People s Republic of Bangladesh: Railway Rolling Stock Operations Improvement Project

Transcription

1 Railway Rolling Stock Operations Improvement Project (RRP BAN ) Project Administration Manual Project Number: Loan and Grant Numbers: LXXXX; TAXXXX 11 December 2017 People s Republic of Bangladesh: Railway Rolling Stock Operations Improvement Project

2 1 ABBREVIATIONS ADB Asian Development Bank APFS audited project financial statements CO 2 carbon dioxide ERP enterprise resource planning ERP IT enterprise resource planning information technology FAPAD Foreign Aided Project Audit Directorate FMA financial management assessment OCR ordinary capital resources PIU project implementation unit QCBS quality and cost based selection RRP report and recommendation of the President SOE statement of expenditure TOR terms of reference

3 CONTENTS I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLANS 2 A. Project Readiness Activities 2 B. Overall Project Implementation Plan 3 III. PROJECT MANAGEMENT ARRANGEMENTS 4 A. Project Implementation Organizations: Roles and Responsibilities 4 B. Key Persons Involved in Implementation 4 C. Project Organization Structure 6 IV. COSTS AND FINANCING 7 A. Cost Estimates Preparation and Revisions 7 B. Key Assumptions 7 C. Detailed Cost Estimates by Expenditure Category 8 D. Allocation and Withdrawal of Loan Proceeds 9 E. Detailed Cost Estimates by Financier 10 F. Detailed Cost Estimates by Components 11 G. Detailed Cost Estimates by Year 12 H. Contract and Disbursement S-Curve 13 I. Fund Flow Diagram 14 V. FINANCIAL MANAGEMENT 16 A. Financial Management Assessment 16 B. Disbursement 18 C. Accounting 19 D. Auditing and Public Disclosure 19 VI. PROCUREMENT AND CONSULTING SERVICES 20 A. Advance Contracting and Retroactive Financing 20 B. Procurement of Goods, Works, and Consulting Services 20 C. Procurement Plan 21 D. Consultant's Terms of Reference 21 VII. SAFEGUARDS 21 VIII. GENDER AND SOCIAL DIMENSIONS 21 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 22 A. Project Design and Monitoring Framework 22 B. Monitoring 22 C. Evaluation 22 D. Reporting 23 E. Stakeholder Communication Strategy 23 X. ANTICORRUPTION POLICY 23 XI. ACCOUNTABILITY MECHANISM 23 XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 24

4 1 APPENDICES: A Design and Monitoring Framework 25 B Procurement Plan 27 C Terms of Reference for Consultancy Services for 32 Detailed Designs of Rolling Stock Maintenance Facilities D Terms of Reference for Consulting Services for 50 ERP IT System Operations and Maintenance E Terms of Reference for Consulting Services for Attached 55 Capacity Development Technical Assistance on Railway Rolling Stock Operations Improvement

5 Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with the policies and procedures of the government and Asian Development Bank (ADB). The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Bangladesh Railway is wholly responsible for the implementation of ADB-financed projects, as agreed jointly between the borrower and ADB, and in accordance with the policies and procedures of the government and ADB. ADB staff is responsible for supporting implementation including compliance by Bangladesh Railway of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At loan negotiations, the borrower and ADB shall agree to the PAM and ensure consistency with the loan agreement. Such agreement shall be reflected in the minutes of the loan negotiations. In the event of any discrepancy or contradiction between the PAM and the loan agreement, the provisions of the loan agreement shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP), changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval, they will be subsequently incorporated in the PAM.

6 1 I. PROJECT DESCRIPTION 1. The Government of Bangladesh proposed a project for financing by the Asian Development Bank (ADB) to improve the operational efficiency of the Bangladesh Railway through the procurement of modern rolling stock, prepare investment projects to enhance its rolling stock maintenance capacity and support the ongoing railway reform. The project will contribute to an increase in the share of the railway as a core mode of transportation and to the shift from roads to rail. This modal shift and the efficient rolling stock will reduce carbon dioxide (CO 2) emission. 2. The project is aligned with the following impacts: a balanced 3R (rail, river & road)-based multimodal transport infrastructure system developed and greenhouse gas emission in the power, transport, and industry sectors reduced. The project outcome will be operational and energy efficiency of Bangladesh Railway improved. 3. Project outputs are as below: (1) Output 1: Modern rolling stock procured. The project will procure 40 broad gauge locomotives, 125 luggage vans for passenger and parcel trains, and 1,000 wagons for freight trains for use in the major corridors of the Bangladesh Railway network. (2) Output 2: Investment plans for maintenance facilities of locomotives and diesel electric multiple units developed. The consulting services under the project will prepare investment plans of urgently required maintenance facilities (feasibility studies, detailed designs, cost estimates, and bidding documents). (3) Output 3: Capacity of Bangladesh Railway officials and locomotive drivers on energy-efficient rolling stock operations improved. The project will establish a training program and train Bangladesh Railway s locomotive drivers on the effective use of new locomotives. It will also recommend measures to improve the overall energy efficiency of rolling stock operations as a policy direction of Bangladesh Railway. (4) Output 4: Enterprise Resource Planning Information Technology system for accrual accounting used and adequately maintained. A team of information technology (IT) engineers will be engaged under the project to (i) provide daily operational support to the users of the ERPIT system, and (ii) operate and maintain the ERPIT system and its infrastructure developed under ADB s Railway Sector Investment Program.

7 2 II. IMPLEMENTATION PLANS A. Project Readiness Activities Indicative Activities Advance contracting actions Jul/Aug 2017 X Table 1: Project Readiness Activities Sep/Oct 2017 Nov/Dec 2017 Jan/Feb 2018 Mar/Apr 2018 May/Jun 2018 Responsible Individual/Unit/ Agency/ Government BR Establish project implementation arrangements X BR Government budget inclusion X MOR, BR DPP approval by ECNEC X GOB (MOR, PC) ADB Board approval X ADB Loan signing X MOF, BR, ADB Government legal opinion provided X MOF, MOR, BR X MOF, BR, ADB Loan effectiveness ADB = Asian Development Bank, BR = Bangladesh Railway, DPP = Development Project Proforma, ECNEC = Executive Committee of the National Economic Council, GOB = Government of Bangladesh, MOR = Ministry of Railways, PC = Planning Commission. Source: Asian Development Bank.

8 3 B. Overall Project Implementation Plan Table 2: Overall Project Implementation Plan Activities 1. Rolling stock procurement 1.1 Rolling stock procurement Procurement Manufacturing, delivery and commissioning Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2. Detailed designs of maintenance facilities Consultant recruitment Detailed designs 3. Capacity development on energy efficient locomotive operations Consultant recruitment Consulting services 4. Mainstreaming the use of ERP system Consultant recruitment Consulting services ERP = enterprise resource planning Source: Asian Development Bank Implementation stage Intermiittent input

9 4 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations: Roles and Responsibilities Table 3: Project Implementation Organizations Project Implementation Management Roles and Responsibilities Organizations Ministry of Finance Focal point for all matters related to the loan agreement, e.g. signing the loan agreement, preparing loan documents for effectiveness, loan category reallocation, loan extension or termination requests Allocation of necessary counterpart budget for project execution Bangladesh Railway Overall coordination of project implementation Railway Reform Project Implementation Committee Project unit (PIU) implementation Asian Development Bank Source: Asian Development Bank. Inter-agency coordination Establishment of Railway Reform Project Implementation Committee, chaired by Director General with all Additional Director Generals as members Establishment of project implementation units and appointment of project directors and sufficient staff for support of project director Inter-ministerial coordination Monitoring of the railway reform action progress Decision making regarding the railway reform actions Provision of guidance and instructions to respective departments regarding railway reform actions Day-to-day project management Procurement of works, goods and services, and consulting contracts Preparation of withdrawal applications Preparation of project progress reports B. Key Persons Involved in Implementation Maintain project accounts and complete loan financial records Monitor and review overall project implementation including project implementation schedule; actions required in relation with safeguards compliance; timeliness of budgetary allocations and counterpart funding; project expenditures; progress with procurement and disbursement; compliance with loan covenants Executing Agency Bangladesh Railway Md. Amzad Hossain Director General Telephone: Fax: address: dg@railway.gov.bd Office Address: Bangladesh Railway Railway Bhaban, Dhaka, Bangladesh

10 5 Asian Development Bank South Asia Transport and Communications Division Mission Leader Ravi Venkat Peri Director Telephone No.: address: Tsuneyuki Sakai Senior Transport Specialist Telephone No.: address:

11 6 C. Project Organization Structure Figure 1: Project Organization Structure Director General Bangladesh Railway General Manager/Project (Mechanical) Project Director Additional Director General (Rolling Stock) Peoject Director Railway Reform Chief Mechanical Engineer/Project Project Director (Facility Improvement) Addl. Chief Mechanical Engineer/Project Addl. Project Director(Facility Improvement) Addl. Project Director (ERP) WM/Proj(Loco) AEE (proj) WM/P(C&W) WM/Proj DEE/Proj DEN/Proj Deputy Director/ERP AWM/proj(Loco) SAE,SSAE/Proj (Elec.) AWM/P(C&W) AWM/Proj Asst Director/ERP SAE, SSAE/Proj (Loco) SAE, SSAE/Proj (C & W) SAE, SSAE/Proj (Mech) SAE, SSAE/Proj (Elec) SAE, SSAE/Proj (Works & Ways) Accountant * WM =Works Manager * DEE = Divisional Electrical Engineer * DEN = Divisional Executive Engineer * AWM= Assistant Works Manager * AEE = Assistant Electrical Engineer * AEN= Assistant Executive Engineer * SSAE - Senior Sub-Assistant Engineer * SAE - Sub-Assistant Engineer Source: Bangladesh Railway.

12 7 IV. COSTS AND FINANCING 4. The project is estimated to cost $ million (Table 4) including taxes and duties, physical and price contingencies, interest and other charges during implementation. Table 4: Project Cost Estimate ($ million) Item Amount a A. Base Cost b 1 Rolling stock procurement Consulting Services 7.13 Subtotal (A) B. Contingencies c C. Financing Charges During Implementation Total (A+B+C) a The government will finance taxes and duties of $81.78 million as exemption and/or cash contribution. b In mid-2017 prices as of 30 June c Physical contingencies computed at 2% for goods. Price contingencies computed at average of 1.5% on foreign exchange costs and 6.3% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest and commitment charges. Interest during construction for the OCR regular loan has been computed at the five-year US dollar fixed swap rate plus an effective contractual spread of 0.2% and maturity premium of 0.1%. Commitment charges for the OCR loan are 0.15% per year to be charged on the undisbursed loan amount. Interest during construction for the OCR concessional loan is computed at 2% per annum. Source: Asian Development Bank. A. Cost Estimates Preparation and Revisions 5. The cost estimates were prepared by Bangladesh Railway with support of an external expert based on the current prices in the international market. Bangladesh Railway will revise the estimates during project implementation from time to time as required in light of changes in international market prices. B. Key Assumptions 6. The following key assumptions underpin the cost estimates and financing plan: (i) Exchange rate: Tk = $1.00 (as of 30 June 2017). (ii) Price contingencies based on expected cumulative inflation over the implementation period are as follows: Table 5: Escalation Rates for Price Contingency Calculation (%) Item Average Foreign rate of price inflation Domestic rate of price inflation Source: Asian Development Bank.

13 8 C. Detailed Cost Estimates by Expenditure Category Item Table 6: Detailed Cost Estimates by Expenditure Category (US$ Million) A. Investment Costs Total Cost 1 Goods % of Total Base Cost Locomotives BG luggage van MG luggage van BG bogie vans MG boggie vans BG BKC wagons MG BKC wagons Consulting services Detailed designs of workshops/shed Institutional Support Subtotal (A) B. Project Management a Project management cost Subtotal (B) C. Tax and duties Tax and Duties Subtotal (C) Total Base Cost D. Contingencies 1 Physical Price Subtotal (C) E. Financing Charges During Implementation 1 Interest During Implementation Commitment Charges Subtotal (D) Total Project Cost (A+B+C+D) BG = broad gauge; BKC = open type; MG = meter gauge. Notes: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

14 9 D. Allocation and Withdrawal of Loan Proceeds CATEGORY Number Table 7: ADB Ordinary Capital Resources Regular Loan Item Amount Allocated ($ million) ADB FINANCING Percentage and Basis for Withdrawal From the Loan Account 1 Goods and Consulting Services percent of total expenditure claimed * 2 Interest Charge percent of amount due 3 Commitment Charge percent of amount due 4 Unallocated Total *Exclusive of taxes and duties imposed within the territory of the Borrower. CATEGORY Number Table 8: ADB Ordinary Capital Resources Concessional Loan Item Amount Allocated ($ million) ADB FINANCING Percentage and Basis for Withdrawal From the Loan Account 1 Consulting Services percent of total expenditure claimed * 2 Interest Charge percent of amount due 3 Unallocated 0.70 Total 6.00 *Exclusive of taxes and duties imposed within the territory of the Borrower.

15 10 E. Detailed Cost Estimates by Financier BG = broad gauge; BKC = open type; MG = meter gauge. Note: Numbers may not sum precisely because of rounding. Source(s): Asian Development Bank. Table 9: Detailed Cost Estimates by Financier Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category Total Cost Item {A} {A/D} {A} {A/D} {C} {C/D} {D} A. Investment Costs 1 Goods a. Locomotives b. BG luggage van c. MG luggage van d. BG bogie vans e. MG boggie vans f. BG BKC wagons g. MG BKC wagons Consultanting services a. Detailed designs of workshops/shed b. Institutional support Subtotal (A) B. Project management 1 Project management cost Subtotal (B) C. Tax and duties 1 Tax and duties Subtotal (C) Total base cost D. Contingencies Physical Price Subtotal (D) E. Financing charges during implementation ADB (Regular OCR-Loan) ADB (Consessional OCR-Loan) 1 Interest during construction Commitment charges Subtotal (E) Total project cost (A+B+C+D+E) % Total project cost GOB

16 11 F. Detailed Cost Estimates by Components A. B. Table 10: Detailed Cost Estimates by Components Total Cost Amount % of Cost Category Amount Investment Cost a 1. GGoods % of Cost Category a Locomotives b BG luggage van c MG luggage van d BG bogie vans e MG boggie vans f BG BKC wagons g MG BKC wagons Consulting services a Detailed designs of workshops/shed b Institutional support Subtotal (A) Project management cost Subtotal (B) C. Tax and duties D. E. Project management costs 1 Tax and duties Subtotal (C) Total base cost Contingencies 1 Physical Price Subtotal (D) Financing charges during implementation Rolling Stock Procurement Consulting Services 1 Interest during implementation Commitment charges Subtotal (E) Total Project Cost (A+B+C+D+E) BG = broad gauge; BKC = open type; MG = meter gauge. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

17 12 G. Detailed Cost Estimates by Year Source: Asian Development Bank Table 11: Detailed Cost Estimates by Year ($ million) Item Total Cost A. Investment Costs 1 Rolling stock procurement Consultants Subtotal (A) B. Project Management Cost Subtotal (B) C. Tax and Duties Subtotal (C) Total Base Cost D. Contingencies E. Financing Charges During Implementation a. Interest During Construction b. Commitment Charges Total Project Cost (A+B+C+D+E) % Total Project Cost % 0.03% 0.38% 9.56% 27.66% 31.11% 31.26%

18 13 H. Contract and Disbursement S-Curve Figure 2: Contract and Disbursement S-Curve Cumulative disbursement Cumulative contract award Disbursement Contract award Cumulative disbursement Cumulative contract award Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q = quarter Source: Asian Development Bank.

19 14 I. FUND FLOW DIAGRAM 7. In case commitment procedure is adopted, the following diagram shows how the funds will flow from ADB to the contractor to implement project activities. Figure 3: Commitment Procedure Requests issuing of a commitment letter Asian Development Bank Issues commitment letter to the Supplier s Bank Bangladesh Railway Project Director Supplier s Bank Supplier Key Document Flow Funds Flow Source: Asian Development Bank.

20 15 8. In case reimbursement procedure is adopted, the following diagram shows how the funds will flow from ADB and the Borrower to implement project activities. Figure 4: Reimbursement Procedure Requests to reimburse for payments made by the Government of Bangladesh Asian Development Bank Releases funds to Bangladesh Bank Project Director Bangladesh Bank Maintains funds under PIU A/C No. Instructs BB to pay contractor or consultant from Bank Account Government of Bangladesh A/C No. for Project Implementation Unit in Bangladesh Bank Key Documents Flow Funds Flow Suppliers or consultants Receives funds for work done A/C = account; PIU = project implementation unit. Source: Asian Development Bank.

21 16 9. In case direct payment procedure is adopted, the following diagram shows how the funds will flow from ADB to the government to implement project activities. Figure 5: Direct Payment Procedure Submits withdrawal application Asian Development Bank Pays directly to suppliers or Consultant Project Director Submits claims To Project Director Suppliers or Consultant Submits claims for work done or services provided Key Documents Flow Funds Flow Source: Asian Development Bank. A. Financial Management Assessment V. FINANCIAL MANAGEMENT 10. The financial management assessment (FMA) was conducted in April 2017 in accordance with ADB s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note. The FMA considered the capacity of Bangladesh Railway, including funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. Based on the assessment, the key financial management risks identified are (i) delays in asset registry and full integration of Enterprise Resource Planning Information Technology (ERP IT) system to enable the preparation of full-fledged accrual based financial statements in accordance with Bangladesh Accounting Standards, (ii) weak internal audit function considering the international best practice and (iii) unresolved audit issues. It is concluded that the overall pre-mitigation financial management risk of Bangladesh Railway is moderate. The government and Bangladesh Railway have agreed to implement an action plan as key measures to address the deficiencies. The financial management action plan is provided in Table 11.

22 17 Table 12: Financial Management Action Plan Issues Actions Timeline Slow progress of the Reform Establish a high-level Reform Project Established Project Implementation Committee, chaired by in 2017 DG and all ADG as members to facilitate Asset Registry has been completed but not yet migrated into the ERP IT system Inability to generate fullfledged accrual based financial statements Inadequate IT resources to manage the ERP system and provide change management Gradual move towards commercial focus and sustainability Weak internal control the process. Complete integration of BR s asset registry into the ERP IT System. Continue efforts to mainstream the use of the ERP IT-System, to ensure full rollout of all modules to all districts of Bangladesh Railway, and prepare accrual-based financial statements for Bangladesh Railway using the system. IT staffing plan shall be approved by Ministry of Public Administration. Implement annual tariff adjustments based on the established indicatorbased formula to achieve that the operation ratio of Bangladesh Railway remains at least at the current level. Fully operationalize the container company and increase the market share in container transport between Dhaka and Chittagong Port from 10% to 15% of the Dhaka-bound containers received in Chittagong Port. Establish a separate unit under the passenger line of business to operate and manage the more luxurious tourist trains operating on the new line between Dhaka, Chittagong and Cox s Bazar with the target to increase the revenues while maintaining a higher standard of comfort and reliability for passengers by charging special tariffs at least at the level of luxury buses. Establish an operation and maintenance unit for the new infrastructure between Chittagong and Cox s Bazar as part of an improved asset management and preventive maintenance framework, which can be replicated in other sections of the Bangladesh Railway network in the coming years, especially where expansion of the network and enhancement of the line capacity have taken place. Establish or outsource the internal audit function in line with best practice terms of reference. June 2018 November 2019 for FY2019 financial statements June 2018 Annually, in the first quarter Increase in market share by 2020 Responsible Entity BR BR BR BR BR BR 2023 BR 2023 BR As soon as possible, latest within FY2018 BR

23 18 Unresolved audit issues BR will resolve and respond to FAPAD on all outstanding audit issues Annually, immediately after FAPAD audits ADB = Asian Development Bank; ADG = assistant director general; APFS = audited project financial statements; BR = Bangladesh Railway; DG = director general; ERP IT= enterprise resource planning information technology; FAPAD = Foreign Aided Project Audit Directorate. Source: Bangladesh Railway B. Disbursement 1. Disbursement Arrangements for ADB Funds 11. The loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2017, as amended from time to time) 1, and detailed arrangements agreed upon between the government and ADB. Section IV-I describes the fund flows for each disbursement procedure to be used for the project. Online training for project staff on disbursement policies and procedures is available. 2 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. Commitment procedure will be used for rolling stock procurement. Direct payment and/or reimbursement procedure will be used for consulting services. 12. Bangladesh Railway will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents and (iv) preparing and sending withdrawal applications to ADB. 13. Statement of expenditure (SOE) procedure. 3 The SOE procedure may be used for reimbursement of eligible expenditures not exceeding $100,000 equivalent per individual payment. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. 14. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is set in accordance with ADB's Loan Disbursement Handbook, unless otherwise approved by ADB. Individual payments below this amount should generally be paid by the borrower and subsequently claimed from ADB through reimbursement. ADB reserves the right not to accept withdrawal applications below the minimum amount. 2. Disbursement Arrangements for Counterpart Fund 15. Counterpart funds will be provided by the Ministry of Finance through the Ministry of Railways to Bangladesh Railway as direct budgetary support. Bangladesh Railway s project BR 1 The handbook is available electronically from the ADB website ( 2 Disbursement elearning. 3 SOE forms are available in Appendix 7B of ADB s Loan Disbursement Handbook (2017, as amended from time to time).

24 19 implementation unit (PIU) will be responsible for annually (i) preparing disbursement projections, and (ii) requesting budgetary allocations for counterpart funds. C. Accounting 16. Bangladesh Railway will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the project following cash-based accounting system following the government s financial regulations. Bangladesh Railway will prepare project financial statements in accordance with the government's accounting laws and regulations which are consistent with international accounting principles and practices. D. Auditing and Public Disclosure 17. The Bangladesh Railway will cause the detailed project financial statements to be audited in accordance with International Standards on Auditing, by an independent auditor acceptable to ADB. The audited project financial statements (APFS) together with the auditor s opinion will be presented in the English language to ADB within six months from the end of the fiscal year by the Bangladesh Railway. 18. The audited entity financial statements, together with the auditor s report and management letter, will be submitted in the English language to ADB within one month after their approval by the relevant authority. 19. The audit report for the project financial statements will include a management letter and auditor s opinions, which cover (i) whether the project financial statements present an accurate and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting standards; (ii) whether the proceeds of the loan were used only for the purpose(s) of the project; and (iii) whether the borrower or executing agency was in compliance with the financial covenants contained in the legal agreements (where applicable). 20. Compliance with financial reporting and auditing requirements will be monitored by review missions and during normal program supervision, and followed up regularly with all concerned, including the external auditor. 21. The government and Bangladesh Railway have been made aware of ADB s approach to delayed submission, and the requirements for satisfactory and acceptable quality of the APFS. 4 ADB reserves the right to require a change in the auditor (in a manner consistent with the constitution of the borrower), or for additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB s financing is used in accordance with ADB s policies and procedures. 4 ADB s approach and procedures regarding delayed submission of audited project financial statements: (i) When audited project financial statements are not received by the due date, ADB will write to the executing agency advising that (a) the audit documents are overdue; and (b) if they are not received within the next 6 months, requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters will not be processed. (ii) When audited project financial statements are not received within 6 months after the due date, ADB will withhold processing of requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters. ADB will (a) inform the executing agency of ADB s actions; and (b) advise that the loan may be suspended if the audit documents are not received within the next 6 months. (iii) When audited project financial statements are not received within 12 months after the due date, ADB may suspend the loan.

25 Public disclosure of the audited project financial statements, including the auditor s opinion on the project financial statements, will be guided by ADB s Public Communications Policy After the review, ADB will disclose the audited project financial statements and the opinion of the auditors on the project financial statements no later than 14 days of ADB s confirmation of their acceptability by posting them on ADB s website. The management letter, additional auditor s opinions, and audited entity financial statements will not be disclosed. 6 VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 23. All advance contracting and retroactive financing will be undertaken in conformity with ADB Procurement Guidelines (2015, as amended from time to time) and ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The borrower and Bangladesh Railway have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the project. 24. Advance contracting. Advance contracting will be carried out for goods and consulting services. 25. Retroactive financing. Retroactive financing may be applied for eligible expenditures up to the equivalent of 20% of the ADB loan, incurred before loan effectiveness, but not more than 12 months before the signing of the loan agreement. B. Procurement of Goods, and Consulting Services 26. All procurement of goods and services will be undertaken in accordance with ADB s Procurement Guidelines (2015, as amended from time to time). 27. The project comprises of 5 supply contracts for procurement of locomotives (40 broad gauge), 75 meter gauge luggage vans, 50 broad gauge luggage vans, meter gauge wagons (400 bogie covered wagons and 180 bogie open wagons) and broad gauge wagons (300 bogie covered wagons and 120 bogie open wagons). International competitive bidding procedures will be used for all supply contracts under the project with ADB s prior review of bid documents and major steps in the procurement process during bid evaluation. 28. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages is in Section C. 29. All consultants will be recruited in accordance with ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). 7 The terms of reference for all consulting services are detailed in Section D. 30. An estimated 175 person-months (102 international, 73 national) of consulting services are required to conduct detailed designs of maintenance facilities, and an estimated 216 national 5 Public Communications Policy: 6 This type of information would generally fall under public communications policy exceptions to disclosure. ADB Public Communications Policy. Paragraph 97(iv) and/or 97(v). 7 Checklists for actions required to contract consultants by method available in e-handbook on Project Implementation at:

26 21 person-months of consulting services are required to support Bangladesh Railway on the operation and maintenance of ERP IT system. Consulting firms will be engaged using the qualityand cost-based selection (QCBS) method with a standard quality cost ratio of 90:10. C. Procurement Plan 31. The procurement plan is in Appendix B. D. Consultant's Terms of Reference 32. The terms of reference for the detailed design consultant are in Appendix C, and that for the ERP IT system operations and maintenance consultant are in Appendix D. 33. The terms of reference for the consultant to be engaged under the attached TA are in Appendix E. VII. SAFEGUARDS 34. The project involves the procurement of locomotives and passenger carriages that will operate on existing railway lines. According to the ADB s Safeguard Policy Statement (2009), the project is categorized as C for impacts on the environment, involuntary resettlement, and indigenous peoples. The preparation of the detailed design for the new maintenance workshops will include the due diligence of its impacts on the environment, involuntary resettlement and indigenous peoples. 35. During project implementation, it must be ensured that there will be no or minimal adverse environmental impacts and all commissioning works must be done in accordance with the environment, health and safety regulations of the Government of Bangladesh. If there are any deviations in project scope that require any of the safeguard categories to be raised, Bangladesh Railway must immediately inform ADB for further advice on preparation of assessment and planning documents. 36. During implementation, Bangladesh Railway will further ensure that the project does not result in any involuntary resettlement or indigenous peoples impacts and no activity that could have potential social safeguards implications will be undertaken until the impacts are assessed and plans with mitigation measures are prepared and approved by the ADB. 37. Prohibited investment activities. Pursuant to ADB s Safeguard Policy Statement (2009), ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the Safeguard Policy Statement (2009). VIII. GENDER AND SOCIAL DIMENSIONS 38. Gender, HIV/AIDS, and public health. The project is categorized as no gender elements (NGE), as it does not include gender equity and women empowerment activities. However, the project will have a positive impact on women, as railway is considered one of the most reliable, comfortable and safest mode of land transportation and women are important railway users. As for other transport-related social issues, the proposed project is not expected to contribute to any increase in the incidence of HIV/AIDS or human- trafficking.

27 22 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION A. Project Design and Monitoring Framework 39. The design and monitoring framework for the project is in Appendix A. B. Monitoring 40. Project performance monitoring. Key performance indicators during project implementation will be the progress of contract award and disbursement of ADB loan proceeds, which will be monitored against the target in Section IV-H of this project administration manual. Achievement of the project performance targets will be assessed following the design and monitoring framework. Bangladesh Railway will establish a project performance management system for the project. Indicators to be monitored for the purpose shall include, but not limited to, (i) the vehicle-kilometers per unit day on line for each type of rolling stock before and after the implementation of the project; (ii) engine kilometers per locomotive day on line; (iii) fuel consumption of locomotive with and without auxiliary power unit and (iv) preparation progress of accrual-based financial statements of Bangladesh Railway. Progress will be monitored and reported by Bangladesh Railway as required. These reports will provide information necessary to update ADB's project performance reporting system Compliance monitoring. Regular monitoring of project implementation to ensure policy compliance will be conducted by ADB. As necessary, special loan administration missions and a midterm review mission will be fielded to ensure policy compliance. Bangladesh Railway will monitor project implementation in accordance with the schedule and time-bound milestones, and keep ADB informed of any significant deviations that may result in not achieving the milestones. 42. Safeguards monitoring. Since the project is categorized as C for impacts on the environment, involuntary resettlement, and indigenous peoples, no safeguards monitoring reports are required. However, if there are any deviations in project scope which require any of the safeguard categories to be raised, Bangladesh Railway will be advised on the type and frequency of monitoring reports required. C. Evaluation 43. A project inception mission will be fielded soon after the legal agreements of the project are declared effective; thereafter, regular reviews will follow at least annually. As necessary, special loan administration missions and a midterm review mission will be fielded, under which any changes in scope or implementation arrangement may be required to ensure achievement of project objectives. Bangladesh Railway will monitor project implementation in accordance with the schedule and time-bound milestones, and keep ADB informed of any significant deviations that may result in the milestones not being met. Within six months of physical completion of the project, Bangladesh Railway will submit a project completion report to ADB. 9 8 ADB's project performance reporting system is available at default.asp?p=evaltool 9 Project completion report format is available at: Sector-Landscape.rar

28 23 D. Reporting 44. Bangladesh Railway will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions, (c) updated procurement plan, and (d) updated implementation plan for the next 12 months; and (iii) a project completion report within six months of physical completion of the project. To ensure that projects will continue to be both viable and sustainable, project accounts and the executing agency audited financial statement, together with the associated auditor's report, should be adequately reviewed. E. Stakeholder Communication Strategy 45. Consultations undertaken during the preparation of the Railway Sector Improvement Program (MFF-0004-BAN), the SASEC Railway Connectivity: Akhaura Laksam Double Track Project (Loans 3169/70-BAN) and SASEC Chittagong Cox s Bazar Railway Project, Phase 1(MFF-0094-BAN) show that people have a positive attitude towards the improvement of the railway services. They viewed rail transport as a key factor in improving opportunities for business development, as well as connections to other parts of the country, neighboring countries and basic services, such as administrative services, education and health care, trade and commerce, and tourism. X. ANTICORRUPTION POLICY 46. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the project. 10 All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all project contractors, suppliers, consultants, and other service providers. Individuals and/or entities on ADB s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contracts under the project To support these efforts, relevant provisions are included in the loan agreement and the bidding documents for the project. XI. ACCOUNTABILITY MECHANISM 48. People who are, or may in the future be, adversely affected by the project may submit complaints to ADB s Accountability Mechanism. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted projects can voice, and seek a resolution of their problems, as well as report alleged violations of ADB s operational policies and procedures. Before submitting a complaint to the Accountability Mechanism, affected people should make an effort in good faith to solve their problems by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, should they approach the Accountability Mechanism Anticorruption Policy: 11 ADB's Integrity Office web site: 12 Accountability Mechanism.

29 24 XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 49. All revisions and/or updates during the course of implementation should be retained in this section to provide a chronological history of changes to implemented arrangements recorded in the FAM, including revision to contract awards and disbursement s-curves.

30 Appendix A 25 DESIGN AND MONITORING FRAMEWORK Impacts the Project is Aligned with A balanced 3R (rail, river, and road)-based multimodal transport infrastructure system developed (Seventh Five-Year Plan, FY2016 FY2020) a Greenhouse gas emission in the power, transport, and industry sectors reduced (Intended Nationally- Determined Contribution) b Results Chain Outcome Operational and energy efficiency of Bangladesh Railway improved Performance Indicators with Targets and Baselines By 2022: a. Vehicle-kilometers per coaching vehicle-day on line increased by 10% (2016 baseline: 469 for broad gauge passenger carriages, 194 for broad gauge other coaching vehicles, 262 for meter gauge passenger carriages, 89 for meter gauge other coaching vehicles) b. Vehicle-kilometers per freight wagonday on line increased by 10% (2016 baseline: 58.7 for broad gauge freight wagons, 10.1 for meter gauge freight wagons) c. Passenger-kilometers increased by 10% (2016 baseline: 9,167 million) d. Ton-kilometers increased by 10% (2016 baseline: 675 million) e. Operating ratio without public service obligation improved by 15% (2016 baseline: 246%) Data Sources and Reporting Mechanisms a e. Annual Information Book issued by Bangladesh Railway Risks Significant loss in traffic demand due to unexpected economic downturn Outputs 1. Modern rolling stock procured f. Fuel consumption of APU-equipped diesel locomotives reduced by 10% (2016 baseline: 350 liters per locomotive per day without APU) By 2021 for all outputs: 1a. 40 broad gauge locomotives procured (2016 baseline: Not applicable) 1b. 75 meter gauge and 50 broad gauge luggage vans procured (2016 baseline: Not applicable) 1c. 400 meter gauge and 300 broad gauge bogie covered wagons procured (2016 baseline: Not applicable) f. Project progress and completion reports by Bangladesh Railway 1a d. Project progress report and completion report by Bangladesh Railway Nonparticipation of eligible international suppliers and consultants due to increased security threats in Bangladesh 1d. 180 meter gauge and 120 broad gauge bogie open wagons procured (2016 baseline: Not applicable)

31 26 Appendix A 2. Investment plans for maintenance facilities of locomotives and diesel electric multiple units developed 3. Capacity of Bangladesh Railway officials and locomotive drivers on energy-efficient rolling stock operations improved 2a. Detailed designs of four maintenance facilities for locomotives and diesel electric multiple units completed. (2016 baseline: Not applicable) 3a. Training program on APU operations established (2016 baseline: Not applicable) 3b. 100 Bangladesh Railway locomotive drivers trained on APU operations (2016 baseline: 0) 3c. Recommendations for further energy efficiency improvement of rolling stock operations accepted by Bangladesh Railway management (2016 baseline: Not applicable) 2a. Development project proposal by Bangladesh Railway 3a c. Final report by the technical assistance consultant 4. ERPIT system for accrual accounting used and adequately maintained 4a. Accrual-based financial statements using the ERPIT system are disclosed annually (2016 baseline: Not applicable) 4a. Bangladesh Railway annual reports Key Activities with Milestones 1. Modern rolling stock procured 1.1 Award all five supply contracts by August Complete procurement of new rolling stock by August Investment plans for maintenance facilities of locomotives and diesel electric multiple units developed 2.1 Award the consulting services contract by September Complete detailed designs by March Capacity of Bangladesh Railway officials and locomotive drivers on energy-efficient rolling stock operations improved 3.1 Award the technical assistance consulting services contract by December Submit recommendations on further energy efficiency improvement rolling stock operations to the management of Bangladesh Railway by June Complete training of Bangladesh Railway officials and locomotive drivers on energy-efficient rolling stock operations by October ERPIT system for accrual accounting is used and adequately maintained 4.1 Award the consulting services contract by June Disclose accrual-based financial statements of Bangladesh Railway for FY2019 by November 2019 Inputs ADB: $354,000,000 (OCR regular loan), $6,000,000 (OCR concessional loan) Government of Bangladesh: $93,370,000 Asian Clean Energy Fund under the Clean Energy Financing Partnership Facility: $500,000 Assumptions for Partner Financing Not applicable APU = auxiliary power unit, ERPIT = enterprise resource planning information technology. a Government of Bangladesh, Planning Commission Seventh Five-Year Plan FY2016 FY2020. Dhaka. b Government of Bangladesh, Ministry of Environment and Forests Intended Nationally Determined Contribution (INDC). Dhaka. Source: Asian Development Bank.