within PetroChina Xinjiang Oilfield Company so that water operations costs and use of tariff funds were ring-fenced and made more transparent. 120. Whilst general technical capacity is high some specialist capacity building needs arise in relation to

(i) building up a proactive capability to detect water leakage on its water distribution network in order to improve the cost effectiveness of asset management and maintain existing levels of NRW, and

(ii) use of network modeling to improve the layout and optimize the performance of the water pipeline system.

Summary Statistics on Kuitun O&M Units

121. Tables 5.7, 5.8, and 5.9 summarize the staffing resources and the educations levels of the permanent and temporary staff respectively in each of the Kuitun O&M units.

Table 5.7: Current Staffing of O&M Units in Kuitun

O&M Unit Managers Technical

Staff Financial Staff

Other Staff

Total Staff Permanent Temporary

KLD WMD KWSC ESD

5 5 6

75 8 4

5 2 3

480* 11

127

565 26

140

188 26

140

377 0 0

Table 5.8: Analysis of the Education Level of Kuitun O&M Units Permanent Staffing

Education Level KLD WMD KWSC ESD Post graduate Graduates Technically qualified High school Lower levels

0 44 87 50 7

0 4 1 10 11

0 14 16 39 71

Total 188 26 140

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Table 5.9: Analysis of the Education Level of Kuitun O&M Units Temporary Staffing

Education Level KLD WMD KWSC ESD Post graduate Graduates Technically qualified High school Lower levels

0 0 0 25

352

0 0 0 0 0

0 0 0 0 0

Total 377 0 0 ESD = Kuitun Environmental Sanitation Department (municipal solid waste and public toilets), KLD = Kuitun Landscaping Department (ecological forest O&M), KWSC = Kuitun Water Supply Company (nonrevenue water), WMD = Kuitun Water Management Department (flood control and auxiliary facilities O&M) * Includes all the temporary staffing. 122. The large number of low grade temporary staff engaged by the Kuitun landscaping department arises from the seasonal nature of much of this organizations work and the fact it currently undertakes this work in-house rather than via outsourcing. 123. Kuitun Landscaping Department. Figure 19 shows the organization chart of this O&M unit which is responsible for the cultivation and maintenance for all public green areas, trees and flowers throughout the city.

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Figure 19: Organization Chart of Kuitun Landscaping Department

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124. The bureau have not yet considered exactly how they will discharge their extended responsibilities resulting from the XIUDP, however, they emphasized this was essentially a simple volume extension of their existing operations. They are considering moving from in-house operations to outsourcing, especially for more suburban, outlying areas and if this strategy is implemented it would likely result in some of the XIUDP trees being dealt with under each form of management. 125. An initial assessment of the incremental resourcing needs for managing the XIUDP provided trees was that an additional budget of CNY5 million and 40 to 50 additional staff would be required. This would amount to CNY25 per annum per tree and each staff member being responsible for the maintenance 4000 to 5000 trees. The department representative confirmed in discussions that the initial estimate of 10 incremental staff included in the IST questionnaire was much understated. 126. The department also consider themselves to be somewhat underfunded relative to their existing service obligations although stated opinions within the department varied on the extent of under-funding which also depends on the actual climatic conditions. A shortfall in the order of CNY5 million entered on the IST questionnaire was confirmed as a reasonable assessment in follow-up discussions. Existing staffing levels are confirmed as adequate for existing needs. 127. The department currently has no experience and skills in the outsourcing of their services. 128. Kuitun Water Management Department. Figure 20 shows the organization chart of this O&M unit which is a department of the Agriculture, Livestock and Water Affairs Bureau and is responsible for the operation and maintenance of all flood control and water conservancy infrastructure falling under City Government control (this excludes water infrastructure under the control of XACC/No7 State Farm) .

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Figure 20: Organization Chart of Kuitun Water Management Department

129. In discussions, the WMD representative admitted that maintenance of the existing flood control infrastructure is not done as well as it should be. He advised that the normal arrangement was for there to be an annual cleaning/dredging of the channels carried out in the spring in advance of the main period of flood risk (however, site visits made by the PPTA team suggest this was not done very thoroughly in 2012 and in some places not at all !). This annual maintenance is outsourced. 130. Inspections and resulting minor maintenance during the remainder of the year is carried out in-house by the WMD’s 26 staff. 131. The WMD have yet to make any assessment themselves of the additional budget or staffing needed to discharge their responsibilities for the new XIUDP facilities once these are constructed. However, they advised that they can employ an additional 7 staff and remain within their government manpower ceiling. 132. It appears that a full assessment of O&M requirements for both existing and new flood control facilities is required, together with a review of alternative means of providing the required services. However, one important consideration is that the WMD staff also form the bureau’s emergency response team if a serious flood event occurs. Therefore, caution is needed to ensure any additional outsourcing does not compromise this emergency response capability. 133. Kuitun Water Supply Company. Figure 21 shows the organization chart of this O&M Unit, which is responsible for tap water production and supply in the urban area of Kuitun, including developed areas of TND and land of No. 7 State Farm.

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Figure 21: Organization Chart of Kuitun Water Supply Company

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134. Comparison between the staffing and education levels of the water utilities in both Kelamayi and Kuitun immediately identifies that the Kuitun WSC is the poor relation of the two, with significantly less technical resource. In part this is explained by the difference in the water supply arrangements in the respective cities, whereby Kelamayi rely on surface water that requires full treatment prior to supply, whilst Kuitun has locally available groundwater that requires little or no treatment. Indeed, due to an equipment malfunction, even simple disinfection of the Kuitun water supply has temporarily had to be suspended. Ground water is therefore simply extracted and put into supply. In such a situation, direct comparison of staffing and resource use by the two different water utilities becomes meaningless and the needs of each have to be considered on their merits in accordance with the local situation. 135. PPTA investigations and discussions have identified a significant number of capacity concerns in relation to the Kuitun WSC. The overarching problem the company appears to face is a lack of finance to upgrade, modernize and thereafter maintain its infrastructure. The company and its decaying infrastructure are unable to keep up with increasing urban population and water demand leading to a deteriorating service to its customers. Whilst a significant amount of pipe replacement is being undertaken as part of the JBIC funded Kuitun City integrated environment project and additional replacement will occur under the XIUDP, there will remain serious deficiencies unless extensive further capacity building and infrastructure enhancement is undertaken. Specific issues and constraints the company faces include the following:

(i) a deficiency in groundwater extraction/treatment of up to 20,000 m3/d during peak periods which is forecast to increase to 65,000 m3/d by 2015. To meet this deficiency a new treatment facility of capacity 65,000 m3/d is planned;

(ii) the control systems at the existing well-field are out-dated and the disinfection system is no longer operational (urgent replacement being sought);

(iii) water quality testing is under-resourced and only done on a monthly basis, and the laboratory does not have the capability to test compliance with the latest PRC tap water quality standards;

(iv) NRW is high (in excess of 20%) and there is no equipment or technical capacity to identify leakage;

(v) the pipeline network is poorly designed (it has grown up on an ad hoc basis as the service area has expanded) and is not zoned to allow pressures to be controlled and balanced. There is also inadequate hydraulic capacity in some parts of the system;

(vi) many customer water meters are either broken or obsolete; (vii) the tariff for water supplied for irrigation does not cover the basic costs of

supply; and (viii) modern information systems are lacking.

136. Kuitun Environmental Sanitation Department. No detailed due diligence or identification of capacity building needs has been conducted for this O&M unit due to the late inclusion of the proposed solid waste and public toilet investments in the XIUDP. 137. The Environmental Sanitation Department (ESD) is a subsidiary department of the Kuitun HURDB and all MSW that is collected is transported for treatment at the city’s sanitary landfill facility, which is managed by a separate subsidiary of the HURDB. This facility was visited by the PPTA environmental specialists who considered it to be operating well.

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138. The ESD only provide a MSW collection service to the main urban area directly controlled by the city government. Outlying areas and those under the control of No.7 State Farm receive no waste collection service from the city. In discussion the ESD representative we spoke to stated that his department hoped to extend their service area, but there was no specific plan to do this. The HURDB confirmed the sanitary landfill provides a service to both the city and No. 7 State Farm. 139. The ESD currently operate 12 public toilets, with 3 further toilets under construction. These are all water closets and permanently staffed-no charges are levied on users. Due to historical reasons, there are also at least as many older public toilets provided by a private operator which are charged for. However these facilities are being phased out or taken over by ESD as the leases expire. In addition in some of the poorer areas there are communal dry toilets. The XIUDP intervention is to replace these dry toilets with wet ones fitted with septic tanks. However, these plans are at an early stage and no decisions have been made on how the XIUDP facilities will be managed. 5.2.5 Overall Assessment of O&M Capacity 140. Generally speaking there are well established entities with relevant skills and experience available to operate and maintain the future XIUDP facilities, although understandably most will need additional resources to discharge their new responsibilities. The proposed institutional arrangements for the XIUDP operations phase therefore make sense, although many details (such as the degree of outsourcing) still remain to be worked out. This is understandable at this early stage of the project. 141. Current financial capacity amongst the Kelamayi O&M units is clearly stronger than in Kuitun, with under resourcing quite evident in respect of Kuitun water supply services, and in the maintenance of the existing flood facilities. 142. The management, operations and maintenance needs of the Jiugongli wetland in Kelamayi will present a special challenge as this will be the first facility of this type in the area and new expertise and skills will be needed. 5.3 Water Sector Management 104. Institutional arrangements for water sector management in both cities are not as integrated as they might be. The importance of integrated water management increases significantly if a city is “water-stressed” as both Kelamayi and Kuitun are along with many other cities in Xinjiang. Specific points of significance in the current arrangements have been identified as follows: 5.3.1 Kelamayi 143. Points of weakness/concern we have identified in current arrangements are as follows

(i) there is an apparent “disconnect” between the urban master plan which provides for up to 40% of open public space–much of which needs to be irrigated–and the realities of water resource availability. Water resources and urban planning need to be more closely integrated. Similarly there is a need to ensure economic development strategies are sustainable in terms of water resource availability.

(ii) Irrigation of urban green space appears to operate very inefficiently.

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(iii) Water supplies are heavily subsidized by Government and/or PetroChina suggesting tariff reform and tariff increases are appropriate.

(iv) The water supply department of the PetroChina Xinjiang Oilfield Company should be made a separate legal entity for accounting and management purposes (i.e., it can be made a freestanding subsidiary within the Oilfield Group Company. This would facilitate greater transparency and more effective regulation by the Kelamayi Water Affairs Bureau.

(v) Wastewater reuse strategies and plans need to be further developed and a comprehensive reuse plan should be incorporated as part of an integrated water resources management plan, along with the water conservation plan.

(vi) The Water Affairs Bureau does not appear to have any responsibility for wastewater management thus increasing the possibility that wastewater collection, treatment and reuse planning is not adequately coordinated with overall water resource planning; and

(vii) The wastewater tariff is at a level that falls far short of even basic O&M cost recovery.

144. Specific strengths in current arrangements are as follows

(i) nonrevenue water levels are very low (although largely due to modern infrastructure, rather than active NRW management);

(ii) domestic water consumption per capita is relatively low and there seems to be a high awareness level that water is a scarce commodity; and

(iii) the Water Supply Department is generally well-resourced in terms of staff, technical skills and the use of modern information technology.

5.3.2 Kuitun 145. Points of weakness/concern we have identified in current arrangements are as follows:

(i) nonrevenue water levels are high and there is no active NRW management. There is also poor control over water pressure and hydraulic constraints in water distribution that result in frequent periods of pressure reduction or total supply outage;

(ii) the Water Supply Company is poorly resourced in terms of staff, technical skills and the use of modern information technology, it also lacks adequate equipment to test compliance with PRC tap water quality standards;

(iii) water tariffs appear to be well below full cost recovery level resulting in the water company also lacking adequate financial capacity. Furthermore the structure of the water tariff does not actively promote water consumption by users – an issue made worse due to the fact a high proportion of customer meters are old and in a state of disrepair.

(iv) Wastewater reuse strategies and plans need to be further developed and a comprehensive reuse plan should be incorporated as part of an integrated water resources management plan, along with the water conservation plan;

(v) the Water Affairs Bureau appears to have little or no capacity to prepare an integrated water resource plan for the city;

(vi) the Water Affairs Bureau does not have any responsibility for either urban water supply or wastewater management thus increasing the possibility that urban water supply planning, together with wastewater collection, treatment and reuse planning is not adequately coordinated with overall water resource planning;

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(vii) the wastewater tariff is at a level that falls far short of even basic O&M cost recovery; and

(viii) flood risk mapping is inadequate, which could compromise the effectiveness of otherwise well prepared emergency response plans.

146. Specific strengths in current arrangements are as follows:

(i) water conservation plans have been prepared and efforts are being made to modernize water irrigation methods;

(ii) water conservation awareness in the city is reasonably high; and (iii) there is a recognition that greater integration of water management is desirable

especially in relation to water planning.

5.4 A Framework for Timely and Successful Project Implementation 147. This section of the appendix briefly considers the framework of measures to try and ensure a successful implementation phase of the project and how the success of the project should be assessed upon project completion. 148. Firstly, the project must have a sound design. A large part of the PPTA effort has been expended in trying to achieve this including:

(i) establishing Design and Monitoring Frameworks at the project and subproject level and the design of a preliminary Project Performance Monitoring System (PPMS);

(ii) sector analysis to ensure the project design is compatible with government sector plans and policies.

(iii) technical, environmental, financial, economic and social due diligence to ensure the project design is optimized and the proposed investments are sustainable (operationally, financially and compatible with the needs and expectations of local communities);

(iv) mutually agreed safeguard action plans in relation to environmental protection, involuntary resettlement, ethnic minorities, social development (including poverty alleviation), and gender equality; and

(v) the identification of any changes in laws or regulations that might be needed to implement the project or improve the prospects for a successful project outcome.

149. These are all matters that have been dealt with in other parts of this report and are largely outside the scope of this appendix. 150. Secondly, strong institutional arrangements for project management are established. This has been discussed in Section 4 of this appendix where the arrangements have been documented. 151. Thirdly, a series of specific analyses have been performed and measures designed specifically to facilitate a smooth implementation. These are as follows:

(i) the identification of capacity building needs. The preparation of training plans and proposals for the appointment of consultants to support project implementation and required capacity building. These matters are dealt with in Sections 6 and 8 of this appendix respectively;

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(ii) undertaking an assessment of the procurement arrangements that will apply for the project, as delays or other problems with project procurement have been shown to have a serious impact on implementation success. This matter is deal with in Section 7 of this appendix;

(iii) undertaking a project risk assessment and preparation of a risk management plan based on known key risks areas. This assessment has been made and is documented in Section 9 of this appendix; and

(iv) The identification of matters that need to be recorded as provisions in the legal loan documents and the drafting of appropriate provisions-these are commonly referred to as “loan assurances” and a draft set of such assurances for discussion at the ADB loan fact-finding mission has been prepared and is included as annex 2 to this appendix.

152. Finally as with all ADB loan projects, the measures and action plans relevant to effective project performance monitoring and control have been documented in a comprehensive project administration manual (PAM) based on ADB’s specified template. 6. Assessment of Capacity Building Needs 153. The assessment of capacity building needs made here recognizes the fact that the project area is in a remote and relatively under-developed part of the PRC with a long and harsh winter. These circumstances apply especially to Kuitun, but generally less so to Kelamayi, which although in a remote location is relatively advanced in terms of economic development and in the provision of municipal services. 154. Capacity building needs have been identified by the following processes:

(i) needs identified in the feasibility study reports; (ii) by the TA consultant based on their previous experience; (iii) in consultation with XPMO and all local PMOs and designated operating and

maintenance units for the various project facilities; and (iv) broader stakeholder consultation to identify shortcomings in current services and

related urban management issues in the project area. 155. As part of this process questionnaires to assess existing capacity and potential needs were issued to all relevant project agencies and replies have been received from all of them. The results have been analyzed and are provided in the relevant segments of this section. 6.1 Lessons learned from previous capacity building 156. Discussions have been held with XPMO and Kuitun PMO on their previous experience with ADB and World Bank capacity building programs. The feedback from the discussions and experience gained during earlier capacity building undertaken by AECOM has included the following lessons of potential relevance to the project:

(i) project consulting services are most useful to local PMOs in the early stages of loan implementation. This especially applies where an implementing agency /PMO has no previous experience in the implementation of an ADB funded project. In some cases delays in the procurement of consultants has therefore compromised their effectiveness;

(ii) project consulting services have not always been efficiently utilized;

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(iii) PMO supervision of consultants needs to be reinforced; (iv) poor terms of reference can compromise the effectiveness of consulting services; (v) capacity building must be relevant to recipients and they must be fully consulted

in its design; (vi) capacity building needs to respond to policy developments rather than anticipate

them; and (vii) implementation of institutional reforms is a lengthy process and difficult to

achieve except where the reforms in question are part of a government sponsored reform program.

6.2 Previous XPMO capacity building 157. XPMO has benefited from earlier capacity building programs under the previous ADB financed projects, with the main focus being on implementation support including:

(i) design review; (ii) project management; (iii) procurement and construction management advice; (iv) project accounting and financial control; (v) environmental monitoring; (vi) resettlement implementation and internal monitoring systems; (vii) establishment of PPMS; and (viii) support in project reporting.

158. The PMO has found this support useful in facilitating the implementation of the earlier ADB project implementations and have requested that similar support be provided for in the project’s capacity building component. It will be important that XPMO’s previous experience in the management of consultants is drawn upon for the benefit of the city PMO and the O&M units who will be the main beneficiaries of the consulting services and the associated training program proposed for the XIUDP. 6.3 Assessment of XPMO capacity building needs 159. XPMO will play a broad supervisory and coordination role in project implementation to ensure the XUARG, as project executing agency discharges its obligations under the loan agreement. 160. In view of its previous ADB project implementation experience, its capacity building needs are seen to be fairly modest and comprise mostly the training of new staff and in becoming familiar with any new ADB procedures or requirements that arise from time to time. 6.4 Assessment of project city PMO capacity building needs 161. Kelamayi has no previous experience in ADB project implementation, whilst Kuitun has experience in one similar project. Both city PMOs will be the focal points for the detailed project implementation work that will necessarily take place at the city level. This will require consulting support in:

(i) design review; (ii) setting up initial procurement systems, including preparation of model contract

documents that contain all project specific clauses;

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(iii) procurement support (especially tender document review), with particular emphasis on compliance with ADB procedures;

(iv) support on construction management (progress tracking, potential contract variations, contract claims, resolving unforeseen technical issues etc in compliance with ADB procedures);

(v) asset commissioning and handover; (vi) establishing project accounting and financial reporting systems and any

necessary ongoing support in financial reporting; (vii) establishing the PPMS and operationalizing this system; (viii) guidance in the preparation of half–yearly progress reporting; (ix) establishing environmental reporting systems and preparation of regular

environmental reports, together with advice on environmental monitoring issues and support in the updating of environmental plans where required ;

(x) establishment of internal resettlement monitoring systems and preparation of regular progress reports, together with advice on resettlement plan implementation issues and support in the updating of RPs (when necessary);

(xi) establishment of ethnic minorities and social impact monitoring systems and associated reporting;

(xii) undertaking tariff reviews and other specific studies as required under the project agreement; and

(xiii) design of suitable public awareness programs and their implementation including:

(a) environmental awareness and motivating environmentally responsible behavior;

(b) personal hygiene and public health awareness; (c) road safety awareness; (d) HIV/AIDS and STIs awareness and prevention; and (e) mobilizing community participation and awareness in the project.

Training in:

(i) project management; (ii) project planning; (iii) supervision of consultants and getting the best from them; (iv) ADB project reporting requirements; (v) ADB procurement guidelines; (vi) ADB disbursement procedures; (vii) project accounting with specific emphasis on the ADB/MPF requirements for

foreign funded projects; (viii) governance and anti-corruption procedures; (ix) ADB safeguard policies, their practical application and compliance monitoring; (x) Application of 3R policies and making improvements in the efficiency of resource

utilization; (xi) design review; (xii) contract management; (xiii) asset commissioning; (xiv) capital investment planning and appraisal; (xv) management training including, business planning, performance management,

organizational design, quality management and information management;

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(xvi) Financial management including: (a) cost control of public utility services; (b) financial control of capital projects; (c) financial planning; (d) budgeting and budgetary control; and (e) management of financial risk.

6.5 Assessment of O&M agency capacity building needs 162. The following needs summarize those identified by individual O&M units, and by members of the PPTA team in relation to general organizational capacity building needs:

(i) Management capacity building including: (a) Governance and anti-corruption (b) Human resources management (c) Performance measurement (d) Quality management

(ii) Financial capacity building including: (a) Financial management (b) Budgeting and budgetary control (c) Management of financial risk

(iii) Generic operations and maintenance capacity building including: (a) Asset management (b) Preparation of operational procedures

(iv) Preparation, procurement and supervision of outsourcing contracts.

163. Specific areas identified where capacity building designed for the needs of individual O&M units is required includes:

(i) improving the limited laboratory facilities for monitoring quality control of water supplies in Kuitun;

(ii) management of nonrevenue water programs in both cities; (iii) network modeling and improving the performance of water distribution systems in

both cities; (iv) wetland management comprising exposure of selected staff to operational

examples of constructed wetlands and training in management of ecological processes and habitat protection;

(v) integrated insect management to ensure that the constructed wetland will not become a breeding site for mosquitoes and other disease vectors, whilst at the same time protecting wetland eco-systems;

(vi) the preparation of pollution control and emergency response plans for Jiugongli wetland; and

(vii) improved process control of WWTP operations. 6.6 Other capacity building needs 164. Other capacity building needs identified during the PPTA which were considered for inclusion in the institutional capacity building component of the project were as follows:

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(i) changes in the structure of the water supply tariff to more actively promote conservation of water use, logically through the introduction of a rising block tariff with a lifeline block incorporated to safeguard service access by the poor;

(ii) improvements in water sector planning (in particular the integration of water planning with both economic and urban planning);

(iii) preparation of comprehensive wastewater reuse plans by first reviewing opportunities for wastewater reuse and identifying the potential contribution reuse might make alleviating pressure on fresh water resources;

(iv) developing strategies for climate change mitigation and introducing systems for the monitoring of city- wide GHG emissions in each city;

(v) optimizing the beneficial utilization of municipal sludge by reviewing existing sludge handling practices and suggesting improvements; and

(vi) capacity building in carbon sequestration silviculture. The “carbon sink forest” is currently in transition from productive timber forestry management to carbon sequestration management. New management policies, targets and practices need to be developed and implemented and a new culture established in the management unit.

7. Assessment of Procurement Capacity 7.1. Introduction 165. This section reviews the proposed arrangements for procurement under the project and the capacity of the agencies involved. Procurement of goods, services and consulting services is a key element of implementation of the project. If efficient and transparent procurement processes are established by the executing agency then this will help lead to a smooth and effective project implementation. With this objective in mind the PPTA team has conducted a full procurement capacity assessment of the executing agency and implementing agencies intended arrangements for the proposed XIUDP procurement. This assessment is based on an ICQ approach in accordance with ADB project administration instructions and model ICQ documentation. Specifically, the assessment process seeks to (i) evaluate the adequacy of executing agency/implementing agencies existing processes adopted for procurement and their ability to comply with ADB’s Procurement Guidelines (2010), as amended from time to time, (ii) identify the need for capacity building and training for the executing agency/implementing agencies during project implementation stage to develop staff’s competence in areas relating to procurement, and (iii) define the appropriate level of review, either prior or post by ADB. The completed documentation is included in full as annex 1 to this appendix and covers arrangements at both the regional executing agency and city implementing agency levels of government. The remainder of this section provides a summary of general procurement arrangements, the intended arrangements that will apply for all XIUDP procurement where ADB loan funds are to be utilized and a summary of the results of the completed capacity assessment, together with proposed measures that ADB should take/require to safeguard bank interests and minimize the risk of mis-procurement. 7.2 General arrangements 166. Public procurement in the PRC has to be carried out in accordance with the PRC bidding law, which stipulates the use of competitive procedures. PRC government has also issued regulations on anti-corruption and fraud prevention measures in public procurement. XPMO, the city PMOs and other relevant project agencies are well familiar with these requirements and their practical application. Detailed written regulations and procedures govern all domestic

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procurement for government funded projects and project procurement staffs are fully familiar with these. 167. An assessment of the general procurement environment for the PRC has been undertaken by the ADB and is updated on an annual basis. The ADB assessment questionnaire and results are shown in Annex 1 of this appendix. 168. There is one significant gap in the PRC bidding law and associated arrangements that is relevant to the XIUDP procurement, and this relates to the procurement of consulting services. This form of procurement is outside the scope of the bidding law. 169. All procurement under the project will be carried out in accordance with ADB procurement guidelines and the ADB guidelines will be applied where these impose stricter or slightly different standards than the PRC bidding law. However there is no fundamental conflict between the PRC law and ADB procurement guidelines and for the procurement of consulting services, which lie outside the PRC law, the ADB guidelines will be applied in full. 170. It is normal practice in the PRC for suitably qualified design institutes to prepare technical specifications for all engineering related contracts, including for goods and equipment. This arrangement will apply for the project. 171. For larger contracts it is normal practice to engage a professional tendering company to manage the procurement process on the project owner’s behalf. The services normally include prequalification (where needed), preparation of the commercial sections of bidding documents, drafting of procurement notices, issue of bidding documents, advice/supervision on contract evaluation, and advice/supervision of contract negotiations and in final contract preparation. During the project’s implementation it is proposed that the city PMOs engage professional tendering companies with previous ADB experience to support them in the procurement process. All such appointments will be subject to “no objection” from XPMO as a quality assurance measure that the tendering company is suitably qualified. 172. PRC government recognizes the risk of corruption in public procurement and has established anti-corruption (discipline inspection) offices at all levels of government, whose work includes the supervision and audit of procurement activities. It is common place for representatives of these offices to send representatives to attend bid openings and evaluations and Xinjiang PMO encourage this involvement for the procurement under their jurisdiction. An analysis of both procurement and corruption risk is provided in the risk assessment section of this Appendix (Section 9 below). 7.3 Previous ADB procurement experience. 173. Xinjiang PMO has directed the procurement process for all three previous ADB urban development projects in XUAR. These being:

(i) Xinjiang Municipal Infrastructure and Environnent Improvement Project 2008 to 2013 ;

(ii) Xinjiang Urban Transport and Environment Improvement Project, 2009 t0 2014; and

(iii) Xinjiang Altay Urban Infrastructure and Environment Improvement Project, 2011 to 2016.

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174. Throughout this period there has also been continuity of senior staffing within XPMO. Kuitun municipal government was one of the participating cities involved in the implementation of the Xinjiang urban transport and environment improvement project, and there remains continuity of senior staffing within Kuitun PMO from this implementation, which is still ongoing. 175. In contrast, Kelamayi city has had no previous involvement in the earlier ADB projects within XUAR, and therefore lacks any practical experience in procurement under ADB funded projects. 176. The procurement for all three previous ADB projects has been carried out in full compliance with ADB guidelines, with no mis-procurement identified, although some delays have occurred relative to the initially prepared project procurement plans. Specific lessons learned from this previous experience include the following:

(i) National Competitive Bidding (NCB) procurement has proved to operate much more smoothly than has International Competitive Bidding (ICB) procurement, which has sometimes encountered significant delays;

(ii) the use of experienced tendering companies (also sometimes referred to as bidding agents) has proved valuable, and especially in offering advice to cities with no or limited experience of procurement on foreign funded projects;

(iii) loan implementation consultants have provided valuable support in design and bidding document review as well as providing general advice and support. Maximum benefit can result from such involvement is the consultants are appointed and mobilize at the very early stages of project implementation as this allows them to advise implementing agencies in the setting up of procedures and records systems; and

(iv) the use of a sole sourced consultant to fill the gap in support from the end of the PPTA through to loan effectiveness has also proved effective—especially where cities have no or limited experience.

7.4 Proposed arrangements for procurement for the implementation of XIUDP. 177. XPMO will assume the lead role in the procurement process and has established a procurement group to undertake this work. However, much of the detailed work will be undertaken at city level or by specialist institutes. Table 7.1 below documents the arrangements that will apply. These arrangements are essentially the same as have operated successfully to date for the three previous ADB projects implemented under the direction of XPMO.

Table 7.1: Overview of Proposed XIUDP Procurement Arrangements Procurement Action Preparation

Or Action Review/Sign-off Notes

Procurement Plans and their regular updating Technical specifications Commercial Bidding Documents Drafting of Procurement notices Preparation of consulting terms of reference Submission for ADB prior review Issue of procurement notices Sale/Issue of bidding documents Receipt of bid submissions and safekeeping Arrangements and oversight of bid opening

City PMO DI TC TC SSC City PMO TC TC XPMO XPMO

XPMO Owner, City and XPMO City and XPMO City and XPMO City and XPMO XPMO n/a n/a n/a n/a

1, 2, 2 2 3, 4

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Preparation of bid opening record/minutes TC XPMO Selection of Expert Bid Evaluation Committee XHURDB n/a 5 Minutes of Bid Evaluation meeting TC Panel members Submission of Bid Evaluation Report to ADB TC City and XPMO 4 Contract negotiations TC/city PMO n/a Contract finalization and approval TC City and XPMO Notifications of contract award to bidders TC n/a Instructions to proceed notice City PMO 6 Retention of Contract and procurement records XPMO. City PMO and TC 7

Notes: 1. Initial plan prepared by PPTA consultant with city input and will be agreed at LFF. 2. Loan consultants will support and review as needed. 3. ADB will undertake prior review as indicated in the agreed procurement plan. 4. All communications with ADB will be through XPMO. 5. Selected by the specialist tendering and contract unit of XHURDB (see below). 6. Except for consulting or other services procured for the whole project which will take action by XPMO. 7. All three parties will retain copies of the full procurement records for their own purposes and reference.

178. A specialist bidding and contract office exists within Xinjiang housing and urban-rural development bureau and similar offices also exist in each city. Public procurement is therefore dealt with as a specialist professional function by qualified and experienced staff. Procurement staff from these offices will be seconded to work with the PMOs in the administration of the project procurement, and procurement decisions will be taken based on specialist advice. The written procurement procedures of Xinjiang housing and urban-rural development bureau will be followed in conjunction with ADB procurement guidelines. 179. A detailed review of procurement arrangements at both the regional and city level has been conducted (as documented in Annex 1) and has identified the following specific safeguards and assurances in relation to the project’s procurement arrangements:

(i) a dedicated unit has been established within each PMO to manage project procurement;

(ii) these units are adequately staffed in terms of staff numbers and experience, and XPMO in particular has extensive previous experience of ADB project procurement (see paragraph 7.3 above);

(iii) specialist external institutes are to be engaged to assist the procurement process, including the preparation of bidding and contract documents;

(iv) adequate checks and balances appear to be built into procedures; (v) bid evaluation is conducted under strictly controlled procedures with independent

experts involved; (vi) record keeping and documentation is adequate; (vii) procedures provide for equal treatment of all bidders; and (viii) anti-corruption measures and supervision are provided for.

7.5 Proposed safeguards on the project’s procurement. 180. Training and capacity building. Training in ADB procurement procedures has been provided to XPMO and some city level staff during the earlier ADB projects and during this PPTA. This training included key parts of the ADB procurement guidelines with particular emphasis on where these diverge from typical national arrangements. Further training sessions will need to be arranged however and any appointed design institutes and tendering companies should be asked to send their relevant staff for this training. Governance and anti-corruption measures should be fully integrated into the training. This training and related advice will be a

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key role of the individual domestic consultant it is proposed be engaged to advise and support XPMO and the cities in the period between the conclusion of the PPTA and loan effectiveness. 181. Subsequent to loan effectiveness, as part of the project’s capacity building component, there will be an international consulting company appointed to provide implementation support. This support will include design and bidding document review, procurement advice and training, and attendance at bid opening and evaluations. In order to ensure continuity of advice to XPMO and the cities, it has been agreed that the appointment of the loan implementation consultant be subject to advance procurement action. 182. Risk mitigation. Risk mitigation measures to reduce procurement and corruption risk will agreed with XPMO and the cities at the loan-fact-finding stage and the draft proposals are documented in section 9 below (project risk management plan). 183. ADB review. ADB will undertake a prior review of the model form of bidding/contract documents ahead of the first ADB funded contract being procured and for other key procurement packages as specified in the procurement plan. ADB will also receive bid evaluation reports for all ADB funded contracts and for selected contracts (such as the appointment of the project management consultants) ADB will require prior review of the draft contract before this becomes effective. Regular six monthly ADB supervisory missions will include a review of procurement activity and the loan and project agreements will provide the normal right of ADB inspection and audit access. 184. Use of contract terms to safeguard ADB interests. Where appropriate, specific requirements of the loan and project agreements will be included in bidding and contract documents to impose relevant conditions on contractors or to inform them of certain matters. Examples include the requirement on contractors to warn and educate their staff on the dangers of HIV/AIDS and STIs, ADB’s audit and inspection rights, insurance requirements, compliance with ADB’s gender policies, and the consequences of corrupt practices. 7.6 Overall assessment of procurement capacity. 185. Based on the above arrangements, the safeguards identified, and the previous procurement record of XPMO, it is concluded that procurement capacity and the procedural arrangements in place are adequate to facilitate full compliance with ADB procurement guidelines and the risk of mis-procurement is acceptably low. 8. Proposed Project Capacity Building 8.1 Objectives of the capacity building 186. Overall scope and objectives of the capacity building. The overall objective of the capacity building is to enhance the prospects that the project achieves its intended impact in a timely manner and in compliance with relevant PRC laws/regulations and ADB policies/procedures. The scope of capacity to achieve this encompasses:

(i) enhancing project management and implementation capacity; (ii) enhancing the capacity of O&M units to provide for sustainable operations; and (iii) promoting inclusiveness and value added.

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187. Project management and implementation support objectives. The objectives of this part of the capacity building are to assist the PMOs, O&M units and others involved in the project to improve their ability to successfully implement the components of the project. Specifically these include

(i) the development of realistic and well considered project plans and project management systems;

(ii) the improvement of efficiency of procurement in accordance with ADB procedures;

(iii) the development of effective engineering design and construction supervision systems to facilitate adherence to quality standards and completion targets;

(iv) the assessment of project effectiveness including monitoring and compliance with relevant ADB safeguard policies (social and environmental);

(v) establishing and maintaining proper records, accounts, financial controls and governance systems for the project;

(vi) project progress and performance reporting; and (vii) advice on compliance with covenants in the project agreement and on the

incorporation of applicable policy initiatives.

188. Project sustainability objectives. The objectives of this part of the capacity building are to ensure that the designated O&M units have adequate and relevant management, financial, technical and operations capacity to provide services that are:

(i) fully funded; (ii) meet user expectations in terms of levels of service and cost; (iii) adopt “best practice” operating standards and procedures; and (iv) compatible with 3R and climate mitigation policies.

189. Public awareness objectives. The objectives of this part of the capacity building are to develop public education programs (and assist in their implementation) to promote environmentally friendly, climate friendly, and energy efficient living on the part of the cities’ residents. Such programs should consider and incorporate

(i) the contribution urban planning and municipal services make to environmental protection and lifestyle improvement,

(ii) environmental and public health awareness, (iii) the role of individual residents, and (iv) meeting resident’s expectations through effective mechanisms of public

consultation and engagement. 190. Special studies and advice. The objectives of this part of the capacity building is to work with the cities to address key issues they face in the sectors being supported under the project and more generally to enhance awareness and means of mitigation from climate change impact. Subject to resource availability, specific issues identified for potential review under the XIUDP capacity building are

(i) strategies to maximize wastewater reuse in each city; (ii) improvements in water sector planning (in particular the integration of water

planning with both economic and urban planning); (iii) strategies for climate change mitigation and the monitoring of city-wide

greenhouse gas emissions in each city; and

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(iv) optimizing the beneficial utilization of municipal sludge. 191. Social and economic development objectives. The objectives of this part of the capacity building, which will be achieved through supporting the implementation of the social safeguard plans (social action plan , gender action plan, resettlement plans, and ethnic minority developments) are to maximize the opportunities the project creates for

(i) facilitating increased local employment. This employment generation to be viewed in the context of the broader social and economic development the project will make possible.

(ii) providing pathways for improved living conditions and lifestyle improvements with particular emphasis on the poor and otherwise disadvantaged segments of society.

8.2 Overview of the proposed capacity building program 192. The capacity building necessary to achieve a successful project implementation and eventual outcome can be categorized into the following:

(i) support during project implementation, (ii) strengthening of O&M agencies to give assurance on project sustainability, and (iii) creating “value added” from the project.

193. In addition there is an extensive training need that is cross-cutting across all aspects of the capacity building. The specific capacity building needs identified under each of these categories are as follows Support during project implementation

(i) design review and support to local design institutes; (ii) procurement support (tender document preparation, bid evaluation, etc.), with

particular emphasis on compliance with ADB procedures; (iii) support on construction management (progress tracking, potential contract

variations, contract claims, resolving unforeseen technical issues, etc.); (iv) establishing project accounting and financial reporting systems and ongoing

support in financial reporting; (v) advice on environmental monitoring and updating of the EMP; (vi) advice on resettlement plan implementation (including internal monitoring); (vii) detailed design and implementation of project performance management system

(PPMS) and support in progress reporting to ADB. Strengthening of O&M agencies to give assurance on project sustainability Improving Access to Services

(i) Review of tariff structures and other support to the financially disadvantaged. Financial Sustainability

(i) Financial management strengthening, with particular emphasis on budgeting, cost control and financial planning; and

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(ii) periodic review of tariff and cost recovery levels, and developing strategies for transitional subsidies in the lead up to achieving full cost recovery.

Operational Sustainability

(i) WWTP operations (including monitoring and control systems); (ii) wastewater source control (including permitting systems); (iii) preparation of operational procedures (to meet ISO 9000 requirements); (iv) asset management; (v) integrated wetland management; and (vi) use of outsourcing (where appropriate).

Creating “value added” from the project

(i) Improving public consultation and engagement; (ii) encouraging behavior change in looking after the local environment; (iii) maximizing local job creation to best utilize the leverage of economic stimulus

created by the project; (iv) enhancing community health awareness (including HIV/AIDS and STIs); (v) enhancing gender awareness; (vi) promoting water conservation, energy efficiency and climate change awareness; (vii) identification and implementation of 3R initiatives (reduce, reuse, and recycling of

waste); and (viii) improvements in water resource planning.

Training

(i) Domestic study tours to view best Chinese practice in the different sectors of the project.

(ii) seminars and workshops in Xinjiang on all areas of the capacity building; (iii) on the job training (such as on the O&M of new project facilities); and (iv) extended training or work placements within the PRC (e.g. technical training

schools or work placements at best practice units in larger cities). 8.3 Assessment of training needs 194. Training will be an important cross-cutting theme in the capacity building efforts and whilst many training needs can be readily foreseen, others will only be identified in detail as the capacity building work is undertaken. 195. Consultation with the different level PMOs, the O&M units and with other stakeholders has identified a general assessment of training needs as set out in Table 8.1 below. In addition, training to relevant government agencies in enhancing public education and public awareness have also been identified in these discussions. An outline training plan has also been prepared and is included in Annex 3 to this Appendix.

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Table 8.1: Assessment of Training Needs Area of Training XPMO City

PMO/PCA O&M Units Others

Project Implementation Related Training Project management Yes Yes Project planning and control Yes Yes Financial control of projects Yes Yes ADB procurement procedures Yes Yes ADB Safeguards policies Yes Yes ADB reporting procedures/PPMS Yes Use of standard contract documents Yes Design review Yes Construction supervision (general) Yes Site records and control Yes Site safety Yes Quality control in construction Yes Evaluation of contract claims Yes Monitoring and evaluation Yes Resettlement monitoring Yes Environmental monitoring Yes Management Training

Utility management (general) Yes Business/corporate planning Yes Capital investment planning & appraisal Yes Training needs assessment Yes Yes Performance measurement Yes Yes Personal management skills development Yes Yes Computer and IT skills training Yes Financial Training

Principles of financial management Yes Yes Yes Enterprise financial accounting Yes Cost & management accounting Yes Project accounting Yes Yes Financial planning Yes Project internal auditing Yes Yes Operations Training

Water quality monitoring and laboratory analysis Yes WWTP operations and process control Yes Wastewater source management See Note 1 Practical application of 3R’s policy Yes Road maintenance Yes Traffic control Yes Road safety Yes Energy conservation (general) Yes Energy conservation Yes Asset Management (including GIS) Yes Other Training

Gender awareness See note 2 HIV/AIDS/ST1 Awareness Yes Yes Environmental awareness See note 3 Community health awareness See note 3

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Notes: 1. No need for consulting support or training has been identified in consultations with the PMOs and O&M units.

However, these units are not currently involved in this activity. National regulations issued by MOHURD on wastewater source permitting do not seem to have been implemented yet in the project area- so a future capacity building need seems to exist.

2. ADB and the TA social experts have identified this need; however there has been very little take up to this by the project agencies during consultations on training needs.

3. These needs were confirmed as important during the PPTA consultative process and also acknowledged by the project agencies at local level.

8.4 Detailed scope of work 196. A detailed scope of work for the proposed capacity building has been prepared and is included as Annex 4 to this Appendix. 8.5 Reporting and timetable 197. The capacity building should ideally be programmed for a period of five years duration to last for the whole implementation period. However, it is anticipated that the most intensive period for capacity building would be during the first two years of project implementation. 198. The provider of the project implementation consulting services should be appointed as soon as possible after loan effectiveness and should be required to provide the following reports

(i) an inception report (within one month of commencement); (ii) detailed training plan within three months of commencement; (iii) half-yearly progress reports compatible with XUARG’s reporting obligations to

ADB; (iv) safeguards monitoring reports compatible with XUARG’s reporting obligations to

ADB; and (v) a completion report that is compatible with XUARG’s reporting obligation to ADB

at the conclusion of project implementation (assuming physical works are completed within 5 years as currently envisaged).

199. All these reports will be submitted in English and Chinese to XPMO and Chinese copies provided to the city PMOs. Recommendations arising from the capacity that require any form of formal client action or approval (i.e. by XPMO, city governments or specific project stakeholders) are to be presented in report format with an appropriate level of justification to support the recommendations made. These reports can be provided in Chinese only unless XPMO specifically requests an English version for the purpose of dialogue with ADB. 8.6 Indicative consulting resource requirements 200. An indicative resourcing schedule has been prepared based on the needs of the various project agencies as assessed during the project preparation phase. This is shown in Table 8.2 below. A detailed budget with the assumptions made in its construction is included as Annex 5 to this Appendix. To date no attempt has been made to disaggregate the budget over individual project components. In practice this is normally done pro-rata to on lending, rather than attempting to allocate capacity building costs based on resource inputs.

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Table 8.2: Estimated Consulting Requirements Area of Expertise International Months National Months

Project Implementation TL/DTL (project management) 6 24 Procurement support 10 Financial Management 0 8 Environmental Monitoring 0 8 Resettlement Monitoring 0 8 Gender and Social Specialist 8 Public Engagement Specialist 0 6 Operational Sustainability

IST and capacity building 5 Traffic Management & Road Safety 0 2 Water Supply Operations 0 6 Wastewater Operations & Process control 0 3 Wetland management 1 6 Carbon Sequestration Forestry 0 3 Asset Management Specialist 3 Quality Assurance Specialist 0 4 Water Planning and Conservation 2 8 Wastewater reuse 0 3 Total 9 115 8.7 Facilities to be provided as part of the capacity building 201. The contract for providing the capacity building should include the provision of the following items:

(i) all staff and personnel costs, including international and local travel, housing accommodation and subsistence;

(ii) office equipment (but not basic office furniture), computer equipment and related hardware (printers etc) and software necessary for the effective conduct of the consultancy, including an allowance for consumables. The client, who shall approve the make and specification of all equipment, shall give assurances that the equipment can be maintained locally. The equipment and software will become the property of the client at the end of the consultancy contract;

(iii) arrangements and financial provision for in country training programs to be reimbursed at cost;

(iv) arrangements and financial provision for domestic study visits to view best Chinese practices to be reimbursed at cost;

(v) the provision of a fully qualified interpreter to work with the consultant on a full-time basis (where necessary); and

(vi) the costs of all report and document preparation and printing. 8.8 Requirements for capacity building providers 202. The capacity building provider should be experienced in implementing similar capacity building programs in the PRC. Prospective providers, in tendering for the capacity building work should be encouraged to make any comments on and suggestions for improvement to the proposed program in submitting their technical proposal. The financial implications, if any, of

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these suggestions should be clearly indicated in the financial proposal. These suggestions will then be dealt with at the negotiation stage of the procurement of the loan consultant. 203. In their technical proposals, the prospective providers should be asked to demonstrate a clear understanding of the client's requirements and indicate inter-relationships between the different tasks within the assignment. An indicative program of work and for the deployment of the various specialists should be provided. 204. The technical proposals should include a methodology and proposed assessment criteria under which the client can measure the performance in the conduct of the capacity building work. This should include an assessment of work quality as well as timeliness of output. In submitting such assessment criteria the providers should be required to confirm they accept their use in measuring their own performance. 8.9 Indicative budget 205. Table 8.3 shows an indicative overall budget for the capacity building.

9. Risk Assessment and Risk Management 9.1 Introduction 206. ADB’s most recent Governance and Anti-corruption policy (GACAP II, approved in 2006) adopts a risk assessment and risk management approach to the improvement of governance systems and the prevention of corruption. Furthermore, this risk assessment is to be carried out using a structured top down approach at the country, sector and project levels. 207. All PTTA are therefore required to prepare project level risk assessments and management plans that identify GACAP related risk specific to the particular project being considered. In accordance with the GACAPII policy, this project level assessment should refers to and takes account of sector and country assessments as appropriate. In the case of the PRC the reference document for the country/sector assessment is found in “People’s Republic of China: Procurement, Financial Management, and Anti-Corruption in ADB Financed Projects” dated May 2007. 208. This risk assessment for the proposed XIUDP therefore first summarises the conclusions of the previously conducted national and sector risk assessment work and then considers specific risks at the project level in the three GACAP key risk areas of public financial management, procurement and anti-corruption. 9.2 PRC country and sector risk assessment 209. Following consultation with the Government, the “People’s Republic of China: Procurement, Financial Management, and Anti-Corruption in ADB Financed Projects” considered in detail the railway and wastewater management sectors, as ADB was and planned a program that was very active in these sectors. The assessment provides the following overview of risk assessment at the country level

(i) PRC government’s performance and broad achievement of its development outcomes i.e., reducing the number of people who live in absolute poverty, reduction of the share of children under five who are underweight, increase in

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elementary school enrollment of school age children, reduction in the proportion of malnourished children all attest to its commitment to maintain sustained economic growth. The PRC’s strong record indicates that systemic governance concerns to developmental outcomes and goals do not pose a significant risk.

(ii) Over the past years the government has demonstrated growing importance to improving governance and combating corruption. Significant efforts have been made to improve the government’s capacity to serve the people and increase transparency and accountability. Since 2001, the National Audit Office of the People’s Republic of China, Chinese National Audit Office (CNAO) has published annual reports on the implementation of the central budget, and from 2004, it has started posting audit reports for some of its projects on its English language website. The Ministry of Finance and the Ministry of Commerce supervise a bilingual website (http://www.chinabidding.com), the official website for the procurement of electric equipment and machinery by international competitive bidding (ICB), the sole online platform for government supervision of ICB, and the platform for communication between government agencies and ICB participants.

(iii) Although corruption issues continue to be highlighted by media and remain a cause for concern, the Government of the PRC continues to make serious inroads in tackling this issue. It has undertaken significant reforms to establish a “national integrity system” that places equal importance on prevention and punishment. The implementation of the integrity system is to be completed by 2010. In 2005, the PRC joined the ADB/Organization for Economic Co-operation and Development (OECD) Anti-Corruption Initiative for the Asia-Pacific.

(iv) ADB’s experience with country performance at the project level has been highly satisfactory. The PRC portfolio has been one of the best performing portfolios within the bank. This is attributable to a high degree of government ownership and fairly strong institutional and implementation capacity. Furthermore, all projects in the PRC have contributed to modernizing institutional structures for building and managing wastewater plant or railways, and for doing so in a transparent manner along commercial lines.

(v) However capacity building is very important as ADB-financed projects are increasingly moving to the poorer western provinces/regions where the problems of weak financial management, institutional capacity and corporate governance are more acute. One area of that should be emphasized is whilst the PRC has passed and implemented a large number of laws, policies and regulations to address the problems, enforcement and supervision at the local government level is weak and becomes worse in small cities, counties and towns, particularly in the less developed western region.

210. The Government of the PRC has passed two laws that regulate public procurement: the law on tendering and bidding (TBL) effective January 2000, which governs public sector procurement, generally financed from fixed asset funds for large public works projects, including equipment, materials, and services procured under those projects; and the government procurement law (GPL), effective from January 2003, which extended this legal coverage to all government procurement activity financed by state budgetary funds. The passage of the GPL established a broader legislative framework for procurement. The MOF is mandated to supervise and administer the GPL. 211. The sector specific risk assessment previously performed has drawn the following conclusions in respect of wastewater management:

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(i) ADB urban sector loans in the PRC have generally been well implemented, based on the experience gained in carrying out sanitation and wastewater management projects in the past decade.

(ii) Expansion of the wastewater management capacity is somewhat hampered by a

weak financial situation of the service providers, typically government departments for drainage and solid waste management.

(iii) Although internal control policies and procedures are generally in place in most

executing agencies, the implementation status of the controls and policies varies significantly. The lack of established and functioning internal control systems has been confirmed by the Chinese National Audit Office (CNAO).

(iv) Internal auditing remains a weak link in expenditure management. Some

agencies have their own internal audit department; the internal audit department of their parent covers others that are part of their parent entity but most internal audit units are “under the direct authority of the executive branch, compromising their independence” and the focus is largely on compliance audits.

(v) Quality constraints in (external) audit reports have been identified underlying the

imperative need to improve sub-optimal capacity for financial reporting. Inaccurate and incomplete recording of transactions due to technical weaknesses or disregard for accuracy and comprehensiveness can obscure fraudulent activity and impede auditing and restrict management control and oversight.

(vi) Procurement under ADB financing has been carried out generally satisfactorily.

While there have been no serious deviations from the Guidelines and ADB procedures, there have been cases where the procedures have not been strictly followed.

(vii) Officials undertaking procurement often come across issues that require

clarification. Currently they seek clarification from other colleagues who may have come across the same issue or seek advice, assistance from ADB staff at the PRCM. This is time consuming and often results in delays. As project implementation for wastewater projects becomes further decentralized, future projects are likely to be comprised of a number of smaller projects implemented by implementing agencies unfamiliar with ADB Procurement Guidelines. The staff will need to undergo extensive training and learn ADB practices and procedures. This all takes time and compounds delays.

9.3 Scope and methodology of the risk assessment for the XIUDP 212. The proposed XIUDP is a broadly based urban development project involving interventions in water supply, wastewater management, river rehabilitation, municipal solid waste management, and improvement of local urban roads. As such the lessons from the wastewater management sector analysis performed at country level are broadly applicable to the whole project as most (although not all) of the project services are managed and/or regulated by the local urban construction departments of the city governments.

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213. Based on the country and sector risk analysis the risks level of the XIUDP is inherently somewhat higher than would apply to similar sector projects in larger cities due to lower management and financial capacity. This especially applies to Kuitun, but less so to Kelamayi and places an increased focus on risk management and related capacity building as the principal means of addressing this higher level of risk. 214. In accordance with GACAP and the country risk assessment a project risk assessment and management plan has been prepared for the XIUDP which embraces public financial management, procurement and anti-corruption controls. Each of these three areas is discussed in turn. 215. In accordance with GACAP and the country risk assessment a project risk assessment and management plan has been prepared for the XIUDP which embraces public financial management, procurement and anti-corruption controls. Each of these three areas is discussed in turn. 216. Public financial management. The public financial management risk assessment is drawn from the financial management assessment (FMA) undertaken under financial analysis work of the PPTA and which made use of ADB’s financial management assessment questionnaire (FMAQ). The FMA considered both inherent risks and control risks.

(i) Inherent risk is the susceptibility of the project financial management system to factors arising from the environment in which it operates, such as country rules and regulations and entity working environment (assuming absence of any counter checks or internal controls).

(ii) Control risk is the risk that the project’s accounting and internal control

framework are adequate to ensure project funds are used economically and efficiently and for the purpose intended, and that the use of funds is properly reported.

217. The FMA undertaken embraces the key risks identified in the country and sector risk assessment being

(i) weaknesses concerned understanding of and adherence to financial management policies and procedures of ADB,

(ii) budget preparation and oversight, (iii) strengthening the internal audit function, and (iv) putting in place systems to ensure financial data is safeguarded.

218. The overall risk assessment from the FMA was that both the inherent and control risks for the XIUDP be rated as “negligible to moderate”. 219. Procurement. The procurement risk assessment is largely drawn from the procurement capacity assessment undertaken as part of the institutional analysis work of the PPTA (See Section 7 and Annex 1 of this Appendix and which made use of a customized procurement capacity assessment questionnaire, which has been used in several previous PPPTA. 220. The risk assessment undertaken embraces the key risks identified in the country and sector risk assessment being:

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(i) the adequacy of procurement capacity; (ii) lack of professionalism in the procurement function; (iii) inadequate monitoring and supervisory procedures; (iv) inadequate procurement planning; (v) excessive contract variations; (vi) delays in the procurement process; and (vii) contractors/suppliers lack the capacity to execute contracts.

221. Important risk mitigation measures include (i) the decision that Xinjiang project management office will assume the lead role in the procurement process, supported by procurement specialists from Xinjiang housing and urban-rural development bureau; (ii) the use of specialist procurement agencies (tendering companies); and (iii) training, advice and support from the loan consultants; and good preparations in terms of project planning and training in ADB procedures. With these mitigation measures in place the overall risk assessment is considered to be negligible to moderate. 222. Controls to minimize the risk of corruption. The risk assessment relating to corruption is largely made based on the identification of potential corruption related risks identified in the PRC wastewater management sector risk assessment where these appear relevant at the project level. These are

(i) corruption in the procurement process; (ii) lack of clarity in responsibility for anti-corruption measures; (iii) failure to enforce anti-corruption measures; (iv) numerous standards for the behaviour of public officials and the complex

language of regulations; and (v) constrained capacity to conduct effective audit of ADB-financed projects.

223. In addition the specific risks of (i) the existence of conflicts of interest and (ii) a lack of transparency as facilitators of corruption or favouritism are included in the assessment made. 224. The overall risk assessment in respect of a failure of anti-corruption controls in relation to the project is judged to be “negligible to moderate”. The main concern is that corruption can easily go unidentified, especially where there is collusion. 9.4 Summary of proposed mitigation measures. 225. The table below assesses all the risks identified above, identifies related mitigation measures built into the project design and assesses risk with and without mitigation.

Table 9.1: Summary Risk Assessment and Risk Management Plan

Risk Description Risk

Assessment Mitigation Measures or Risk Management Plan

(i) Country-specific risks: Inadequacy of financial management, management and skills capacity.

Medium

There are existing resident skills, expertise, and experience in most areas for timely and successful implementation. Training will be given to Kelamayi financial staff to familiarize them with ADB requirements.

(ii) Entity-specific risks Inadequate understanding of roles between executing, implementing and other agencies.

Low A clear organizational structure of the executing and implementing agencies is already established in relation to the project, and separation of roles and responsibilities between parties are clear. Work plans of core activities for agency project personnel are well developed.

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Risk Description Risk

Assessment Mitigation Measures or Risk Management Plan Internal audit function is inadequate.

Several forms of government audit will be applied under the overall oversight of Xinjiang Regional Audit Bureau.

(iii) Project-specific risks: Kelamayi lacks experience in ADB projects. Large-scale resettlement in Kuitun will involve numerous transactions and an extended funds flow.

Medium

Technical assistance is to be provided in ADB disbursement procedures and project accounting. Existing XUAR government experience and capacity will be leveraged and made available for the project.. Specific audit controls will be applied to resettlement disbursements in accordance with PRC procedures.

(i) Implementing entity financial management policies and procedures for the project are inadequate.

Medium

Written financial procedures will be developed in Kelamayi for the ADB project and reviewed by suitably experienced XUAR government officials.

(ii) Funds flow: inadequate ability to interpret and adhere to ADB guidelines for disbursement and withdrawal of project funds by executing and implementing agencies.

Medium

Executing and implementing agencies will liaise regularly with ADB to ensure that ADB guidelines are followed. Loan disbursement performance will be addressed through multi-level interagency coordination. Regular training on ADB’s disbursement policies will be provided. Separate accounts for all project components financed by ADB and the government will be maintained and audited. Direct payment procedures will generally be used for large civil works, equipment contracts and consulting service contracts.

(iii) Staffing: Problems with staff turnover and adequacy of staff financial management skills. PIU accounting staff have inadequate understanding of ADB requirements.

Medium Thorough training on ADB’s disbursement procedures and project accounting requirements will be provided There will be oversight of disbursement by experienced financial staff at the executing agency level. Loan consultants will provided guidance and support.

(iv) Account and bank reconciliations are not timely

Medium Qualified and trained staff will undertake account and bank reconciliations on a periodic basis. Minor weaknesses identified in the FMA will be addressed prior to project commencement.

(v) Internal audit department has inadequate capacity

Medium The small size of the implementing agencies makes it difficult to for them to justify having their own internal audit staff. Some forms of government audit will be strengthened to address this shortcoming.

(vi) External audit fails to provide a thorough review of compliance with accounting regulations and financial covenants.

Low Independent external auditors acceptable to ADB and the government will be appointed by the executing agency to audit project accounts and compliance with financial covenants on an annual basis.

(vii) Failure to provide regular financial reports that meet user needs.

Medium The executing agency will be required to make comprehensive progress reports (including financial) to ADB twice per year. Financial project reporting will need to comply with PRC Ministry of Finance requirements. Xinjiang will oversee compliance. Loan consultants will advise on improving financial management reports.

(viii) Information systems are not secure and financial data is not backed up on a regular and timely basis.

Low

The FMA has concluded that existing arrangements are adequate. Minor weaknesses identified in the FMA will be addressed prior to the project commencement.

2. Procurement

(i) Kelamayi lacks Medium The executing agency will take a leading role in the

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Risk Description Risk

Assessment Mitigation Measures or Risk Management Plan experience with procurement under ADB-funded projects.

procurement process and exercise control. Specialist tendering companies will be used to enhance capacity. Training in ADB procurement procedures will be provided during project preparation and via the loan capacity building component.

(ii) Procurement function lacks professionalism.

Medium Specialist tendering companies will be used to enhance professionalism. Procurement professionals will be seconded to PMOs. Accredited experts will be used for bid evaluations.

(iii) There are a lack of monitoring mechanisms to oversee the procurement process.

Low Effective supervisory and monitoring arrangements are already in place through the involvement of Xinjiang PMO.

(iv) Contract variations occur frequently.

Medium Experienced design institutes, tendering and construction supervision companies will be involved.

(v) Lack of proper procurement scheduling.

Low A detailed procurement plan has been prepared under the PPTA and subject to ADB review.

(vi) Delays in the procurement process.

Medium Training will be provided in project management and planning. Appropriate use will be made of advance procurement action, and standard bidding documents will be used. Tendering companies and loan consultants will provide advice and support.

(vii) Non-performance by contractors or suppliers.

Medium

Performance guarantees will be used, and past performance will be investigated and/or monitored. Loan consultants and/or the ADB PRC Resident Mission will provide advisory support when potential problems are identified.

3. Governance and Corruption Risks (i) Corruption in the procurement process.

Medium Addressed under procurement risks. Local supervision and anticorruption departments at the city and Xinjiang level will be involved and inspected. ADB procurement guidelines and procedures will be used. Transparency in the procurement process will be increased.

(ii) Lack of clarity in responsibility for anticorruption measures.

Medium

While overlaps undoubtedly exist, the national-level focus to identify and address corruption is likely to result in investigation of possible corruption. ADB contracts will contain clauses to clarify responsibilities of and consequences for contractors in case of corruption.

(iii) Failure to enforce anticorruption measures.

Medium

The government has introduced an integrity program that targets prevention and punishment. The loan capacity-building program will include the strengthening of governance mechanisms.

(iv)The existence of conflicts of interest.

Medium

Institutional due diligence has been performed under the PPTA and no apparent conflicts have been identified. Government officials are required to declare conflicts of interest.

(v) Lack of transparency. Medium

Loan conditions will promote greater transparency. Government officials in the PRC are required to declare personal and family wealth.

4. Other Project Risks (i) Lack of project coordination between agencies.

Medium Xinjiang PMO project monitoring support from project implementation consultant.

(ii) Delays in land acquisition. Medium to high Results from detailed measurement survey will be updated if there are design changes. Affected persons’ compensation funding will be made available early. Resettlement plans will be strictly complied with. The development of resettlement sites and replacement housing and shops will be expedited.

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Risk Description Risk

Assessment Mitigation Measures or Risk Management Plan (iii) Counterpart funding delays. Medium Municipal governments will provide covenanted

assurances for timely provision of counterpart funding. Direct coordination with the Xinjiang Regional Finance Bureau.

(iv) Unsustainable operations and maintenance of physical components.

Medium There will be long-term capacity building for nominated O&M agencies, and regular tariff reviews. Municipal governments have provided assurance of funding.

(v) Failure by the public to change behavior.

Medium A community-based, environmentally friendly behavior-change campaign will be conducted.

Overall Medium ADB = Asian Development Bank, FMA = financial management assessment, PIU = project implementation unit, PMO = project management office, PPTA = project preparatory technical assistance, PRC = People’s Republic of China, XUAR = Xinjiang Uygur Autonomous Region. Source: Asian Development Bank. 10 Conclusions and Recommendations 10.1 Overall project implementation arrangements

226. Xinjiang Regional Government (XUARG) as the designated executing agency for the project has established a high level project leading group (PLG) and a multi-disciplined project management office (PMO). This is essentially the same project management structure as has applied for the preparation and implementation of the three earlier urban development projects in Xinjiang. Hence this arrangement is well proven and the regional PMO has strong experience and capacity to manage this new ADB project. 227. Both Kelamayi and Kuitun cities have established their project management structure comprising a PLG to provide overall project direction and resolve issues that cannot be dealt with at the working level, and a multi-disciplined PMO to undertake day to day project management and coordination. The city level PMOs are under the construction bureau and the housing and urban-rural development bureau in Kelamayi and Kuitun respectively. These project coordinating agencies as designated by the city governments are actively involved in urban construction on a day to day basis and well placed to oversee XUIDP project management on a day to day basis. 228. The above project management arrangements and structure are commonly used in the PRC and has been shown to be conceptually sound. However, Kuitun City has only limited experience with the implementation of an ADB project and Kelamayi City has no such experience. There is therefore a clear need for project city level capacity building in ADB requirements and procedures for the implementation phase of the project. Assessments made in relation to procurement capacity, financial management and project management experience the various PMOs together the anti-corruption mechanisms that exist have rendered satisfactory results. 229. It is therefore concluded that subject to capacity building in selected areas, both the institutional arrangement and the implementation capacity of the implementing agency is fully conducive to a successful project implementation. 10.2 Proposed O&M arrangements

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230. Both cities have now determined the O&M arrangements for each of the subprojects. In each case, the choice of nominated O&M units is the agency that is currently responsible for the provision of the relevant urban service and thus gives both continuity and utilizes existing capacity. This also gives a solid base for the further O&M capacity building that is needed. 231. Whilst all the O&M units can undoubtedly benefit from some capacity building input, there are two agencies that will need to be given a special attention, although for very different reasons:

(i) Kelamayi District Landscaping Bureau will assume responsibility for the management and operation of the newly constructed Jiugongli wetland and this will be a significant broadening of this agency’s existing responsibilities requiring capacity building in integrated wetland management, and more specifically in insect control and in pollution prevention and response planning. It is also suggested the agency receive support in selecting and implementing the optimum operational arrangement for the wetland – be that in-house management or via an outsourcing contract.

(ii) Kuitun Water Supply Company is a traditional local Chinese water company which

suffers from poor levels of financial capacity, inadequate infrastructure and a lack of modern equipment and technology. Significant institutional strengthening is therefore needed if this company is to provide a water supply service that meets the needs of the Kuitun city and its residents.

232. 2Understandably, O&M is currently better funded in Kelamayi than it is in Kuitun and appropriate assurances to fully fund the O&M of project facilities should be included in the project legal documents. 10.3 Water management

233. Institutional arrangements for water sector management in both cities are not as integrated as they might be. The importance of integrated water management increases significantly if a city is “water-stressed” as both Kelamayi and Kuitun are, along with many other cities in Xinjiang. Consultations with both cities indicate the benefits of greater integration are recognized but that there are significant impediments to full integration of water management at the present time. The priority, based on the PPTA due diligence work, is clearly to establish a more integrated approach to water planning. 234. Furthermore both cities use a flat rate water tariff and both water and wastewater services are subsidized to a significant extent. The incentive on users to conserve water is therefore much reduced. Tariff reform is needed to put the provision of urban water services on a sounder financial footing and also to increase the incentive on users to conserve water. 235. Irrigation use of water is a major part of total water demand in both cities and therefore is a logical water conservation priority. The project design does not include specific initiatives in this area, but it is proposed that integrated planning and water conservation feature as part of the capacity building, as well as a study on optimizing wastewater reuse, and consideration of other non-traditional sources of water. Similarly a review and planning study for future urban sludge management is proposed. 236. As referred to above the capacity of the Kuitun WSC, in terms of its technical skills level, its financial capacity and the condition of its infrastructure is a cause for concern. One strategic

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solution that should be investigated would be to seek majority private sector investment in this company. Specific investments included with the project of a capacity building nature include enhancing NRW management capability and upgrading technology applied to the testing of tap water quality. 10.4 Kuitun flood control

237. Institutional arrangements for flood control have been examined and comprehensive flood control and emergency response plans are found to exist, with responsibilities for dealing with any flood incidents. The main capacity gap appears to be the lack of available flood maps and a concern over current maintenance arrangements and funding. 10.5 Lack of local government empowerment

238. In Kelamayi, some of the land earmarked for the wetland construction is owned by the PetroChina Oil Company. This company is a state-owned enterprise supervised directly by the national government which means that Kelamayi municipal government has no effective control over its operations and receives no direct tax revenues from it. This company exerts massive influence on the city, and it is said the livelihoods of over 90% of the urban population are dependent on its operations. This situation further diminishes the authority of Kelamayi municipal government, however from discussions held it apparent that the company is fully involved in the project and very supportive of it. 239. In both cities the respective local governments do not have full control over all land and water resources. This is due to the existence of the Xinjiang Army Construction Corps (XACC) which is an organization that also reports to the national government and controls a large amount of land in Xinjiang, which even XUARG, has limited control over. This institutional arrangement is both historic and apparently well-entrenched. The project therefore has to be designed around this arrangement rather than making any real attempt to change. 10.6 Potential institutional reforms

240. A number of institutional constraints or anomalies have been identified that have either complicated project design or potentially lead to sub-optimal performance in the sectors covered by the project. None of these reforms are considered to be pre-conditions for project success but we believe do merit consideration by the appropriate authorities.

(i) The existence of XACC as a major land owning organization with a political status broadly equivalent to XUARG compromises the ability of local governments to effectively administer their designated areas, and weakens them financially. As a matter of principle it is felt that any landowner or business operating in a local government area should be subject to local laws and the regulatory authority of the local government concerned. It is suggested this point be pursued as a matter of policy dialogue as suggestions on specific institutional reforms are well outside the scope of this PPTA.

(ii) Both city governments should over time consider greater institutional integration of water sector management. The most logical reform in the short or medium term would be to create an integrated “Water Affairs Bureau” in the same way that has been established in other Chinese cities, such as Beijing and Shanghai. This would immediately facilitate greater integration in water sector planning.

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(iii) In addition, each city should consider establishing a standing high level committee led by a Vice Mayor to coordinate water, economic development (including agriculture) and urban planning activities, resolve conflicting demands for water allocations and ensure planned city development is sustainable from a water management perspective.

(iv) Both cities should consider alternative means of delivering urban services from the direct government management of operations as applies in most cases at the present time. In particular, greater use of genuinely competitive outsourcing or management contracts should be considered. This would implement the central government policies of government downsizing, increasing market competition in the urban management sector, and government assuming a regulatory rather than management role in service provision.

(v) As referred to above, serious consideration should be given the introduction of private investment into Kuitun Water Supply Company, possibly even a full privatization. However, tariff reform would be a pre-requisite for making this viable.

(vi) In Kelamayi, the water supply department of PetroChina Xinjiang Oilfield Company should be made a separate legal entity in order that water revenues are fully ring-fenced and to facilitate more effective and transparent price and service regulation by local government.

10.7 Required changes in laws or regulations

241. The project has been designed within the current legal framework so that it can be implemented without changes in laws or regulations being a necessary pre-requisite to successful project implementation. 242. Regulatory issues that are critical to project success are as follows:

(i) The surface water target classification of the Jiugongli wetland being confirmed and retained as national class V. This is because the technical viability of the tertiary treatment, effluent discharge and reuse scheme is dependent on this classification, and if the target was revised upward to class IV the project would no longer be viable.

(ii) Effective regulatory enforcement of industrial wastewater discharges, especially within the drainage catchments of the Nanjiao and Jiugongli WWTP in Kelamayi.

243. Both of these matters are the subject of covenants (assurances) in the XUIDP project agreement that have been agreed with the XUARG during project preparations. 244. Regulatory gaps that can be identified and which, if filled, could help improve sector/project performance or reduce risk are as follows

(i) safety guidelines (including monitoring and record keeping) for both wastewater reuse and sludge utilization on land; and

(ii) regulations and guidelines requiring cities to establish procedures for the measurement and ongoing reporting of city-wide GHG emissions.

10.8 Capacity building needs and proposals

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245. This appendix contains quite extensive capacity building proposals which are considered a very important safeguard to the achievement of ultimate project success and which complement the proposed physical investments. The proposed investment in capacity building is $1.6 million and includes for 9 months of international consulting and 115 months of national consulting. Annex 5 provides the budget breakdown and assumptions made. Annex 4 provides the recommended specification for the consulting services.

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Annex 1: Procurement Capacity Assessment – Completed Questionnaires

1. PRC Country Level Procurement Assessment (as conducted by ADB)

General Procurement Environment Assessment Risk Assessed as Low Average High

1. Is there a procurement law? The answer to this is a simple yes or no, i.e. is there a single law governing procurement which is representative of best practice or is procurement governed through various laws, decrees etc.? Assess this as either “High” or “Low”.

X

2. Are the laws and regulations clear and concise? If there is no single law check “high”, and similarly if the law is complex and difficult to follow check “average”. If the law is easy to follow check “low”.

X

3. What does the law (or regulations applicable to procurement) cover? If there is a single law, “low” will apply when the law covers drafting and use of standard bidding documents evaluation, contracting, through to the management of contracts including payment, warranty and defects liability periods. The less the procurement process is covered the higher the risk. If there is no single law, check “high”.

X

4. Does the law cover the procurement of consulting services? If consulting services are not covered or there is no law the risk is high, if they are covered the risk is low.

X

5. Does the law differentiate between processes for consulting services and Goods/Works? If there is no law, or it applies the same processes to consulting services as for goods and works check high. If there is some differentiation but the processes are similar, check average. If consulting services are dealt with separately check low.

X

6. Does the law require advertisement of all procurement opportunities Low risk will be represented through advertisement all above $25,000, average above all above $100,000, high by no advertisement or advertisement at a higher threshold than $100,000.

Requirements are different in different provinces and sectors

7. Are contract awards advertised? The same thresholds as stated at question 6 should be applied 8. Are there restrictions on goods works and services on the basis of origin? If procurement is limited to solely national origin check high, if there are restrictions or a national preference scheme, average. If None low.

X

9. Do the law or relevant legislation and regulations provide acceptable provision for the participation of state owned enterprises? Only if the SOE is legally and financially autonomous and not a dependent agency of the purchaser low, other than this high.

X

10. Are there restrictions on the nationality of bidders and consulting firms invited? If procurement is limited to solely national firms and individuals check high, if there are restrictions or a national preference scheme, average. If None low

X

11. Are foreign bidders and consultants forced to offer through or with local partners? If yes, high; in certain circumstances, average; never, low

X

12. Is there a domestic preference scheme? If there is across the board high, if applicable in limited circumstances, average, if none, low.

X

13. Is there a national standard mandated for use for quality control purposes? No, or Yes with direct, accessible international equivalents low, yes without international equivalents high.

X

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General Procurement Environment Assessment Risk Assessed as Low Average High

14. Are any agencies exempt from the law? Such as the security forces, if yes high, also high of any types of goods are exempt from parts of the law such as medicines, text books or any other commodity.

For government procurement, yes; For general procurement, no

15. Is the default method for procurement open competition? Either yes or no and low or high. X

16. Is open procurement easily avoided? If the procurement law allows avoidance of open procurement above the national threshold on the basis of circumstances that are not in response to natural disasters, i.e. simple urgency, check high, if open procurement can be avoided by senior management decision average. If avoidance requires approval of an oversight agency, low.

X

17. Do the rules and regulations require pre-qualification? Only for complex contracts, low, no contracts average, all contracts high. X

18. Do the rules and regulations require registration? If yes, high, if only for specialist goods such as medicines average. If no registration low.

Require company registered

19. Are there systematic procurement process audits? Yes, low. Only financial audits average, none, high X

20. Is there a national procurement manual or guide? A single procurement manual or guide, low, manual exists but out of date/not in wide use average, none high.

X

21. Do the laws and regulations mandate the use of standard documents? Documents for goods, works and consultants services low, just for 2 of the three averages, only one or none high.

Depend on sectors, some line ministries have standard documents

22. Have these standard bidding documents been approved for use on ADB projects? Yes low, some but not all average, no high.

X

23. Do the regulations require the collection of nationwide statistics on procurement? Yes and statistics collected low, yes but data not collected or used average, no high.

X

24. Is consolidated historical procurement data available to the public? Yes low, too much or too little, average, no high. X

25. Do the procurement laws and regulations contain provisions for dealing with misconduct? Such as fraud and corrupt practices – the procurement law or regulations may include or cross refer to anti-corruption legislation. Yes low, no high.

X

26. Is fraud and corruption in procurement regarded as a criminal act? The penalties should include penal servitude (prison) yes low, no high. X

27. Have there been prosecutions for fraud and corruption? If there have been successful prosecutions for fraud and corruption, low, if prosecutions seem to focus solely on low grade junior staff average, none high

X

28. Is there an alternative disputes resolution process independent of government and courts? If there is an arbitration law and independent process low, if the standard contracts use ICC or similar dispute resolution average, if arbitration is through the courts or can be overturned by courts high.

X

29. Does the law allow for sovereign immunity to the executing agency for claims against it? If plaintiffs can sue the government for contractual non-performance low, if they cannot high

X

30. Do the regulations allow for black listing (disbarment) of firms and individuals? If there is no black listing process or the process is transparent and equitable

X

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General Procurement Environment Assessment Risk Assessed as Low Average High

and undertaken by an independent oversight agency low. If there is a process and it is administered by a single line agency such as finance average, if it is administered by the executing agency high. 31. Which body oversees procurement? Independent body reporting to the elected body low, single body reporting to the cabinet average, no body or reports to a single state agency such as the Prime Minister or Finance Minister high.

By government at different levels

32. What powers does the oversight body have? If the body can impose administrative sanctions on an executing agency and its staff and overturn contact awards including ministerial decisions low, if the body only can impose sanctions through the head of the executing agency, average, if the body can only recommend action high.

X

33. Is there a nationwide procurement training plan? If procurement training is assessed and planned for nationwide low, if this is delegated to line agencies average, if there is no strategy or plan high.

X

34. Is there a procurement accreditation or professionalization program? An externally recognized program low, a government sponsored program average, none, high.

X

35. Are major projects identified within an agencies appropriation or budget? Yes low, no but a system in place for the ring-fencing of project funds average, neither low.

X

36. Is the procurement cycle tied to an annual budgeting cycle? I.e. can procurement activity only commence once a budget is approved? No a medium expenditure framework is in place low, activity may start up to but excluding contract award average, yes tied to annual budget high.

Budget need to be approved, but may not be always on annual basis.

37. Once an appropriation or budget is approved will funds be placed with the executing agency or can the executing agency draw them down at will? Yes low, no–additional controls imposed high (such as cash release system)

X

38. Can an executing agency draw directly from a loan or imprest account or will it spend budgeted funds with the borrower claiming reimbursement? Draws directly low, from budgeted funds high

Both

39. When an executing agency is implementing a project using funds from the national budget has a delay in funding significantly delayed procurement? No or not applicable low, yes high.

X

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2. Capacity Assessment Questionnaire - XUARG PART A: General Resource Assessment Response A.1. Is there a procurement department? Yes A.2. What procurement does it undertake? Executing agency is responsible for

coordinating, providing guidance to city PMOs / implementing agencies and reporting to relevant departments.

A.3. Are the staffs provided with written job descriptions? Yes A.4. How many years experience does the head of the procurement unit have in a direct procurement role?

15 years

A.5. How many staff in the procurement department are: i. Full Time? 1 ii. Part Time? 1 iii.Seconded? 2

A.6. At what level does the department report (to the head of agency, deputy etc.)?

Head of XPMO

A.7. Do the staffs that will be involved with the procurement have English language skills sufficient to undertake international procurement?

Yes

A.8. Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project?

Yes

A.9. Does the unit have adequate facilities such as PCs, internet connections, photocopy facilities, printers etc. to undertake the expected procurement?

Yes

A.10. Is there a procurement training program? Yes PART B: Procurement Processes: Goods and Works B.1. Has the agency undertaken foreign assisted procurement of goods or works recently (last 12 months, or last 36 months)? (If yes funded by whom and name of the project).

Yes, Xinjiang Municipal Infrastructure and Environmental Improvement Project, Xinjiang Urban Transport and Environmental Improvement Project & Xinjiang Altay Urban Infrastructure and Environment Improvement Project. (All ADB funded)

B.2. If the above is yes, what were the major challenges? The procedures for funding were rather slow.

B.3. Is there a procurement process manual for goods and works?

No

B.4. If there is a manual is it up to date and does it cover foreign assisted procurement?

No

B.5. Is there a systematic process to identify procurement requirements (1 year or more)?

Yes.

B.6. Who drafts the specifications? Implementing agency with the assistance of design institute

B.7. Who approves the specification? Executing agency B.8. Are there standard bidding documents in use and have they been approved for use on ADB funded projects?

Yes, ICB use ADB format, and NCB use domestic format.

B.9. Who drafts the bidding documents? Technical: Implementing agency with assistance of design institute; Commercial: bidding agent.

B.10. Who manages the sale of the document? Bidding agent B.11. Are all queries from bidders replied to in writing? Yes B.12. Is there a minimum period for preparation of bids and if yes how long?

10 days

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B.13. Does the bidding document state the date and time of opening and how close is it to the deadline for submission?

Yes, immediately

B.14. Is the opening public? Yes B.15. Can late bids be accepted? No B.16. Can bids be rejected at bid opening? Late bids will be rejected. B.17. Are minutes taken? Yes B.18. Who may have a copy of the minutes? All tenderers B.19. Are the minutes free of charge? Inclusive; no separate charge B.20. Who undertakes the evaluation (individual(s), permanent committee, ad-hoc committee)?

Tender evaluation committee composing of clients and experts

B.21. What are the qualifications of the evaluators in respect to procurement and the goods and works under evaluation?

Selected randomly from expert database

B.22. Is the decision of the evaluators final or is the evaluation subject to additional approvals?

The decision from the evaluation committee is final.

B.23. Using at least three real examples how long between the issue of the invitation for bids and contract effectiveness?

See City level examples. XPMO just is part of the overall project procurement process working to support the city needs and ensure quality control.

B.24. Are there processes in place for the collection and clearance of cargo through ports of entry?

Yes

B.25. Are there established goods receiving procedures? City PMOs / PCAs have. B.26. Are all goods received recorded as assets or inventory in a register or similar?

Yes

B.27. Is the agency / procurement department familiar with letters of credit?

Not familiar

B.28. Does the procurement department register and track warranty and latent defects liability periods?

City PMOs / PCAs will track.

PART C: Procurement Processes: Consulting Services C.1. Has the agency undertaken foreign assisted

procurement of consulting services recently (last 12 months, or last 36 months)?

Yes, within the last 12 months

C.2. If the above is yes what where the major challenges? No major challenges encountered C.3. Is there a procurement process manual for consulting

services procurement? No; will follow ADB guidelines

C.4. Is the manual up to date and does it cover foreign assisted projects?

N/A

C.5. Who identifies the need for consulting services requirements?

Implementing agencies and executing agency

C.6. Who drafts the ToR? Implementing agencies and executing agency

C.7. Does the ToR follow a standard format such as background, tasks, inputs, objectives and outputs?

Yes

C.8. Who prepares the request for proposals? Implementing agencies and executing agency

C.9. Are assignments advertised and expressions of interest called for?

Yes

C.10. Is a consultants’ selection committee formed with appropriate individuals in terms of procurement and technical expertise?

Yes

C.11. What criteria are used to evaluate EOIs? Firms with experience of similar projects in particular in Xinjiang; key staff with experience of similar projects in particular in Xinjiang; key staff can communicate in Chinese; also following ADB guidelines

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C.12. Historically what is the most common method used (QCBS, QBS etc.)?

QCBS

C.13. Do firms have to pay for the proposal document? Yes C.14. Do the evaluative criteria follow a pre-determined

structure and are they detailed in the RFP? Yes

C.15. Are pre-proposal visits and meetings arranged? Yes C.16. Are minutes prepared and circulated after pre-

proposal meetings? Yes

C.17. To who are minutes distributed? All bidders C.18. Are all queries from consultants answered to in

writing? Yes

C.19. Are the financial and technical proposals in separate envelopes?

Yes

C.20. Are proposal securities required? Yes C.21. Are technical proposals opened in public? No C.22. Do the financial proposals remain sealed until

technical evaluation is completed? Yes

C.23. Are minutes of technical opening distributed? No C.24. Who determines the final technical ranking and how? The evaluation panel; scoring based on

the prescribed scoring criteria C.25. Are the technical scores published and sent to all

firms? Yes

C.26. Is the financial proposal open in public? Yes C.27. Are there minutes taken and distributed of financial

proposal opening? Yes

C.28. How is the financial evaluation completed? Bid confirmed after checking for any calculation errors and any missing items

C.29. Are face to face contract negotiations held? Yes, with successful bidder C.30. How long after financial evaluation is the selected firm

to negotiate? Typically one week after receiving ADB’s no-objection

C.31. What is the usual basis for negotiation? Based on technical and financial proposals

C.32. Are minutes of negotiation taken and signed? Yes C.33. How long after negotiations until the contract is

signed? As soon as practicable, domestic and ADB sign-off required.

C.34. Are advance payments made? Depends on contract conditions, but not usually.

C.35. Is there an evaluation system for measuring the outputs of consultants?

Yes

PART D: Process Oversight and Control D.1. Is there a standard statement of ethics and are those

involved in procurement required to formally commit to it? Yes

D.2. Are those involved with procurement required to declare any potential conflict of interest and remove themselves from the procurement process?

Yes

D.3. Is the commencement of procurement dependent on external approvals (formal or de-facto) outside of the budgeting process?

Proposed by implementing agencies and approved by XPMO on behalf of the executing agency

D.4. Who approves procurement transactions and do they have procurement experience and qualifications?

Procurement transactions are all approved by experienced and qualified staff. XPMO endorses/approves all key actions in the procurement process.

D.5. Which of the following actions require approval outside of the procurement unit or a permanent evaluation committee and who grants the approval?

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a) Bidding document, invitation to pre-qualify or request for proposal

Yes, XPMO on behalf of the executing agency

b) Advertisement of an invitation for bids, pre-qualification or call for expressions of interest

Yes, XPMO on behalf of the executing agency

c) Evaluation reports Yes, Evaluation Committee prepares for implementing agency/executing agency endorsement.

d) Notice of award No e) Invitation to consultants to negotiate Yes, XPMO on behalf of the executing

agency f) Contracts Yes, XPMO on behalf of the executing

agency D.6. Is contractual performance systematically monitored and reported upon?

Yes

D.7. Does the agency monitor and track its contractual payment obligations?

Yes

D.8. On average how long is it between receiving a firm’s invoice and making payment?

Depending on the process, normally about one month

D.9. What is the standard period for payment included in contracts?

No standard period

D.10. When payment is made late are the beneficiaries paid interest?

No

D.11. Are payments authorized by the same individuals empowered to approve invitation documents, evaluations and contracts?

No

D.12. Is there a written auditable trail of procurement decisions attributable to individuals and committees?

Yes

D.13. Are procurement decisions and disputes supported by written narratives such as minutes of evaluation, minutes of negotiation, notices of default / withheld payment?

Yes

D.14. Is there a formal non-judicial mechanism for dealing with complaints?

Yes

D.15. Is a complaints resolution mechanism described in national procurement documents?

Yes

PART E: Records Keeping E.1. Is there a referencing system for procurement files? Yes E.2. Are original contracts secured in a fire and theft proof location?

Yes

E.3. Are copies of bids or proposals retained with the evaluation?

Yes

E.4. Are copies of the original advertisements retained with the pre-contract papers?

Yes

E.5. Is there a single contract file with a copy of the contract and all subsequent contractual correspondence?

Yes

E.6. Are copies of invoices included with contract papers? Copies of invoices are kept separately. E.7. For what period are records kept? 30 years ADB = Asian Development Bank, EA = executing agency, EOI = expression of interest, IA = implementing agency, ICB = international competitive bidding, DI = design institute, NCB = national competitive bidding, XPMO = Xinjiang project management office, RFP = request for proposal, TOR = terms of reference, QBS = quality-based selection, QCBS = quality- and cost-based selection.

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3. Procurement Capacity Assessment Questionnaire – Kelamayi PART A: General Resource Assessment Response A.1. Is there a procurement department? Yes A.2. What procurement does it undertake? All project procurement in Kelamayi A.3. Is the staff provided with written job descriptions? Yes A.4. How many years of experience do the head of the procurement unit have in a direct procurement role? More than 10 years

A.5. How many staff in the procurement department are: 6 i. Full Time? 1 ii. Part Time? 2 iii. Seconded? 3

A.6. At what level does the department report (to the head of agency, deputy etc.)? Director of Construction Bureau

A.7. Does the staff that will be involved with the procurement have English language skills sufficient to undertake international procurement?

No

A.8. Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project?

Yes

A.9. Does the unit have adequate facilities such as PCs, internet connections, photocopy facilities, printers etc. to undertake the expected procurement?

Yes

A.10. Is there a procurement training program? Yes PART B: Procurement Processes: Goods and Works B1. Has the agency undertaken foreign assisted procurement of goods or works recently (last 12 months, or last 36 months)?

No

B.1. If the above is yes, what were the major challenges? Not applicable B.2. Is there a procurement process manual for goods and works? No

B.3. If there is a manual is it up to date and does it cover foreign assisted procurement? Not applicable

B.4. Is there a systematic process to identify procurement requirements (1 year or more)? Yes

B.5. Who drafts the specifications? Design Institute

B.6. Who approves the specification? The project owner approves according to the national standards.

B.7. Are there standard bidding documents in use and have they been approved for use on ADB funded projects?

Standard bidding documents used but are not approved for use on ADB funded projects.

B.8. Who drafts the bidding documents?

DI drafts technical part Tendering Company drafts commercial part and incorporates the approved. technical specification

B.9. Who manages the sale of the document? The tendering company B.10. Are all queries from bidders replied to in writing? Yes B.11. Is there a minimum period for preparation of bids and if yes how long?

Yes, 21 days according to the national standards

B.12. Does the bidding document state the date and time of opening and how close is it to the deadline for submission? Yes

B.13. Is the opening public? Yes B.14. Can late bids be accepted? Late bids are not accepted B.15. Can bids be rejected at bid opening? Yes B.16. Are minutes taken? Yes

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B.17. Who may have a copy of the minutes? Internal use only as these also record the evaluation discussions

B.18. Are the minutes free of charge? Yes

B.19. Who undertakes the evaluation (individual(s), permanent committee, ad-hoc committee)?

An expert panel are randomly selected from the expert database maintained by the CB

B.20. What are the qualifications of the evaluators in respect to procurement and the goods and works under evaluation?

They must meet the stipulated national requirements.

B.21. Is the decision of the evaluators final or is the evaluation subject to additional approvals? Final

B.22. Using at least three real examples how long between the issue of the invitation for bids and contract effectiveness?

1. WW collection pipeline construction, 25 days 2. Landscaping water supply pipeline construction: 25 days; 3. Sewage interceptor construction: 28 days

B.23. Are there processes in place for the collection and clearance of cargo through ports of entry?

Yes, must accord to the requirements of PRC customs

B.24. Are there established goods receiving procedures? Yes B.25. Are all goods received recorded as assets or inventory in a register or similar? Yes

B.26. Is the agency / procurement department familiar with letters of credit? No

B.27. Does the procurement department register and track warranty and latent defects liability periods? Yes – both are tracked

PART C: Procurement Processes: Consulting Services C1. Has the agency undertaken foreign assisted procurement of consulting services recently (last 12 months, or last 36 months)?

No

C.2. If the above is yes what were the major challenges? Not applicable C.3. Is there a procurement process manual for consulting services procurement? No.

C.4. Is the manual up to date and does it cover foreign assisted projects? Not applicable

C.5. Who identifies the need for consulting services requirements? Project owner

C.6. Who drafts the ToR? Project owner

C.7. Do the Terms of Reference follow a standard format such as background, tasks, inputs, objectives and outputs?

No prescriptive format is laid down but each of the mentioned elements is normally included

C.8. Who prepares the request for proposals? Project owner C.9. Are assignments advertised and expressions of interest called for? Yes

C.10. Is a consultants’ selection committee formed with appropriate individuals in terms of procurement and technical expertise?

Yes

C.11. What criteria are used to evaluate EOIs? The main one is the experience of the consulting company.

C.12. Historically what is the most common method used (QCBS, QBS etc.)? QCBS

C.13. Do firms have to pay for the proposal document? No – sent out by e-mail C.14. Do the evaluative criteria follow a pre-determined structure and are they detailed in the RFP? Yes

C.15. Are pre-proposal visits and meetings arranged? Not normally

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C.16. Are minutes prepared and circulated after pre-proposal meetings? Yes – if a meeting is convened

C.17. To who are minutes distributed? Short-listed Bidders C.18. Are all queries from consultants answered to in writing? Yes

C.19. Are the financial and technical proposals in separate envelopes? Yes

C.20. Are proposal securities required? No C.21. Are technical proposals opened in public? No C.22. Do the financial proposals remain sealed until technical evaluation is completed? Yes

C.23. Are minutes of technical opening distributed? No

C.24. Who determines the final technical ranking and how? According to the evaluation of an expert panel

C.25. Are the technical scores published and sent to all firms?

Yes, together with the final evaluation result

C.26. Is the financial proposal open in public? Yes C.27. Are there minutes taken and distributed of financial proposal opening? Yes

C.28. How is the financial evaluation completed? According to the evaluation measures in the RFP

C.29. Are face to face contract negotiations held? Yes, unless a simple assignment & bid on a fixed price basis.

C.30. How long after financial evaluation is the selected firm invited to negotiate?

Once the evaluation is approved and ADB no –objection is received an invitation will be sent.

C.31. What is the usual basis for negotiation? Bidding price, contract laws, bidding document and relevant national laws and regulations

C.32. Are minutes of negotiation taken and signed? Yes

C.33. How long after negotiations until the contract is signed?

The consultant is asked to sign the draft contract at the conclusion of negotiations, the government side signature is added once required domestic and ADB clearance has been obtained.

C.34. Are advance payments made? Not normally, if so the consultant has to provide a bank guarantee

C.35. Is there an evaluation system for measuring the outputs of consultants? Yes

PART D: Process Oversight and Control D.1. Is there a standard statement of ethics and are those involved in procurement required to formally commit to it? Yes

D.2. Are those involved with procurement required to declare any potential conflict of interest and remove themselves from the procurement process?

Yes

D.3. Is the commencement of procurement dependent on external approvals (formal or de-facto) outside of the budgeting process?

No

D.4. Who approves procurement transactions and do they have procurement experience and qualifications?

Project Department Manager Yes

D.5. Which of the following actions require approval outside of the procurement unit or a permanent evaluation committee and who grants the approval?

i. Bidding document, invitation to pre-qualify or request Construction Unit auditing

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for proposal ii. Advertisement of an invitation for bids, pre-qualification or call for expressions of interest Project owner

iii. Evaluation reports Project owner iv. Notice of award Project owner v. Invitation to consultants to negotiate Project owner vi. Contracts Project owner

D.6. Is contractual performance systematically monitored and reported upon? Yes

D.7. Does the agency monitor and track its contractual payment obligations? Yes

D.8. On average how long is it between receiving a firm’s invoice and making payment?

7—14 Days following approval of the invoice. Invoice approval depends on the number of issues.

D.9. What is the standard period for payment included in contracts?

14 days from approval of invoice applies for domestic contracts.

D.10. When payment is made late are the beneficiaries paid interest? No

D.11. Are payments authorized by the same individuals empowered to approve invitation documents, evaluations and contracts?

No

D.12. Is there a written auditable trail of procurement decisions attributable to individuals and committees? Yes

D.13. Are procurement decisions and disputes supported by written narratives such as minutes of evaluation, minutes of negotiation, notices of default / withheld payment?

Yes

D.14. Is there a formal non-judicial mechanism for dealing with complaints? Yes

D.15. Is a complaints resolution mechanism described in national procurement documents? Yes

PART E: Records Keeping E.1. Is there a referencing system for procurement files? Yes

E.2. Are original contracts secured in a fire and theft proof location? Yes

E.3. Are copies of bids or proposals retained with the evaluation? Yes

E.4. Are copies of the original advertisements retained with the pre-contract papers? Yes

E.5. Is there a single contract file with a copy of the contract and all subsequent contractual correspondence? Yes

E.6. Are copies of invoices included with contract papers? No, these are kept separately, but are readily accessible for audit.

E.7. For what period are records kept? According to the relevant national requirements.

Procurement Capacity Assessment Questionnaire – Kuitun

PART A: General Resource Assessment Response

A.1. Is there a procurement department?

No independent procurement department, Implementation Department will be responsible for procurement

A.2. What procurement does it undertake? Civil work, goods and consultant service procurement for Kuitun subproject of

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ADB financed Xinjiang Urban Transportation and Environmental Improvement Project and ADB Financed Xinjiang Integrated Urban Development Project

A.3. Is the staff provided with written job descriptions? Yes A.4. How many years’ experience does the head of the procurement unit have in a direct procurement role? 15years

A.5. How many staff in the procurement department are: i. Full Time? 1 ii. Part Time? 1 iii. Seconded? 2

At what level does the department report (to the head of agency, deputy etc.)? The head of agency.

A.6. Does the staff that will be involved with the procurement have English language skills sufficient to undertake international procurement?

Yes

A.7. Are the number and qualifications of the staff sufficient to undertake the additional procurement that will be required under the proposed project?

Yes

A.8. Does the unit have adequate facilities such as PCs, internet connections, photocopy facilities, printers etc. to undertake the expected procurement?

Yes

A.9. Is there a procurement training program? Yes PART B: Procurement Processes: Goods and Works

B.1. Has the agency undertaken foreign assisted procurement of goods or works recently (last 12 months, or last 36 months)? (If yes funded by whom and name of the project).

Yes , civil work, goods and consultancy service procurement for Kuitun subproject of ADB Financed Xinjiang Urban Transportation and Environmental Improvement Project

B.2. If the above is yes, what were the major challenges?

The differences of procurement policy between ADB and WB financed projects and domestic procurement policy. The time for approval from authorized government agencies and ADB/WB is too long. Fund transfer is slow.

B.3. Is there a procurement process manual for goods and works?

No formalized procedures or manual, but staffs have Chinese translations of ADB procurement guidelines.

B.4. If there is a manual is it up to date and does it cover foreign assisted procurement? Not applicable.

B.5. Is there a systematic process to identify procurement requirements (1 year or more)?

Yes, procurement plan is prepared for each new project during the project preparations.

B.6. Who drafts the specifications? Technical design and research institute prepares and professional engineering consultants review.

B.7. Who approves the specification? Project owner and PMO endorse and submit to XUARG for no objection.

B.8. Are there standard bidding documents in use and have they been approved for use on ADB funded projects?

Yes

B.9. Who drafts the bidding documents? Commercial bids are drafted by tendering company and technical specifications are drafted by design

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institute. B.10. Who manages the sale of the document? Tendering company. B.11. Are all queries from bidders replied to in writing? Yes B.12. Is there a minimum period for preparation of bids and if yes how long?

Yes, 4 weeks for NCB bids and 6 weeks international bids.

B.13. Does the bidding document state the date and time of opening and how close is it to the deadline for submission?

Yes ,immediately

B.14. Is the opening public? Yes B.15. Can late bids be accepted? No

B.16. Can bids be rejected at bid opening? Late or obviously incomplete bids will be rejected.

B.17. Are minutes taken? Yes

B.18. Who may have a copy of the minutes?

PMO, tendering company, bidders, supervision agency (discipline inspection agency, finance bureaus, DRC at local and provincial levels)

B.19. Are the minutes free of charge? Yes

B.20. Who undertakes the evaluation (individual(s), permanent committee, ad-hoc committee)?

An evaluation panel consisting of the project owner, PMO and qualified experts.

B.21. What are the qualifications of the evaluators in respect to procurement and the goods and works under evaluation?

Experts are from an expert database approved by local government.

B.22. Is the decision of the evaluators final or is the evaluation subject to additional approvals?

For ADB projects a bid evaluation report is prepared by the tendering company and submitted to ADB by XPMO.

B.23. Using at least three real examples how long between the issue of the invitation for bids and contract effectiveness?

NCB civil work of A14 package, 80 days. ICB equipment of B4 package ,150 days NCB civil work of D4 package, 80 days.

B.24. Are there processes in place for the collection and clearance of cargo through ports of entry? Yes

B.25. Are there established goods receiving procedures?

Yes, both municipal PMO and all project implementing units all have it.

B.26. Are all goods received recorded as assets or inventory in a register or similar? Yes.

B.27. Is the agency / procurement department familiar with letters of credit? No

B.28. Does the procurement department register and track warranty and latent defects liability periods?

PMO and project implementing units track both

PART C: Procurement Processes: Consulting Services

C.1. Has the agency undertaken foreign assisted procurement of consulting services recently (last 12 months, or last 36 months)?

Yes

C.2. If the above is yes what were the major challenges?

The difference between domestic procurement policy and ADB procurement policy

C.3. Is there a procurement process manual for consulting services procurement? No

C.4. Is the manual up to date and does it cover foreign assisted projects? Not applicable

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C.5. Who identifies the need for consulting services requirements?

Municipal PMO in conjunction with XPMO

C.6. Who drafts the ToR? XPMO (sometimes with advice of consultants)

C.7. Do the Terms of Reference follow a standard format such as background, tasks, inputs, objectives and outputs?

Yes

C.8. Who prepares the request for proposals? XPMO with help from a tendering company

C.9. Are assignments advertised and expressions of interest called for?

Yes

C.10. Is a consultants’ selection committee formed with appropriate individuals in terms of procurement and technical expertise?

Yes

C.11. What criteria are used to evaluate EOIs? Based on the qualifications and experience of the relevant company.

C.12. Historically what is the most common method used (QCBS, QBS etc.)? QCBS

C.13. Do firms have to pay for the proposal document? No C.14. Do the evaluative criteria follow a pre-determined

structure and are they detailed in the RFP? Yes

C.15. Are pre-proposal visits and meetings arranged? No, potential bidders can arrange a visit it by themselves if they so wish.

Are minutes prepared and circulated after pre-proposal meetings? Not applicable

C.17. To who are minutes distributed? Not applicable C.18. Are all queries from consultants answered to in

writing? Yes

C.19. Are the financial and technical proposals in separate envelopes? Yes

C.20. Are proposal securities required? No

C.21. Are technical proposals opened in public? Yes C.22. Do the financial proposals remain sealed until

technical evaluation is completed? Yes

C.23. Are minutes of technical opening distributed? No

C.24. Who determines the final technical ranking and how?

Bid Evaluation Committee determines the final technical ranking according to evaluation criteria in the RFP

C.25. Are the technical scores published and sent to all firms?

Yes, but not until after the opening of financial bids.

C.26. Is the financial proposal open in public? Yes C.27. Are there minutes taken and distributed of financial proposal opening? Yes

C.28. How is the financial evaluation completed? According to the RFP evaluation criteria, a check is made to identify all errors and omissions.

C.29. Are face to face contract negotiations held? Yes

C.30. How long after financial evaluation is the selected firm to negotiate?

PMO issue invitation after receiving ADB’s objection letter.

C.31. What is the usual basis for negotiation? Bidding documents and draft contract in the annex of bidding document.

C.32. Are minutes of negotiation taken and signed? Yes

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C.33. How long after negotiations until the contract is signed?

About 2 weeks but it depends on internal XUAR and ADB reviews and “no objection”.

C.34. Are advance payments made? No normally, but if the contract provides for this then a bank guarantee has to be provided.

C.35. Is there an evaluation system for measuring the outputs of consultants? Yes

PART D: Process Oversight and Control D.1. Is there a standard statement of ethics and are those involved in procurement required to formally commit to it? Yes

D.2. Are those involved with procurement required to declare any potential conflict of interest and remove themselves from the procurement process?

Yes

D.3. Is the commencement of procurement dependent on external approvals (formal or de-facto) outside of the budgeting process?

Yes, subject to request from project implement agency and PMO approves it.

D.4. Who approves procurement transactions and do they have procurement experience and qualifications?

PMO, XPMO as appropriate. All staff authorizing such transactions is adequately qualified and experienced.

D.5. Which of the following actions require approval outside of the procurement unit or a permanent evaluation committee and who grants the approval?

i. Bidding document, invitation to pre-qualify or request for proposal Yes, XPMO

ii. Advertisement of an invitation for bids, pre-qualification or call for expressions of interest Yes, XPMO

iii. Evaluation reports No iv. Notice of award Yes, XPMO v. Invitation to consultants to negotiate Yes, XPMO vi. Contracts Yes, XPMO

D.6. Is contractual performance systematically monitored and reported upon? Yes

D.7. Does the agency monitor and track its contractual payment obligations? Yes

D.8. On average how long is it between receiving a firm’s invoice and making payment? Typically between one and two months

D.9. What is the standard period for payment included in contracts? No standard period used

D.10. When payment is made late are the beneficiaries paid interest? No

D.11. Are payments authorized by the same individuals empowered to approve invitation documents, evaluations and contracts?

No

D.12. Is there a written auditable trail of procurement decisions attributable to individuals and committees? Yes

D.13. Are procurement decisions and disputes supported by written narratives such as minutes of evaluation, minutes of negotiation, notices of default / withheld payment?

Yes

D.14. Is there a formal non-judicial mechanism for dealing with complaints?

Yes, an arbitration process is available

D.15. Is a complaints resolution mechanism described in national procurement documents?

Yes

PART E: Records Keeping

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E.1. Is there a referencing system for procurement files? Yes

E.2. Are original contracts secured in a fire and theft proof location?

Yes, Original contracts are kept secure in various places as there are several original versions signed.

E.3. Are copies of bids or proposals retained with the evaluation? Yes

E.4. Are copies of the original advertisements retained with the pre-contract papers? Yes

E.5. Is there a single contract file with a copy of the contract and all subsequent contractual correspondence? Yes

E.6. Are copies of invoices included with contract papers?

No, copies of invoices are kept separately

E.7. For what period are records kept? 30 years

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Annex 2: Draft Loan Assurances 1. The following are the assurances to be provided by the People's Republic of China (PRC) Government, Xinjiang Uygur Autonomous Region Government (XUARG), and the Kelamayi and Kuitun Municipal Governments (KMGs) under the loan agreement and project agreement for the Xinjiang Integrated Urban Development Project:

Legal Covenants

General Implementation Arrangements 2. XUARG will ensure that the project is implemented in accordance with the detailed arrangements set forth in the project administration manual (PAM). Any subsequent change to the PAM shall become effective only after approval of such change by XUARG and Asian Development Bank (ADB). In the event of any discrepancy between the PAM and this loan agreement, the provisions of this loan agreement shall prevail. Condition of Award of Contract 3. XUARG shall ensure that the KMGs shall award any civil works contract under a project component unless the resettlement plan for such component has been updated based on the final detailed design, including detailed measurement surveys, and such updated resettlement plan shall be submitted to ADB for its concurrence prior to commencement of any related civil works, and disclosed to affected people in accordance with ADB’s applicable information disclosure requirements for resettlement. 4. XUARG shall ensure that the KMGs do not award any civil works contract under a project component unless the project environmental management plan (EMP) has been updated based on the final detailed design, and submitted to ADB for its concurrence prior to commencement of any related civil works, and disclosed to affected people in accordance with ADB’s applicable information disclosure requirements for environment. 5. XUARG shall ensure that the Kelamayi Municipal Government does not award any civil works contract under the wetland construction component unless (i) the site of the wetland has been cleaned-up by the PetroChina Xinjiang Oilfield Company, and (ii) an independent post-cleanup audit confirms that the site is ready and safe for redevelopment. Change in Ownership 6. XUARG and the KMGs will ensure that during the project implementation, in the event of (a) any change in the ownership or control of project facilities; or (b) any sale, transfer or assignment of share or interest that results in a change of control in any agency owning or managing any project facilities that is anticipated, will cause the relevant agency to consult with ADB at least six (6) months prior to the implementation of such change. XUARG and the KMGs will cause the said Agency to further ensure that the new controlling management of the concerned agency complies with (a) all project related agreements executed between ADB and the Borrower or XUARG; and (b) the policies of ADB relevant to the project.

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Financial Covenants

Counterpart Funding 7. XUARG will cause the KMGs to provide counterpart funding in a timely manner, including any additional counterpart funding required for any shortfall of funds or cost overruns. XUARG will also cause the KMGs to ensure that operation and maintenance (O&M) of all project facilities is fully funded without any delay. Finance and Tariffs 8. XUARG will cause the KMGs to (i) increase water supply and wastewater tariffs and fees progressively to achieve full cost recovery and in accordance with national tariff policies and regulations; (ii) undertake an annual review of tariffs and fees including an assessment of their impact on the poor; and (iii) based on such review, take necessary measures to ensure service provision to the poor. 9. During the process of establishing and adjusting tariffs for urban service, XUARG will cause the KMGs to take into consideration (i) the minimum tariff level needed to cover basic operating costs, debt service and capital replacement; (ii) users' affordability and willingness-to-pay data from available surveys; and (iii) recent tariff escalations. XUARG will also cause the KMGs to include public consultation in their tariff setting processes. 10. XUARG will cause the KMGs to develop the relevant plans to increase tariffs for the irrigation use of water by 2015. Such plan will provide (i) a roadmap to achieve the sufficient tariff to operate as an effective incentive on the conservation of water; and (ii) where tap water is used for irrigation the tariff rate should also be sufficient for the relevant water supply company to recover all its reasonable costs for the supply of such water. Financial Management 11. XUARG, and the KMGs will establish and maintain sound financial management systems in accordance with ADB’s Financial Management and Analysis of Projects, including the establishment of separate project accounts and the maintenance of minimum balances to ensure smooth cash flow and the timely settlement of project construction liabilities and future debt servicing.

Safeguards Covenants

Environmental 12. XUARG shall, and shall cause the KMGs and each involved agency to ensure that the preparation, design, construction, implementation, operation and decommissioning of the project and all project facilities comply with (i) all applicable laws and regulations of the PRC and XUAR relating to environment, health and safety; (ii) the Environmental Safeguards stipulated in ADB’s Safeguards Policy Statement (2009); and (iii) all measures and requirements set forth in the IEE, the EMP, and any corrective or preventative actions set forth in a safeguards monitoring report. 13. XUARG shall, and shall cause the KMGs to ensure that throughout project implementation, (i) any changes to the project design are reviewed that may potentially cause

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negative environmental impacts; (ii) in consultation with ADB, environmental monitoring and mitigation measures are revised as necessary to assure full environmental compliance; and (iii) provide ADB within 60 days justification for any proposed changes to the mitigation measures required during design, construction and operation. 14. XUARG will cause the KMGs to prepare, at the outset of component implementation, detailed internal monitoring programs to be implemented by the contractors during construction, and to incorporate such mitigation and monitoring measures into the design of components, relevant bidding documents and construction contracts. 15. XUARG will cause the KMGs to ensure that spoil and dredged material generated in the course of implementation of the project is tested and disposed of in accordance with national and local laws and regulations, and that such disposal creates no significant risk of secondary pollution. 16. XUARG will cause the KMGs to ensure that all wastewater sludge generated by all wastewater treatment plants located within the cities of Kelamayi and Kuitun is disposed of in accordance with national and local laws and regulations, and that such disposal creates no significant risk of secondary pollution. 17. XUARG will cause Kelamayi Municipal Government and PetroChina Xinjiang Oilfield Company to ensure that a proper site clean-up of the wetland construction site is undertaken in advance of the commencement of construction. The results of such clean-up are to be verified, prior to the commencement of construction, by a sampling and testing program conducted by a suitably qualified environmental monitoring agency with the test results made available to ADB. 18. XUARG will cause Kelamayi Municipal Government to ensure that any possible pollution from sources or activities in the proximity to the site of the Jiugongli wetland that might endanger the water quality of the wetland is adequately controlled. In addition, a comprehensive emergency preparedness and response plan is to be prepared in advance of the initial filling of any part of the wetland. Such plan will be made available to ADB. 19. XUARG will cause the Kelamayi Municipal Government to ensure that all industrial wastewater discharged to the WWTPs is adequately pre-treated in accordance with relevant national and local standards prior to discharge. 20. XUARG will cause the Kuitun Municipal Government to ensure that sludge from the septic tanks of all public toilets constructed/rehabilitated under the project is conveyed in a closed tanker for treatment at the Kuitun municipal wastewater treatment facility, or is used or disposed of in a manner agreed in advance with ADB. 21. XUARG and the KMGs will cause the contractors to select and manage borrow and spoil disposal sites in accordance with the EMP and in consultation with relevant environmental protection authorities. 22. XUARG and the KMGs will ensure that the contractors will take necessary actions to avoid interruptions to water supply, wastewater collection, heating and other utility services during the construction of the project. 23. XUARG shall, and shall cause the KMGs to ensure that (i) the project implementation consultants are engaged in a timely manner, including safeguards specialists; (ii) licensed

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environmental monitoring stations are contracted to conduct periodic environmental impact monitoring in accordance with the approved monitoring plan; and (iii) the capacity-building program described in the EMP and the resettlement plans is implemented as planned from the date of engagement of the consultants until project completion. 24. XUARG shall cause the KMGs to ensure that (i) no alien invasive species are introduced for the plantations along the river rehabilitation works (Kuitun) and the wetland (Kelamayi); (ii) the water used for irrigation meets the relevant quality standard; (iii) actual water use for irrigation is monitored; and (iv) the results of monitoring and analysis are reported in the annual environmental monitoring reports. Resettlement 25. XUARG will ensure and cause the KMGs to ensure that all land and all rights-of-way required for the project 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 (i) all applicable laws and regulations of the PRC relating to land acquisition and involuntary resettlement; (ii) the Involuntary Resettlement Safeguards; and (iii) all measures and requirements set forth in the RP, and any corrective or preventative actions (iv) set forth in a Safeguards Monitoring Report; or (v) as subsequently agreed between ADB and XUARG. Ethnic Minorities 26. XUARG will cause the KMGs to implement the ethnic minority development plans (EMDP) whereby (i) benefits will target ethnic minorities in the project areas in accordance with ADB's Safeguards Policy Statement 2009; (ii) all contracts for works will specify requirements to comply with the SAP and EMDP and, as a priority, provide employment to ethnic minorities; and (iii) adequate staff and resources will be dedicated to supervise and monitor the implementation of the EMDP, which will be reported to ADB on a semiannual basis. The XUARG will require XUAR PMO to engage an independent monitoring agency acceptable to ADB to monitor the implementation of the EMDP on a semiannual basis, and submit the monitoring report to ADB. The monitoring data shall be disaggregated by ethnicity and gender and economic status, and each monitoring report shall include an analysis of social/poverty impacts and the effectiveness of actions taken by ethnicity, gender and economic status. Human and Financial Resources to Implement Safeguards Requirements 27. XUARG will make available or cause the KMGs to make available necessary budgetary and human resources to fully implement the EMP, the RPs, and the EMDP. 28. XUARG will cause the Kelamayi Municipal Government to ensure that (i) a qualified and experienced design institute is engaged for the preliminary and detailed design of the wetland component; (ii) the design includes a modeling of wastewater treatment efficiency and water balances for the wetland operation, including the phase 1 wetland; and (iii) the final design is shared with ADB for review and appraisal prior to awarding of civil works contracts. Safeguards-Related Provisions in Bidding Documents and Works Contracts 29. XUARG shall, and shall cause the KMGs to ensure that all bidding documents and contracts for civil works contain provisions that require contractors to:

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(i) comply with the measures relevant to the contractor set forth in the IEE, the

EMP, the resettlement plan, and EMDP (to the extent they concern impacts on affected persons during construction), and any corrective or preventative actions set forth in safeguards monitoring reports;

(ii) make available a budget for all such environmental and social measures; (iii) provide the KMGs with a written notice of any unanticipated environmental, or

resettlement risks or impacts that arise during construction, implementation or operation of the project that were not considered in the IEE, the EMP, the resettlement plan and EMDP; and

(iv) reinstate pathways and other local infrastructure to at least their pre-project condition as soon as possible and no later than the completion of construction.

Safeguards Monitoring and Reporting 30. XUARG will do the following or cause the project Executing Agency to do the following:

(i) submit Safeguards Monitoring Reports to ADB:

(a) in respect of Environmental Safeguards, annually during the implementation of the project;

(b) in respect of Involuntary Resettlement Safeguards, semiannually during the implementation of the project resettlement activities and annually for 2 years thereafter;

(c) in respect of Indigenous Peoples Safeguards, semiannually during the implementation of the project; and

(d) and disclose relevant information from such reports to affected people promptly upon submission.

(ii) 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 IEE, the EMP, the RP and the EMDP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan;

(iii) for involuntary resettlement, engage qualified and experienced external experts or qualified NGOs 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

(iv) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP, the RP or the EMDP promptly after becoming aware of the breach.

Safeguards - Prohibited List of Investments 31. XUARG shall ensure that no proceeds of the ADB loan are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of the Safeguards Policy Statement. Construction Contracts 32. XUARG will cause the KMGs to ensure that works contracts will include provisions to require the contractors to (i) employ women, the local poor and ethnic minorities to at least the

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percentages of the labor force as set out in the EMDP, SAP, and GAP; (ii) not to discriminate against people seeking work on the basis of age, provided they are capable of doing the work; (iii) provide equal pay for equal work, regardless of gender or ethnicity; (iv) advertise labor requirements in a timely manner prior to recruitment, in venues and languages that can reasonably be expected to be seen by interested men and women, regardless of age or ethnicity; (v) provide those they employ with a written contract; (vi) provide the timely payment of wages; (vii) use local unskilled labor, as applicable, (viii) comply with core labor standards and the applicable labor laws and regulations, including stipulations related to employment, e.g. health, safety, welfare and the workers’ rights, and anti-trafficking laws; (ix) not force the labor to work against their will; and (x) not employ child labor. XUARG and the KMGs will further cause the Work contractors to maintain records of labor employment, including the name, ethnicity, age, gender, domicile, working time, and the payment of wages and ensure that the records are included in summary form in the project performance management system (PPMS). In order to ensure prospective contractors are warned in advance, the requirements of this clause are to be clearly specified in all relevant bidding documents. 33. XUARG will cause the KMGs and the PCA to ensure that the contractors will (i) implement HIV/AIDS and sexually transmitted infections (STIs) awareness and prevention training for all employees; (ii) provide necessary measures to ensure the safety and health of its employees; (iii) together with the local centers of disease control, disseminate information on the risks, hazards, impacts and prevention know-how on HIV/AIDS and STIs among the staff, workers on the construction sites and the local community by means of information disclosure, education and consultation; (iv) take due care to ensure that solid and liquid wastes are appropriately disposed of in and around construction sites, or sites where the company might house employees; (v) in conjunction with the relevant local government and community leaders, hold a public meeting in each area prior to commencing construction to discuss issues associated with ensuring the safety of children in the vicinity of the construction site; (vi) observe local customs concerning acceptable behavior toward the local population; and (vii) ensure that all relevant information and communication are accessible by ethnic minority members who understand only their indigenous language and residents with limited literacy. Gender and Social Action Plans 34. XUARG will cause the KMGs to (i) issue an affirmative action statement to ensure inclusion of both women and men in all project activities; (ii) implement the gender action plan (GAP) including taking all reasonable and necessary steps to encourage women living in project areas to participate in the planning and implementation of the project; and (iii) monitor the project's impacts on women during project implementation and report them in the PPMS. 35. XUARG will cause the KMGs to implement and monitor in a timely manner the social action plan (SAP) including (i) the campaign in Kuitun to promote awareness and behavioral change to realize the benefits of improved personal hygiene and responsible waste disposal (ii) in both cities the campaign on the prevention of HIV/AIDS and STIs; and (iii) provide adequate staffing to supervise and document these activities. Public Awareness 36. XUARG will cause the KMGs to undertake public awareness campaigns on the project and its benefits, including but not limited to information related to the RPs, IEE, EMP, EMDP, GAP and SAP, to be conducted through information disclosure, education and consultation in

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languages and presentation formats relevant to the location and literacy levels of the local populations, including easily understandable visuals. Public awareness campaigns will also be budgeted and organized to inform and educate residents about HIV/AIDs and STDs; environmental sanitation, health, and hygiene; and road safety.

Other Covenants

Engineering and Technical 37. XUARG will cause Kelamayi municipal government to ensure all relevant agencies cooperate to promote traffic safety provisions for the road component of the project, including the provision of adequate traffic safety signage, signal lamps, traffic control and other necessary facilities. XUARG will also cause the Kelamayi municipal government to ensure that traffic safety education activities are conducted by means of radio and television and traffic safety booklets in the languages appropriate to the local population to enhance the traffic safety awareness of the local people. Improved Municipal Solid Waste Management 38. XUARG will cause Kuitun municipal government to ensure that no solid waste will be dumped into the flood channels, through (a) extending its municipal solid waste collection service, (b) providing sufficient local communal waste collection points, and (c) carrying out a public awareness campaign to that purpose. Design and Construction Quality and Management 39. Prior to the commencement of a procurement process under the project, XUARG will cause the KMGs to complete the relevant geological (including seismic) and geotechnical investigations during the preparation of the detailed designs, and ensure that adequate risk mitigation is fully incorporated in the designs, in compliance with all relevant national, regional and local design codes and standards. 40. XUARG will cause the KMGs to ensure that all works under the project are designed and constructed in accordance with national standards and specifications and that the construction supervision, quality control, contract management, and completion inspection and acceptance follow all applicable national laws and regional and local regulations. Operation and Maintenance 41. XUARG will cause the KMGs to ensure that all works under the project will be inspected, operated and maintained in accordance with prescribed standards, specifications and regulations and sound practices. 42. XUARG will cause the KMGs to ensure that (i) each agency responsible for operating and/or maintaining project facilities prepares (a) a sustainable O&M plan; and (b) a budget plan on an annual basis for O&M; and (ii) they provide sufficient financial and staffing resources to the relevant O&M agencies. 43. XUARG will cause the KMGs to ensure that all assigned O&M agencies will be fully involved in the project implementation, including professional staff from O&M agencies participating in project design, the bidding, and implementation of contracts, and the acceptance

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of the completed project works. 44. XUARG will cause the Kuitun municipal government to ensure that, prior to commissioning of newly rehabilitated flood channels constructed under the project; all upstream parts of the flood control system (channels and dykes etc.) are thoroughly cleared of all rubbish and obstructions. Thereafter, XUARG will cause the Kuitun municipal government to ensure that all such upstream facilities are operated and maintained together with the project facilities under an integrated O&M plan. Governance and Anticorruption 45. XUARG shall, and shall cause the KMGs to ensure they and all agencies involved in the project, comply with ADB’s Anticorruption Policy (1998), as amended from time to time. XUARG shall also cause the KMGs to undertake the following anticorruption actions: (i) involving full-time officials from the relevant Discipline Investigation Bureau in the bidding, award and implementation of contracts; (ii) introducing a dual-signing system, in which the contract winner signs an anticorruption contract with the employer when they sign and execute the contract; and (iii) periodically inspecting the contractors’ fund withdrawals and settlements. 46. In furtherance of the principles of transparency, participation, accountability and zero-tolerance for corruption, XUARG shall cause the KMGs to develop and maintain relevant web-sites that describe the project in order to provide the public with information on the project and project progress including setting out (i) the procurement plan and tracking of procurement contract awards, (ii) any proposed tariff increases and associated scheduled public hearings, (iii) relevant laws and regulations, (iv) job opportunities, and (v) information related to pro-poor subsidies or tariff life-lines. XUARG shall cause the KMGs to periodically make such information available on radio and in newspapers. Grievance and Redress Mechanism 47. XUARG will ensure that within 60 days from the project’s effectiveness, the KMGs develop complaint and problem management mechanisms acceptable to ADB, to: (i) review and document eligible complaints of project stakeholders; (ii) proactively address grievances; (iii) provide the complainants with notice of the chosen mechanism/action; and (d) prepare semi-annual reports to summarize the number of complaints received and resolved, and final outcomes of the grievances and chosen actions and make these reports available to ADB upon request. Eligible complaints include those related to the project, any of the service providers, any person responsible for carrying out the project, complaints on misuse of funds and other irregularities, and grievances due to any safeguard issues, including resettlement, environment, ethnic minorities, and gender. Project Progress Reporting and Monitoring 48. XUARG shall furnish, through XUAR PMO, to ADB semi-annual reports on the execution of the project and on the operation and management of the project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the semester under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following semester.

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49. During project implementation, XUARG shall or shall cause each implementing agency to develop, in consultation with ADB, a Project Performance Monitoring System (PPMS) including baseline performance monitoring, systematic project performance monitoring, and benefits monitoring and evaluation of each subcomponent. The XUARG shall or shall cause each implementing agency to carry out surveys (i) at the start of project implementation to establish baseline data, and (ii) not later than six months after project completion, to evaluate the project benefits. Data to be compiled and analyzed for the purpose of performance monitoring and evaluation shall be in a format compatible with the PPMS as developed in consultation with ADB. 50. XUARG shall cause each implementing agency to supply monitoring reports to the XUAR PMO of the implementation activities under this project, and a semi-annual report of the implementation of project activities relevant to such implementing agency under the project to the XUAR PMO. XUARG shall also cause the XUAR PMO to conduct periodic and random monitoring of each project component under the project to determine the degree to which project funds have been effectively and efficiently used to implement the project, achieve its objectives, outcomes, and its performance indicators.

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Annex 3: Draft Training Plan for Project Implementation

Area of Training

Target Trainee Training Methods Year of Implementation Duration Priority Note

XPMO City O&M

Units Others Train the

trainers Workshop Seminar Study

tour On-job training days

PMO/PCA

Project Implementation Related Training

Project management √ √ √ √ √ 1 2 H by professional institutes

Project planning and control √ √ √ √ √ 1 1 M Financial control of projects √ √ √ √ √ 1 1 M ADB procurement procedures √ √

√ √

√ 1 2

H

by TA consultant

ADB Safeguards policies √ √ H ADB reporting procedures/PPMS √ H

Use of standard contract documents √ H

Design review √ √ 1 H by TA consultant

Construction supervision (general) √

√ √

√

√ 1 3

H

by TA consultant

Site records and control √ H Site safety √ H Quality control in construction √ H Evaluation of contract claims √ H Monitoring and evaluation √

√

√ 1 2

H by TA consultant Resettlement monitoring √ √ H

Environmental monitoring √ √ H

Management Training

Utility management (general) √

√

√

2 2

L

by professional organization

Business/corporate planning √ √ L

Capital investment planning & appraisal √

√

L

Training needs assessment √ √ √ L

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Area of Training

Target Trainee Training Methods Year of Implementation Duration Priority Note

XPMO City O&M

Units Others Train the

trainers Workshop Seminar Study

tour On-job training days

PMO/PCA

Performance measurement √ √ √ √ L

Personal management skills development √ √

L

Computer and IT skills training √ √ √ 1 2 L

Financial Training

Principles of financial management √ √ √

√

√

1 2

M

Enterprise financial accounting √ L

Cost & management accounting √ M

Project accounting √ √

√

√

1 2

H

Financial planning √ √ L

Project internal auditing √ √ H

Operations Training

Water quality monitoring and laboratory analysis √

√

√ √ 3 3 H

by laboratory equipment supplier or staff of other WTPs

WWTP operations and process control √

√ √ √ √ 3 3 H

by staff of other WWTPs , or domestic study tour, or on-job training at other WWTP

Wastewater source management √ √ √ √ 3 1 M

Wetland management √ √ √ √ 2 10 H domestic

Use of outsourcing √ √ √ √ 2 1 M

Preparation of operation √ √ √ 3 1 M

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Area of Training

Target Trainee Training Methods Year of Implementation Duration Priority Note

XPMO City O&M

Units Others Train the

trainers Workshop Seminar Study

tour On-job training days

PMO/PCA procedures

Practical application of 3R’s policy √ √ √ 2 1 M

Road maintenance √ √

√

2 1 H

Traffic control √ √ √ H domestic

Road safety √ √ √ H Energy conservation (general) √ √

√ √

2 1 L

GHG Emissions Control √ √ √ √ L

Carbon Sink Silviculture √ √ √ √ √ √

Asset Management (including GIS) √ √ √ √ 3 1 H

Other Training

Gender awareness √ √ √ √

√

√ √

1 1

M

HIV/AIDS/ST1 Awareness √ √ M

Environmental awareness √ √ √ √ √ M

Community health awareness √ √ √ √ √ M

Public engagement - its uses and benefits √ √ √ √ √

√ 1 1 M

for project designer

How to plan and conduct effective public consultation √ √ √ √ √ 1 4 M

for people who plan and carry out consultations

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Annex 4: Detailed Scope of Work for the Capacity Building Provider(s) 1. The capacity building consultant will work primarily with XPMO and the city PMOs, but also with other agencies as required, and especially the designated O&M units, providing advice, assistance and where necessary training on the following: Project Management and Implementation Support

(i) The development of comprehensive project implementation plans and procedures for monitoring and control.

(ii) The introduction of document control, design supervision, and contract management systems for the project. This should utilize and adapt as necessary the arrangements set up for the earlier ADB urban environmental funded projects in Xinjiang.

(iii) The review of designs, drawings and the bidding documents, including the identification of potential technical problems and suggesting means of resolving these, including the incorporation of environmental mitigation measures where appropriate.

(iv) Ensure that bidding documents include for contractors to provide equipment operating and maintenance manuals in Chinese and that training in equipment and maintenance is adequately provided for.

(v) International Competitive Bidding (ICB), National Competitive Bidding (NCB) and International Shopping (IS) contract procedures in accordance with the ADB's Guidelines on Procurement.

(vi) The development of reporting procedures to the ADB, including those covering construction progress, withdrawal of funds and payment to contractors and suppliers.

(vii) Exercising construction supervision and management including: (a) approval of construction methods, (b) ensuring work is undertaken according to the intent of contract

specifications, (c) control over construction quality, (d) adherence to contract work programs and recovery of slippage, (e) site health and safety procedures, (f) record keeping systems to protect client interests in event of claims etc., (g) claims assessment and determination.

(vii) Provide advice and support on asset commissioning and handover, including a review of documentation provided by the contractors and that they have fully discharged their training obligations.

(viii) Provide advice and training on the establishment and operation of project accounting and disbursement procedures.

(ix) Provide advice and training on project financial controls, reporting and audit. (x) Establish a Project Performance Monitoring System (PPMS) including its detailed

design, data collection and analysis procedures, and the provision of training in its use. In order to avoid duplication of resources the outcome of this work should as far as possible be compatible with the PRC Ministry of Finance project reporting system as well as related local information gathering and reporting systems.

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(xi) Undertake a review of the independent resettlement monitoring and reporting arrangements and the reports so produced. Recommend actions necessary to ensure compliance with approved resettlement plans.

(xii) Develop and advise on the implementation of an environmental monitoring program and reporting procedures to ensure appropriate mitigation measures are undertaken during the project construction and operational phases of the project facilities based on the EMP approved during the project preparation phase.

(xiii) Ensuring that requirements of the agreed social development action plan (SDAP) for the project, including the project impact on minorities are fully integrated into project monitoring systems. Provide advice on the implementation of the SDAP as required.

(xiv) Assisting in periodic reviews of service cost recovery and monitoring progress made towards the strategic objective of full cost recovery in respect of the water supply, and wastewater services.

(xv) Identifying potential opportunities for private sector involvement in the project operations and maintenance phase and, where necessary, advising the relevant project owners on how these could be implemented in practice.

Operational Improvements 2. Specific tasks will include: (a) Generic needs (potentially relevant to all components)

(i) Provide advice on staffing required for the new/upgraded facilities and assist in the process of writing job descriptions and recruitment.

(ii) Review asset recording systems and provide advice on how these can be improved and integrated, including the application of GIS.

(iii) Review levels of service targets and systems for monitoring service performance and recommend changes/improvements.

(iv) Provide advice and support on the preparation of operational procedures. (v) Review maintenance arrangements, plans and procedures. Assess the adequacy

of these and recommend improvements. (vi) Undertake energy audits at each operational facility and recommend cost

effective measures to reduce energy consumption where these are available. (vii) Identify and make recommendations on any operational cost saving measures

that represent them. (viii) Review existing O&M plans and make appropriate suggestions for improvement.

(b) Water Supply

(i) Advise on water quality control procedures, sampling and analysis. (ii) Review arrangements for the management, operation and maintenance the city

water distribution networks and for measuring levels of nonrevenue water (NRW) and suggest appropriate improvements.

(iii) Examine procedures for the reading, testing and replacement of customer meters and recommend improvements.

(iv) Provide advice on the establishment of dedicated teams to detect and repair water leaks.

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(v) Based on the result of pilot studies conducted under the XIUDP NRW subprojects make recommendations and plans for the institutionalization of lessons learned.

(vi) Conduct a review of existing customer service targets and current performance in relation to these. Develop action plans needed to address service deficiencies.

(vii) Assist Kuitun Water Supply Company to conduct a full manpower, skills and technology audit to identify the extent of deficiencies in manning, skills and technology levels.

(viii) Recommend a priority action plan to address such deficiencies and assess the current level of under-funding.

(c) Wastewater Management

(i) Provide advice on WWTP process controls and monitoring requirements to allow consistent compliance with relevant effluent targets.

(ii) Review sludge disposal practices and provide advice if more cost effective and climate friendly approaches are feasible, taking account of sludge composition

(iii) Investigate levels of surface water infiltration into sewers and assess the impact such infiltration is having on operational costs. Recommend remedial measures accordingly.

(iv) Review equipment and methods adopted for inspection and maintenance of the sewer network and recommend improvements as appropriate.

(v) Review arrangements for wastewater source management, including permitting of discharges and record keeping. Consider and recommend appropriate improvements including improved inter-agency data-sharing and cooperation.

(d) Roads

(i) Review existing arrangements for the maintenance of roads and related infrastructure and assess the changes needed to maximize the life of both existing and newly constructed roads.

(ii) Review existing road safety and accident prevention programs and recording systems of road accidents. Assess the effectiveness of existing arrangements and recommend appropriate improvements.

(e) Wetland Management

(i) Assist the Kelamayi District Landscape Bureau to identify and evaluate alternative strategic approaches for the future management, operations and maintenance of the Jiugongli wetland facilities.

(ii) Support the implementation of the selected strategic approach (i.e., assist in the detailed assessment of O&M requirements and the development of detailed procedures if in-house management and O&M is selected, or support the procurement process and the establishment of suitable supervisory arrangements if an outsourcing approach is selected).

(iii) Provide advice and support on the establishment of an integrated wetland management system which should include exposure of selected staff to operational examples of constructed wetlands and training in management of ecological processes and habitat protection.

(iv) Provide advice and assistance on integrated insect management to ensure that the constructed wetland will not become a breeding site for mosquitoes and other

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disease carrying vectors. “Integrated” management is stressed because insect and disease control needs to be undertaken within the context of the creation and maintenance of valuable wetland ecosystems on site. This will be undertaken through exposure of selected staff to operational examples of constructed wetlands and training in the management of insects and diseases.

(v) Assist in the preparation of a pollution prevention and emergency response plan for the Jiugonliu wetland and in the development of any systems or documents needed to make this plan operational.

(f) Forestry Management

(i) Provide advice, support and necessary training in carbon sequestration silviculture. (Note: In Kelamayi, the “carbon sink forest” is currently in transition from productive timber forestry management to carbon sequestration management. New management policies, targets and practices need to be developed and implemented and a new culture established in the management unit. In Kuitun carbon sequestration is one of the prime objectives of the tree planting within XIUDP and of earlier similar initiatives by the city government - a review of the management approach should be conducted, opportunities for improvements identified, and implementation support and advice provided).

Improved Public Utility Management 3. Review management procedures and provide advice and support in the areas of

(i) Financial management, including budgetary control. (ii) Business planning and performance management. (iii) Quality management systems. (iv) Use of outsourcing, including procurement advice and training/guidance on

supervisory arrangements. Enhancing Public Awareness and Promoting Environmentally Friendly Behaviour

(i) Review the results of the socio-economic survey undertaken during the PPTA and the records of other stakeholder consultations.

(ii) Hold selective supplementary stakeholder discussions and other public participation events to gain a more in depth understanding of stakeholder views on urban environmental and public health issues and desirable behaviour changes that should be promoted.

(iii) Use the results of the survey and consultations to design a detailed public education program to improve awareness in environmentally friendly and energy efficient living.

(iv) Assist in the implementation of the program, including the preparation of relevant public education material.

(v) Suggest a mechanism for monitoring the effectiveness of the program.

Enhancing Gender Awareness

(i) Hold consultations with local women’s groups and review existing material/survey results to identify gender awareness issues.

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(ii) Design and prepare a gender awareness program that incorporates the GAP developed and agreed during project preparations to respond to the identified issues.

(iii) Assist in the implementation of the program. Development of Community Health Program

(i) Hold discussions with local health officials to understand specific local health issues resulting from poor urban environmental conditions, and as a consequence of the project implementation (such as increased risk in HIV/AIDS/STIs transmission).

(ii) Identify the social groups most at risk from these health concerns. (iii) Design a targeted community health awareness program based on these

investigations. (iv) Assist in the implementation of the program, including the preparation of relevant

materials for promoting awareness. (v) Suggest a mechanism for monitoring the effectiveness of the program.

Special Studies and Advice 4. Undertake studies as outlined below and provide follow-up advice as may be needed

(i) Improvements in water sector planning (in particular the integration of water planning with both economic and urban planning). Building on work during the XIUDP preparations the consultant should work with each city to ascertain a sustainable water balance for each city as starting point for future water resources planning and then use an integrated and consultative approach to update current water resource plans.

(ii) Identify strategies to maximize wastewater reuse in each city leading to the development of a wastewater reuse plan for each city, as a component of the city’s integrated water resources plan.

(iii) Critically review the current water conservation plans, including an assessment of current water conservation performance in relation to both international and Chinese best practice and suggest appropriate modifications to the existing plans. Specific attention should be paid to improvements in areas of high water demand such as for irrigation and industrial use.

(iv) Work with relevant agencies of each city to design and implement a rising block residential water tariff that encourages greater economy in the use of water whilst providing lifeline access by the poor.

(v) Strategies for climate change mitigation and the monitoring of city wide GHG emissions in each city.

(vi) Optimizing the beneficial utilization of municipal sludge. Assist each city to undertake prepare a municipal sludge plan for the beneficial reuse of WWTP and septic tank sludge in a climate friendly manner, wherever it is economic to do so.

Training 5. Training is a critical cross-cutting theme relevant to all aspects of the capacity building work and the appointed consulting company will be expected to ensure that appropriate training is provided in a timely manner so that consulting inputs have maximum effect. Thus consulting work plans and the training program must be fully coordinated. Specific tasks necessary to

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ensure training resources are effectively used include:

(i) In consultation with XPMO and the City PMOs, to review the training needs identified during the PPTA and identify any specific supplementary needs;

(ii) Based on this analysis, prepare a detailed training plan and implementation program for XPMO and ADB approval

(iii) Support XPMO the city PMOs and the other relevant agencies in the implementation of the training program (once approved)

(iv) At the mid-term point of the project and in full consultation with the project stakeholders, undertake an interim review of training provided under the capacity building program and recommend adjustments to the training plan as necessary

(v) Use this review to also assess the effectiveness of capacity building measures generally and make recommendations accordingly to deal with these findings, together with any supplementary capacity building needs that might have been identified during the course of project implementation.

(vi) At the completion of the loan consulting undertake a further review of the training provided its effectiveness and lessons learned. The results of such review to be included in the final report of the loan consulting.

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Annex 5: Detailed Capacity Building Budget (with Assumptions) Overall Summary

Item Description Unit Number Unit Cost Estimate Notes reference

International consulting fees Month 9 15,000 135,000 International Per Diem Month 9 2,000 18,000 International Travel Trip 8 1,500 12,000 (a)

National consulting fees Month 115 4000 460,000 (b) National Per Diem Month 115 1500 172,500 (c) National Travel Trip 69 470 32,430 (c) Office Equipment for consultants LS 10,000 Office rental for consultants Month 60 1000 60,000 (d) Office support Month 60 500 30,000 (d), (e) Surveys and consultations PS 20,070 Local Travel Month 60 500 30,000

Sub Total for Consulting 950,000 Training PS 600,000 (f) Contingency 50,000 Overall Total 1,600,000 LS= Lump sum as per consultant’s financial proposal, PS= Fixed provisional sum administered by the Client via the loan consulting contract. Analysis of Consulting Inputs

Expertise International National Notes Months Trips Months Trips

Implementation Support Team leader/deputy 6 6 24 10 (g) Procurement 10 6 Financial 8 7 Environmental 8 7 Resettlement 8 6 Gender and Social Specialist 8 4 Public Engagement Specialist 6 3 Sub Total 6 6 72 43 Enhancing Operational Sustainability IST & capacity building 5 5 Traffic Management & Road Safety 2 1 Water Supply Operations 6 3 Wastewater Operations & Process control 3 2 Wetland management

1 1 6 4 Carbon Sequestration Forestry 3 1 Asset Management Specialist 3 2 Quality Assurance Specialist 4 2 Subtotal 1 1 32 20 Specialist Studies and Advice Water Planning and Conservation 2 1 8 4 Wastewater reuse 3 2 Subtotal 2 1 11 6 Overall Total 9 8 115 69

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Notes and Assumptions a. This estimate assumes some travel will be from within the PRC as it is likely the team leader would be largely

PRC-based. b. In practice the rates of national experts will vary quite significantly depending on their discipline and seniority, but

$4,000 per month is considered a reasonable assumption for the average rate. c. These estimated unit rates assume 25% of national consultants are Xinjiang-based. d. The main parts of the consulting services are assumed to be provided over a 5 year period. There may be a

need for team leader / deputy team leader and some safeguard monitoring inputs in the first half of year 5 to help with project completion reporting.

e. Employment of an office secretary with English language skills. f. The team leader would be expected to spend approximately 4 months in the field in year 1 and then 2 months in

each of years 2, 3, 4, and 5. The deputy team leader would be full time for 6 months and then part time thereafter.

g. The international team leader must have ICB procurement experience. h. An exchange rate of $1 = CNY6.35 is assumed in calculating the US$ equivalents of local costs.