KAZAKHSTAN SEMEY DISTRICT HEATING PROJECT - PIU SUPPORT FOR TECHNICAL SUPERVISION TERMS OF REFERENCE

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1 1. INTRODUCTION KAZAKHSTAN SEMEY DISTRICT HEATING PROJECT - PIU SUPPORT FOR TECHNICAL SUPERVISION TERMS OF REFERENCE The European Bank for Reconstruction and Development (the "EBRD" or the "Bank") has developed a project (the "Project") together with the State Communal Enterprise "TeploKommunEnergo" (the "Company") and the Akimat of Semey City (the "Akimat") to upgrade the district heating ( DH ) system in the City of Semey ("Semey" or the "City"), East-Kazakhstan Oblast in the Republic of Kazakhstan. The loan agreement was signed on 24 th of December The City, with a population about 350,000, is one of the important industrial cities in Kazakhstan's northern region. The City remains one of the major transit cities in both road and rail transport, connecting Kazakhstan with central Russia through the Trans-Siberian railway. The Company was set up in 2003 as a result of a merger of 3 local DH companies: (i) TOO (limited liability company) AES Semipalatinskaya CHP (ii) State Communal Enterprise Semei Zhylu and (iii) OJSC STEK and provides generation, transmission, and distribution of heat and hot water in the City. The Company is wholly owned by the Akimat. The Company owns and operates 17 heat sources (including a coal-fired CHP-1) with the total installed capacity of 916 GCal/hour. The DH transmission and distribution network has total length of 274 km in two-piped count. Apart from that, the Company also owns 11 km of steam network and 72 central heat substations ( CHS ). The Company is the only supplier of centralised DH services in the City. The Project will enable the Company to address the above outlined issues and improve its district heating services by financing priority investments for the rehabilitation and modernisation of its networks. The Project will result in increased energy efficiency, a reduction in losses, and improvements in environmental standards. This will stimulate the process of commercialisation of district heating operations in general, thus supporting the sector reforms and having a significant demonstration effect in the country. The Project s procurement investment plan ( PIP ) covers about 35 per cent of the City area and includes the following components: (i) Reconstruction of DH transmission network; (ii) Reconstruction of DH distribution network; (iii) Installation of IHSs and meters and rehabilitation of CHSs; (iv) Development and installation of a hydraulic model. The investments funded by the Bank and the Clean Technology Fund ( CTF ) are being procured in accordance with the EBRD Procurement Policies and Rules for Public Sector Projects. A Project Implementation Unit ("PIU") was formed in the Company, with representatives from the City, which manages all procurement, as well as installation, construction and implementation of the investments. 1

2 The Company intends to engage an experienced technical supervision firm (hereinafter the "Technical Supervisor" or the Consultant ) to support the Company to oversee the Project implementation process via administration and supervision of the PIP contracts implementation, including the acceptance of procedures or arrangements with the relevant state authorities in accordance with the Kazakh legal requirements. 2. OBJECTIVES The overall objective of the Technical Supervisor is to assist the Company in supervision of the quality of construction works in accordance with the Employer s requirements of the Contract and the constructions norms of the Republic of Kazakhstan and in accordance with the FIDIC Conditions of Contract. Works and duties under technical supervision activities must meet the requirements of the Law "On architectural, urban planning and construction activities in the Republic of Kazakhstan" (from July 16, 2001 number 242), Rules for the provision of engineering services in the sphere of architectural, town-planning and construction activities (Order No. 71 of the Minister of National Economy of the Republic of Kazakhstan of February 3, 2015) and other normative and technical documents of the Republic of Kazakhstan. The Technical Supervisor will provide administration and supervision services during the Project implementation period and perform acceptance procedures with the relevant state authorities. 3. SCOPE OF WORK Technical Supervisor s activity should meet the requirements of all construction sites in Kazakhstan including the following obligations: for the construction of buildings and structures for production and non-production purposes in order to ensure systematic verification and acceptance of the completed stages of construction and installation works; for the conformity of buildings and structures with design solutions, state standards in the field of architecture, town planning and construction; for the quality of materials, products and structures used; for the implementation of construction and commissioning of facilities in accordance with the established procedure and within the terms determined by the agreement (contract). 3.1 The Technical Supervisor should perform, inter alia, the following activities: provide supervision over compliance by the contractor (general contractor) with the requirements of organizational and technological documents that determine the technological process of construction and installation works; ensure high-quality execution of construction and installation works; ensure supervision of compliance with the requirements specified in subparagraphs 1), 3), 4), 5) and 6) of paragraph 3 of Article 31-1 of this Law; attend site meetings and endeavour to ensure that at all times outstanding problems are settled in order to avoid any delay or extra expenditure (nonetheless, 2

3 having regard to the terms of the contracts and the limitations on the authority of the Technical Supervisor referred to under these ToR); keep full and proper records of all meetings and discussions attended or conducted by the Technical Supervisor and make the same available for inspection by the Company and the Bank forthwith on request; on request of the Company, attend meetings to resolve differences of opinion on general or technical matters; advise the Company on the general organisation of the contractors resources at the Site, including management and programming systems, manpower, plant and equipment; carry out regular and proper maintenance of the log/diary of technical supervision; control the execution of instructions entered in the log/diary of technical supervision; participate in the preparation and signing of inspection certificates of hidden works and intermediate acceptance of critical constructions; submit on a monthly basis to the state architectural and construction control and supervision body a report on the status and progress of the construction of the facility; inform the Company and the relevant subdivision of the state architectural and construction control and supervision body in case of failure or improper performance by the contractor (general contractor); check the availability of written permits for the production of works: a) in the security zones of communication and transmission lines, in the zones of the diversion of railways and highways in accordance with the Rules for the Establishment of Protected Areas of Telecommunication Networks and the Operating Modes in them approved by the Decree of the Minister for Investment and Development of the Republic of Kazakhstan of December 24, 2014 year 281, registered in the Register of state registration of regulatory legal acts under No , b) the Rules for Determining the Size, Regime of Using the Lands of Protected Areas and Land Use for the needs of railway transport in the ROW, approved by order of the Minister of Transport and Communications of the Republic of Kazakhstan dated July 23, I, registered in the Register of state registration of regulatory legal acts for the number 2989; do control over the compliance with the construction schedule and the commissioning of facilities in operation within the regulatory deadlines or deadlines specified in the contract of work; check that the contractors continue to give the details and notices that are required under the contracts relating to any delay and forward such details and notices to the Company and the Bank; Notify the Company and the Bank immediately if a contractor fails to complete any section within the applicable Completion Date or appears likely so to fail. Work with the Company and the contractor to set up the Dispute Adjudication Board, as required under the FIDIC Conditions of Contract, and follow up all requisite processes 3

4 in addressing the contractors or Company s claims. If necessary prepare a case for the application of Delay damages or a claim against the Performance Guarantee where a contractor has failed to perform; Promptly after receipt of any contractor s claim, provide the Company with an assessment of the Technical Supervisor s preliminary conclusions with regard to the potential outcome of the claim. The Technical Supervisor will require a contractor to copy to the Company all accounts sent to the Technical Supervisor with regard to the contractor s claim; Prior to certification of any payment to a contractor in relation to a contractor s claim, consult with the Company on the grounds on which the Technical Supervisor intends to certify the payment. Provide the Company with any particulars to enable the Company to establish its position with regard to the Technical Supervisor s certificate; check the availability of state standards and executive documentation, attorneys of measuring instruments on the objects under construction; together with the Company participate in the acceptance and transfer to the contractor of the geodetic centre basis, and also control the provision of its preservation by the contractor before the completion of the construction; note that the Company is under obligation to seek the Bank s concurrence before agreeing to or implementing any modification to the terms and conditions of any contract. The Technical Supervisor will assist the Company to comply with the procedures agreed with the Lender; unless, in the opinion of the Technical Supervisor, an emergency occurs affecting the safety of life or of the Works or of adjoining property, provide a preliminary report to the Company on any prospective variation, outlining the basis for the Technical Supervisor s valuation of the variation, including but not limited to the following: a. the Technical Supervisor s opinion on the extent, if any, of applicability to the varied Works of the rates and prices set out in the contract; when expressing an opinion, the Technical Supervisor will take into account the actual or expected currencies of cost (and the proportions thereof) of the inputs of the varied work without regard to the proportions of various currencies set out in the contract; b. the quantity and the value of the varied Works that can be determined using the rates and prices set out in the contracts; c. the quantity and the Technical Supervisor s estimate of the value of the varied Works, which can be determined using the rates and prices set out in the contract as the basis for valuation: the Technical Supervisor will provide a detailed breakdown of the rates and prices set out in the contract and identify the price components that the Technical Supervisor used or intends to use for the valuation of the varied works; d. the quantity and the Technical Supervisor s estimate of the value of the varied Works, which can only be determined using the rates and prices agreed to be agreed upon between the Technical Supervisor and the contractors: the Technical Supervisor will provide to the Company with an appropriate justification of the basis for the agreement in case of a variation, follow the procedures and conditions stipulated within the FIDIC Conditions of Contract. 4

5 supervise the contractor's individual testing of the installed equipment and engineering networks and proper registration of their results; participate in the acceptance of equipment after the tests; on an ongoing basis, check the quality of construction and installation works, materials, products, structures and equipment used, the conformity of their design documentation, the technical conditions of connection to the engineering support network, the requirements of technical regulations, the results of engineering surveys, the availability and correctness of the documents, confirming their quality (passports, certificates, test results), as well as documented results of incoming inspection, timely reveal defects and informing about them the Company and the contractor; conduct control of the conformity of the composition and quality of the performance of technological operations, including operational control to the requirements of state standards; perform acceptance inspection, timely check the volumes of construction and installation works performed by the contractor and carry out their acceptance, perform examination of hidden works and intermediate acceptance of critical constructions with registration of acts in the established form; within the terms and conditions stipulated within the FIDIC Conditions of Contract receive a request from a contractor to issue a Taking Over Certificate in respect of the Works; taking into account any comments of the said parties, give instruction in writing to a contractor specifying all the work required to be done by the contractor before the issuance of a Taking Over Certificate; notify the contractor of any defects in the Works affecting Completion that may appear after giving such instructions and before completion of the Works specified therein; provided that the contractor has completed the Works so specified and remedied any defects so notified to the satisfaction of the Technical Supervisor and the Company, issue a Taking Over Certificate within the period as prescribed in the FIDIC Conditions of Contract, provided always that in the Company s opinion, the contractor has satisfactorily completed the Works; enter in the journal on technical supervision remarks and instructions for the elimination of identified defects and violations; monitor generally the contractors in performing their obligations during the Defects Notification Period. Prepare and issue a Performance Certificate, within the times and using procedures prescribed within the FIDIC Conditions of Contract; in the event that a contractor refuses to carry out any rectification work, assist the Company in the employment of an alternative contractor and in the recovery from the contractor of the costs of employing the same where applicable; advise the Company and the Bank of the value of any completed section and of any further information as may be necessary for calculating any adjustment in the amount of the performance security and any other bonds or securities procured by the contractor to secure its obligations; arrange for the return of any outstanding guarantees provided by contractors and suppliers, such as performance securities; participate in inspections carried out by the author's supervision, the body of the state architectural and construction inspection, monitor the performance by the contractor of instructions received during inspections, with a note in the relevant journals; 5

6 provide control over the performance of works that affect the safety of the facility, the control of which cannot be performed after other works, as well as the safety of building structures and sections of engineering and technical support networks, if the elimination of the shortcomings identified in the process of construction control is impossible without disassembly or damage to other building structures and sections of engineering and technical support networks; contribute with his activities to the targeted and rational use of the Company's funds, maintain a complete and accurate accounting of completed and paid works in the closing statement; require the contractor to observe the proper conditions for storage of materials, products, structures and equipment on the construction site, as well as ensuring the safety of the works performed, the erected buildings and structures prior to their delivery to the Company; consider the claims of the contractor for the issues of the provision of construction with design and estimate documentation and its quality, as well as on quality control and acceptance of works, take decisions on these claims or make proposals for the decision of the Company; during the construction period, establish, together with the contractor, the projected observations for construction of critical buildings and structures and finalise the outcome of observations by relevant documentation; upon acceptance of works performed under the contract, as well as in preparation for the commissioning of the facility, check the actual readiness of each type of works, structures, equipment and facility as a whole, the availability of properly finalised executive documentation, verify the availability of fixed and installed equipment listed in acts of acceptance, with actual availability on the object being handed over; confirm the readiness of the facility for commissioning, issue conclusions on the quality of construction and installation works, according to the form approved by the order of the Minister of National Economy of the Republic of Kazakhstan dated 24 February2015, No. 121 "On approval of the forms of conclusions on the quality of construction and installation works and compliance with the work performed project, declaration of conformity, act of acceptance of the object in operation ", registered in the Register of state registration of regulatory legal acts under No ; participate in the examination of objects that are subject to conservation, in the preparation of documentation for the conservation or temporary termination of construction, as well as in assessing the technical condition of the objects when transferring to construction organizations to continue the works after the re-opening or temporary suspension of construction; make offers to the Company about the suspension of construction and installation works performed which violates the design estimates and state standards; suspend the execution of works (with the obligatory subsequent written notification from the Company and the contractor) in cases of threat of deformation and collapse of structures, danger to life and health of people and the environment, as well as failure to comply with technical supervision instructions for the elimination of defects and violations; make offers to the contractor, and in necessary cases to the Company, on bringing to responsibility of persons who violate the requirements of design estimates and state standards and who do not follow technical supervision instructions; 6

7 make proposals to the Company on the introduction of progressive methods of production of works, new materials and technologies ensuring quality improvement, reducing costs and reducing construction time; submit monthly reports regularly to the state agency on architectural and construction inspection reports on the progress of construction and the quality of works performed enclosing the photos to the report); have a constant access to the construction site; submit a monthly report to the Company on the progress of project implementation; carry out inspection of concealed works, intermediate acceptance of critical constructions and acceptance of works for payment. Inspection and acceptance of works should be carried out with the participation of the representative of the contractor, and where necessary, representatives of subcontracting construction organizations (in the course of inspection and acceptance of the works performed by them) and the organization that carries out the author's supervision; The Contractor shall notify about the upcoming inspection or acceptance of works of the technical supervision expert one day in advance before the date for carrying out the inspection and acceptance of works. In case if the technical supervision representative would not be able to inspect the concealed works by the deadline specified in the contractor's request, and the delay in the inspection would lead to the suspension of subsequent works, the contractor should unilaterally prepare a report of inspection of the concealed works. In this case, at the request of a representative of technical supervision, to open the constructions to confirm the correctness of the works, the opening should be carried out at the Company s own expense, and if there are violations of the quality requirements at the expense of the contractor's funds. Based on the results of the survey of concealed works, an act will be prepared in the form detailed in regulatory technical documents Inspection of concealed works should be carried out before the beginning of the subsequent works. If the subsequent works are to be done after a long interruption (for more than six months) or a rapid change in weather (rains, frosts, etc.), then the inspection of the concealed works should be done once again. Repeated inspection should also be carried out in case if damage incurred to the inspected works and constructions and its elimination; Acceptance of performed works for the payment should be made by a representative of technical supervision in accordance with terms of construction contract. A billing period could be a month or a period of time that would be required for construction or implementation of construction works.. Based on the results of the acceptance, an acceptance certificate for the completed construction works should be prepared, which would need to be inspected by the a technical supervisor in the form specified in Annex 3 to the Rules for the Organization of Activities and the Functions of the Company (developer) approved by Order No. 229 of the Minister of National Economy of the Republic of Kazakhstan dated 19 March 2015 in the Register of state registration of Laws and Regulations No When inspecting concealed works, intermediate acceptance of critical structures, and also accepting the works finalised for payment, the contractors required to provide the following documentation: a document on the boundaries establishment of the land plot in accordance with the order of the Minister of National Economy of the Republic of Kazakhstan date 5 November 2014, No. 67 "On Approval of the Forms of Documents for the 7

8 Provision of Land Plots for the Construction of Facilities within the Settlement of a Settlement", registered in the Register of State Registration of Laws and Regulations No. 9952; an act of sitting a building, construction; an act of inspection the surveying of building and construction elevations ; an act of carrying the bench mark; a general work log; a log of pile driving and inspection of piles; a log of work on the installation of building structures; a welding log; a log of anticorrosive protection of welded joints; a log of embedment of joints and knots; a log for making bolted connections with controlled tension; an author's supervision log; acts (protocols) testing materials, products, structures, engineering systems and equipment; a documents on the quality (passports and certificates) of the material, product, design and equipment; an actual geodetic location sketches intermediate acceptance of separate critical constructions with execution of an act in the form established by state regulations. When inspecting and accepting works, intermediate acceptance of critical constructions, the technical supervision representative checks the conformity of the materials, products, structures and equipment used with the requirements of the design and normative-technical documentation; conformity of the composition and volume of the executed works of the design estimates; elimination of defects and violations noted in work logs and author's supervision; require the contractor (general contractor) to strictly comply with design decisions and calculations provided by the approved project, as well as the requirements of organizational and technological documents that determine the technological process of construction and installation works. Acceptance is subject to work performed in full accordance with the design estimates. All deviations from the design estimates are agreed by the Company and the project organization. In the absence of such approvals, work is accepted only after elimination of deviations issue written instructions on the mandatory elimination by the contractor (general contractor) of the violations of state (interstate) standards, deviations from the design decisions envisaged by the approved project, and (or) the requirements of the organizational and technological documents with the right to suspend construction and installation works for the execution of instructions in a timely manner carry out the duties in relation to payment of the contractors Works in accordance with the contracts receive from the contractors on a monthly basis invoices pursuant to the contracts; upon receipt of the contractors invoices, copy to the Company and the Bank each such invoice and give due consideration to any comments of the Company; Check in accordance with the relevant provisions of the contracts the contractors invoices and resolve with the contractors, where possible, any mistakes and 8

9 queries which may arise in conjunction therewith; advise the Company of any adjustments considered necessary; Ascertain the amount to be certified in respect of the contractors invoices pursuant to the contracts. Within the times stipulated in the FIDIC Conditions of Contract, issue a certificate addressed to the contractor and the Company specifying the aggregate amount payable by the Company to the contractor; Certify any additional monies due to a contractor in respect of valid claims notified in accordance with the procedure set out in a contract; Consider any invoices submitted by the contractors pursuant to the contracts and certify any additional sums which the Consultant is empowered to certify as due, provided always that the contractors has supplied sufficient particulars to enable the Consultant to determine the amount due; Collate and prepare quarterly budgets showing sums anticipated to fall due from the Company to the contractors, dates and amounts of invoices and certificates under the contract and milestones values expected to be achieved in the quarter and deliver the same to the Company and the Bank forthwith; Fully comply with the procedure for disputed certificates set out in the contracts. In particular, complete within two weeks any adjudication under the contracts, which may be required. Forthwith carry out any correction or modification of any certificate or other action authorised by the contracts whenever the Technical Supervisor considers it appropriate to do so; As required by the FIDIC Conditions of Contract, no later than fifty six (56) days after the date of issue of the last Performance Certificate, receive from the contractors draft Final Payment Certificates pursuant to the contracts. Within the times stipulated in the FIDIC Conditions of contract after receipt of this draft Final Payment Certificate, work with the contractors to agree a Final Statement; maintain Project accounts and prepare final Project accounts; at the completion of the construction site, persons carrying out technical supervision shall issue a certificate to the Company on the quality of construction and installation works. 4. REPORTING, DELIVERABLES AND IMPLEMENTATION ARRANGEMENTS The Assignment is expected to start in Q and has an estimated overall duration of 24 months. Technical Supervisor will report to the nominated representative of the Company Experience of performing construction supervision under FIDIC terms will be highly advantageous. 9

10 on all aspects of this assignment. In order to ensure efficient and effective implementation of the Project, the Consultant will also work closely with other consultants in particular Poyry Oy which has been engaged to provide support to the PIU. For the entire duration of the assignment, Technical Supervisor shall make available suitably qualified experts to ensure implementation of the Project in compliance with the local laws and in accordance with the FIDIC Conditions of Contract. Technical Supervisor will prepare Progress Reports on a quarterly basis and Final Reports for each completed contract under the PIP, which has to be delivered to the Company with a copy to the EBRD. All reports shall be prepared in Russian and submitted in hard copy (1 in each language) to the Company and in electronic copy to the EBRD and the Company (in both languages). The Company will provide to the Technical Supervisor one copy of complete set of design estimate documentation with a mark in the drawings "To the production of works." The Technical Supervision will have free access to the facilities under construction and with the right to receive the documentation related to the facilities under construction. 5. CONSULTANT PROFILE Technical Supervisor shall have a corresponding certificate for the right to carry out engineering services in the sphere of architectural, town-planning and construction activities in Kazakhstan and perform the services on the terms as detailed below. Practical experience of performing construction supervision under FIDIC terms is also highly desirable. For failure to perform (or improperly perform) duties or carrying out its activities in violation of the requirements of the legislation of the Republic of Kazakhstan, a person exercising technical supervision shall be liable under the laws of the Republic of Kazakhstan. On technically and technologically complex facilities of the first and second levels of responsibility, technical supervision should be performed by accredited legal entities with at least three experts who have a certificate of technical supervision at the appropriate level of responsibility. Individuals who have an expert certificate of technical supervision carry out activities at technically simple facilities of second and third levels of responsibility. Individuals and accredited legal entities who carry out technical supervision activities are required to have on the right of ownership or lease a measuring and control instruments, regulatory documentations and an accredited laboratory (contracted). Accreditation of legal entities that carry out technical supervision is carried out by the authorized agency for architecture, urban planning and construction. Technical Supervisor s expert team is expected to include Key Experts as follows: a. Key Expert No 1: Team Leader with proven experience in the supervision of similar construction works in Kazakhstan. 10

11 b. Key Expert No 2: Lead Technical Supervision Expert with proven experience in the supervision of similar construction works in Kazakhstan. c. Key Expert No 3: Lead Engineer with proven experience in the supervision of similar construction works in Kazakhstan. The Key Experts will be supported by auxiliary experts as deemed necessary for successful implementation of the Project by the Technical Supervisor. 11