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Completion Report

Project Number: 39405-013 Loan Numbers: 2382 and 2383 September 2021

Bangladesh: Dhaka Water Supply Sector Development Program

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

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CURRENCY EQUIVALENTS

Currency unit – taka (Tk)

At Appraisal At Project Completion (6 November 2007) (30 June 2016)

Tk1.00 = $0.01438 $0.01276

$1.00 = Tk69.53 Tk78.35

ABBREVIATIONS

ADB – Asian Development Bank

AEFS – audited entity financial statement APFS – audited project financial statements

CBO – community-based organization

DMA – district metered area

DMF – design and monitoring framework

DTW – deep tube well

DWASA – Dhaka Water Supply and Sewerage Authority EIRR – economic internal rate of return

GAP – gender action plan

GIS – geographic information systems

ICB – international competitive bidding

LGD – Local Government Division

NGO – nongovernment organization

NRW – nonrevenue water

O&M – operation and maintenance

PMU – project management unit

WASA – water supply and sewerage authority

NOTES

(i) The fiscal year (FY) of the Government of Bangladesh ends on 30 June. “FY”

before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 30 June 2021.

(ii) In this report, “$” refers to United States dollars.

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Vice-President Shixin Chen, Operations 1

Director General Kenichi Yokoyama, South Asia Department (SARD)

Director Norio Saito, Urban Development and Water Division (SAUW), SARD

Team leader Pedro Almeida, Urban Development Specialist, SAUW, SARD Team members Md. Monjurul Ahmed, Financial Management Officer, Bangladesh

Resident Mission, SARD

Saswati Belliappa, Senior Safeguards Specialist, SAUW, SARD Santosh Pokharel, Economist, SAUW, SARD

Elvie Jane Tirano, Senior Operations Assistant, SAUW, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

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CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1

B. Project Outputs 2

C. Project Costs and Financing 5

D. Disbursements 5

E. Project Schedule 6

F. Implementation Arrangements 6

G. Technical Assistance 7

H. Consultant Recruitment and Procurement 7

I. Gender Equity 8

J. Safeguards 8

K. Monitoring and Reporting 9

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9

B. Effectiveness 10

C. Efficiency 11

D. Sustainability 11

E. Development Impact 12

F. Performance of the Borrower and the Executing Agency 13

G. Performance of the Asian Development Bank 13

H. Overall Assessment 13

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

A. Issues and Lessons 14

B. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16

2. Project Cost at Appraisal and Actual 23

3. Project Cost by Financier 24

4. Disbursement of ADB Loan Proceeds 26

5. Contract Awards of ADB Loan Proceeds 27

6. Status of Compliance with Loan Covenants 28

7. Status of Compliance with Tranche Policy Actions 37

8. Overall Analysis of Packages Cost and Loan Reallocation of Funds 39

9. Technical Assistance Completion Report 40

10. Procurement Timeline 46

11. Gender Action Plan 48

12. Safeguards 59

13. Economic and Financial Analysis 62

14. Contribution of Project to ADB Strategy 2030 Operational Priorities 77

15 Technical Assistance Cost 79

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BASIC DATA

A. Loan Identification

1. Country Bangladesh

2. Loan number and financing source 2382-BAN and 2383-BAN

Concessional ordinary capital resources

3. Project title Dhaka Water Supply Sector Development

Program (DWSSDP)

4. Borrower People’s Republic of Bangladesh

5. Executing agency Dhaka Water Supply and Sewerage Authority (DWASA) [L2382-BAN]

Finance Division of the Ministry of Finance (MOF) and the Local Government Division (LGD) of the Ministry of Local Government, Rural Development, and Cooperatives [L2383-BAN]

6. Amount of loan

Loan 2382-BAN(COL) Loan 2383-BAN(COL)

$150 million

$50 million

7. Financing modality Sector development program B. Loan Data1

1. Appraisal – Date started – Date completed

23 July 2007 6 September 2007 2. Loan negotiations

– Date started – Date completed

6 November 2007 7 November 2007 3. Date of Board approval 10 December 2007 4. Date of loan agreement 12 December 2007 5. Date of loan effectiveness

– In loan agreement – Actual

– Number of extensions

11 March 2008 14 December 2007 None

6. Project completion date Loan 2382

– Appraisal – Actual Loan 2383 – Appraisal – Actual

31 December 2013 30 June 2016 31 December 2013 30 June 2014

1 Loan 2382-BAN and Loan 2383-BAN have the same milestone dates indicated in points 1 to 5.

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7. Loan closing date Loan 2382

– In loan agreement – Actual

– Number of extensions Loan 2383

- In loan agreement - Actual

- Number of extensions

30 June 2014 30 June 2016 1

30 June 2014 30 June 2014 None

8. Financial closing date Loan 2382

– Actual Loan 2383 – Actual

22 January 2020 6 October 2014 9. Terms of loan

– Interest rate

– Maturity (number of years) Loan 2382

Loan 2383

– Grace period (number of years)

1% per annum during grace period, 1.5%

per annum after grace period 32 years

24 years 8 years 10. Terms of relending (if any)

– Interest rate 5%

– Maturity (number of years) 20 years – Grace period (number of years)

– Second-step borrower

5 years

11. Disbursements a. Dates

Loan 2382

Initial Disbursement 19 December 2007

Effective Date 14 December 2007

Final Disbursement 18 December 2019 Actual Closing Date

22 January 2020

Time Interval 144 months

145 months

Loan 2383

Initial Disbursement 17 December 2007

Effective Date 14 December 2007

Final Disbursement 14 December 2011 Actual Closing Date

6 October 2014

Time Interval 48 months 82 months

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b. Amount (’000)

Category

Original Allocation

(1)

Increased during Implementation

(2)

Canceled during Implementation

(3)

Last Revised Allocation (4 = 1 + 2 – 3)

Amount Disbursed

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Undisbursed Balance (6 = 4 – 5) Loan 2383

1. DWSSDP total in SDR Total $ equivalent

Loan 2382 1. Civil works 2. Equipment

3. Surveys and training 3A. Socioeconomic monitoring survey 3B. Training programs 4. Workshops, meetings,

and consultation 4A. Information, education, and communication 4B. Safeguards compliance assistance (workshops, meetings) 5. Consulting services 6. Recurrent costs (project

management expenditure) 7. Interest charges 8. Unallocated

31,843 50,000

65,725 367 346 127 2,602 331 10,982

2,168

2,389 10,493

0 0

0 0

5,575 14,013 0 25 2 0 1,881

557

0 0

0 0

0 0

998 1,454 346 90 2,402 328 2,756

1,398

1,789 10,493

0 0

31,843 50,017

70,302 12,926 0 62 204 3 10,107

1,327

600 0 0 0

31,843 50,017

70,302 12,926 0 62 204 3 10,107

1,327

600 0

0 0

0 0

0 0 0 0 0 0 0

0

0 0

0 0 Total in SDR

Total in $ equivalent

95,530 150,000

22,053 0

22,053 0

95,530 139,519

95,530 139,519

0 0 Note: Numbers may not sum precisely because of rounding.

C. Project and Program Data

1. Project and program loan cost ($ million) Project loan cost: $139.59 million

Program loan cost: $50.02 million

Loan No. Cost Appraisal Estimate Actual

2383 Foreign exchange cost 50.00 50.02

Local currency cost 0.00 0.00

Total program loan 50.00 50.02

2382 Foreign exchange cost 35.40 32.93

Local currency cost 114.60 106.59

Total project loan 150.00 139.52

2. Financing plan ($ million)

Loan No. Cost Appraisal Estimate Actual

2383 Implementation cost

Borrower financed 0.00 0.00

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ADB financed 50.00 50.02

Other external financing 0.00 0.00

Total implementation cost 50.00 50.02

Interest during construction costs

Borrower financed 0.00 0.00

ADB financed 0.00 0.00

Other external financing 0.00 0.00

Total interest during construction cost

0.00 0.00

Total 50.00 50.02

2382 Implementation cost

Borrower financed 62.75 64.14a

ADB financed 146.25 138.60

Other external financing 0.00 0.00

Total implementation cost 209.00 202.74

Interest during construction costs

Borrower financed 0.00 0.00

ADB financed 3.75 0.92

Other external financing 0.00 0.00

Total interest during construction cost

3.75 0.92

Total 262.75 253.68

a $1 = Tk77 (June 2016).

3. Cost breakdown by project component ($ million) Loan No. 2382 Component

Appraisal

Estimate Actual Base cost:

Part A: Distribution systems and quality improvement Part B: Capacity building and institutional strengthening Part C: Project management and implementation

Support Contingencies

Financing charges during implementation

160.40 8.30 16.10 23.20 3.70 0.00

185.17 0.41 17.15 0.00 0.92 0.00

Total 212.70 203.66

4. Project schedule

Item

Appraisal Estimate

Actual Contract

Award

Completion of Works Date of contract with consultants

(a) Design and management consultants Oct 2007 30 Jun 2009 31 Mar 2016 (b) Financial and capacity building consultants Oct 2007 7 Jul 2009 7 Jul 2014 (c) Project performance monitoring consultants Oct 2007 7 Jul 2009 20 Jul 2009

(d) Management contract Jun 2011

(e) NGOs, public awareness, six consultants 28 Dec 2011 25 Dec 2015 (f) NGOs, resettlement, six consultants 29 May 2011 30 Jun 2016 Completion of engineering design 12 May 2009

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Civil works contracts

(a) Zones 5, 8, 9 distribution network rehabilitation and strengthening, ICB-02.1

(b) Zone 8 distribution network rehabilitation and strengthening, ICB-02.2

(c) Zone 5 distribution network rehabilitation and strengthening, ICB-02.3

(d) Zone 4 distribution network rehabilitation and strengthening, ICB-02.4

(e) Zone 10 distribution network rehabilitation and strengthening, ICB-02.5

(f) Zone 3 distribution network rehabilitation and strengthening, ICB-02.6

(g) Laboratory rehabilitation, NCB-1.1

(h)Chlorination room, NCB-1.3 - Rehabilitation PL in Korail slum area, NCB-2.4

(i) Service connection, Korail slum area, NCB-2.5 (j) Service connection, Korail slum area, NCB-2.6 (k) Rehabilitation of overhead tanks

(l) Construction of new overhead tanks

Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009

28 Feb 2011 4 Dec 2011 21 Dec 2011 31 Oct 2012 27 Sep 2012 27 Aug 2012 11 Sep 2012 20 Apr 2015 29 Apr 2013 16 Apr 2013 6 Apr 2013

31 May 2015 31 Oct 2015 31 Aug 2015 14 Jun 2012 31 Mar 2016 2 Jul 2016 not available not available not available Completed Completed

Equipment and supplies (a) Domestic meters

First procurement 12 Jan 2012 Completed

Last procurement (b) Bulk meters

First procurement Last procurement (c) Regular valves

First procurement Last Procurement (d) Special valves

First procurement Last procurement (e) Data loggers

First procurement Last procurement (f) Chlorination units

First procurement Last procurement (g) Laboratory equipment First procurement Last procurement

11 Jan 2015 14 Oct 2010 4 Sep 2012 7 Dec 2010 1 Apr 2014 15 Nov 2011 26 May 2014 10 Nov 2010 28 Sep 2014 22 Nov 2009 23 Feb 2013 15 Sep 2013 16 July 2015

Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed

5. Project performance report ratings L2382-BAN

Implementation Period

Ratings Development

Objectives

Implementation Progress

From 14 December 2007 to 31 December 2007 S S

From 1 January 2008 to 31 December 2008 S S

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From 1 January 2009 to 31 December 2009 S S

From 1 January 2010 to 31 December 2010 S S

Single Project Rating

From 1 January 2011 to 30 September 2011 OT

From 1 October 2011 to 31 December 2011 PP

From 1 January 2012 to 30 June 2012 PP

From 1 July 2012 to 31 December 2012 OT

From 1 January 2013 to 31 December 2013 OT

From 1 January 2014 to 31 December 2014 OT

From 1 January 2015 to 31 December 2015 OT

From 1 January 2016 to 31 December 2016 OT

From 1 January 2017 to 31 December 2017 OT

From 1 January 2018 to 31 December 2018 OT

From 1 January 2019 to 31 December 2019 OT

From 1 January 2020 to 31 March 2020 OT

OT = on track, PP = potential problem, S = satisfactory.

Loan 2383-BAN

Implementation Period

Ratings Development

Objectives

Implementation Progress

From 14 December 2007 to 31 December 2007 S HS

From 1 January 2008 to 31 December 2008 S S

From 1 January 2009 to 30 June 2009 S S

From 1 July 2009 to 31 July 2009 S PS

From 1 August 2009 to 31 December 2009 S S

From 1 January 2010 to 31 December 2010 S S

HS = highly satisfactory, OT = on track, PP = potential problem, PS = partly satisfactory, S = satisfactory.

D. Data on Asian Development Bank Missions

Name of Mission Date

No. of Persons

No. of Person-Days

Specialization of Members

Loan pre-appraisal mission 23–24 Jul 2007 4 8 a, b, c, d

Loan appraisal mission 13–23 Aug 2007 6 66 a, b, e, f, g, d

Loan appraisal mission, second half 5–6 Sep 2007 4 8 a, h, d, j

Pre-inception mission 8–15 Nov 2007 1 8 e

Inception mission 27–31 Jan 2008 4 20 e, j, k, d

Country portfolio review mission and

country programming mission 24–28 Apr 2008 1 5 e

Review mission 25 Aug–2 Sep 2008 2 18 e, d

Review and inception mission 29 Mar–9 Apr 2009 2 24 e, d

Review mission 15–23 Jul 2009 2 18 e, d

Review mission 10–16 Mar 2010 2 14 e, d

Review mission 12–18 Jan 2011 1 6 e

Mission to Dhaka after TPRM 31 Jul–1 Aug 2011 3 6 l, m, n

Review mission 17–21 Sep 2011 3 15 a, o, n

Review mission 14–16 Dec 2011 2 6 l, m, n

Review mission 20–24 Mar 2012 2 10 a, n

Review mission 26–29 Aug 2012 4 16 a, o, n, h

Midterm review mission 4–11 Sep 2013 6 48 p, o, a, q, n, r

Review mission 16–20 Nov 2014 2 10 p, n

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Review mission 26–31 Mar 2015 3 18 p, s, t

Review mission 16–20 Sep 2015 4 20 u, u, e, v

Project completion review NA

a = urban development specialist, b = senior counsel, c = senior country programs specialist, d = project implementation officer, e = urban economist, f = water supply specialist, g = safeguards specialist, h = deputy country director/senior country programs specialist, i = gender development (consultant), j = assistant project analyst, k = project analyst (consultant), l = director, m = project officer, n = senior project officer, o = head, project administration unit , p = senior urban development specialist, q = project analyst, r = gender and development adviser, s = senior water resources officer, t = associate operations officer, TPRM = tripartite portfolio review meeting, u = principal urban development specialist, v = team leader, water resources management.

Note: In line with para. 12 of the PAI 6.07A, “The reasons for not fielding a mission should be indicated in the PCR).”

The project completion review mission has not been fielded in line with travel restrictions imposed by the coronavirus disease (COVID-19) pandemic. Sufficient data and information were available for completing the PCR, such as the PCR from the executing agency, aide-memoires and back-to-office reports, and memos.

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I. PROJECT DESCRIPTION

1. At appraisal, Bangladesh was densely populated with 140 million people, the world's seventh largest national population. Supplying safe and reliable water was a challenge. Nearly a quarter of the population lived in urban areas, whose populations were increasing by 2.5%

annually. In 2007, Dhaka housed almost one-third of the urban population, with the Dhaka Water Supply and Sewerage Authority (DWASA) serving 8.2 million, or 70% of them. With the population of Dhaka expected to reach 17 million in 2025, DWASA’s service coverage will decline to 48%, leaving 52% of the city with untreated water.0F1 During project preparation, water supply and sewerage authorities (WASAs) and pourashavas (peri-urban towns) were found to face institutional and financial constraints that hindered their effective management, user charge recovery, and control of nonrevenue water (NRW).

2. The Asian Development Bank (ADB) approved the Dhaka Water Supply Sector Development Program on 10 December 2007 at an estimated cost of $264.5 million. The program was designed to facilitate sustained economic development and improve public health services by improving water supply services in fast-growing urban centers, specifically the Dhaka Metropolitan area. The program’s outcome focused on providing and sustainably operating improved water supply services by rehabilitating and improving management and operation in the urban water supply institutions in Dhaka. The program’s outputs included (i) increased autonomy, improved local governance, and a strengthened local institutional management framework; (ii) an improved sector strategy and plan; (iii) improved financial sustainability in the urban water supply sector; (iv) strengthened DWASA organizational structure and financial management; (v) improved distribution system and quality control in DWASA; (vi) strengthened DWASA capacity and institution; and (vii) project management implementation support.

II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation

3. The program was relevant to the government and ADB sector strategies at appraisal and remained relevant at completion. It was aligned with ADB’s country strategy and program for Bangladesh, 2006–2010, which highlighted the need to support policy and institutional reform to improve sector governance and efficiency in urban water supply; and with ADB’s Urban Sector Strategy (1999) and Strategy 2020, with focus on institutional and policy reform that enhances operational efficiency and sustainability in infrastructure projects, and improves the delivery of infrastructure services such as water supply.1F2 It aligned with Strategy 2030 operational priority 4 on the provision of safe and effective water and sanitation services, despite predating it.2F3 It was consistent with the government’s seven-point agenda for reducing poverty in its national poverty reduction strategy, 2005, and aligned with priorities for the urban water supply sector laid out by the government in its Sector Development Programme–Water and Sanitation Sector, 2006.3F4 The

1 Local Government Division. 2005. Sector Development Program, Water and Sanitation Sector in Bangladesh. Dhaka.

2 ADB. 2005. Country Strategy and Program: Bangladesh, 2006–2010; ADB. 1999. Urban Sector Strategy; and ADB. 2008.

Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020.

3 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila.

4 The Sector Development Programme—Water and Sanitation Sector, 2006 emphasizes (i) ensuring basic minimum needs related to water supply and sanitation for all citizens, especially the poor; (ii) decentralizing service delivery and capacity building of local government institutions to sustain investments and good governance; (iii) recommending optimal service delivery options and an institutional framework; (iv) drawing up a blueprint to realize sector reform and capacity building to achieve the desired coverage and performance levels; and (v) outlining a sector investment plan for the next 10 years to fulfill sector targets, reforms, and capacity building needs within available resources (Government of Bangladesh. 2005.

Poverty Reduction Strategy. Dhaka).

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program remains consistent with government goals to ease groundwater depletion, reduce water wastage, and improve both women’s productivity and public health.6F5

4. The program incorporated lessons from past and ongoing ADB projects in the water sector.4F6 In post-project evaluation, ADB recommended preparing an investment program with operation and maintenance (O&M) attached, so as to properly maintain water supply, drainage, and sanitation systems in Dhaka.5F7 Lessons from earlier investments in Bangladesh strengthened the project design by (i) prioritizing financial performance along with policy, sector, regulatory, legal, and institutional reform of water utilities; (ii) incorporating phased, performance-based funding; (iii) reducing procurement contracts; and (iv) strongly engaging the community.

Stakeholder participation, including frequent and meaningful consultations and information dissemination at appraisal and during implementation, not only raised the government’s level of ownership but also demonstrated that program formulation was adequate. The program loan helped the government improve governance and management in WASAs and pourashavas. The project loan aimed to provide sustainable delivery and operation of urban water services by enhancing water supply systems based on a long-term policy and an investment road map.

5. The sector development program modality was appropriate as the program (i) addressed medium- and long-term requirements; (ii) enabled a long-term partnership for socio-economic development between the government and ADB; (iii) allowed the blending of a policy-based loan to catalyze policy reform and a project loan for physical investment; (iv) reflected the government’s ability to effectively address large-scale development challenges; and (v) allowed flexibility in scope and implementation periods. The design and monitoring framework (DMF) at appraisal was comprehensive and remained the same throughout project implementation, but risks related to procurement and staffing could have been better managed during implementation. Additional deep tube wells (DTWs) were included to further enhance production of water supply.8 Project performance is rated satisfactory as only 2 of 22 ratings were assessed potential problem.

B. Project Outputs

6. Program loan. The program loan focused on reforms to improve urban water supply. It was prepared for systemwide application to enable urban water supply utilities to operate more efficiently and sustainably. It has four outputs (described in paras. 7–10). Outputs and components were not changed during implementation. Of the 20 policy conditions, 6 were for the first tranche release and 14 for the second tranche release. All conditions were fully complied with. Further, all 13 policy actions, which were not conditions for release but aimed to strengthen water resource conservation and governance, were also achieved. Details of compliance with tranche policy actions are in Appendix 7.

7. Output 1: Increased autonomy, improved local governance, and strengthened local institutional management framework. This output had six targets, and all were achieved on time: (i) actions to decentralize and give broader administrative and financial autonomy to WASAs

5 The DWASA intends to shift away from groundwater sources and to replicate and scale up the district metered area (DMA) approach. This is reflected in two follow-on projects to broaden water supply coverage in Dhaka by enhancing the distribution network: ADB. 2013. Dhaka Environmentally Sustainable Water Supply Project, with a focus on water quality and sustainability. Manila; and ADB. 2016. Dhaka Water Supply Network Improvement Project. Manila.

6 ADB. 1982. District Towns Water Supply Project. Manila; ADB. 1993. Second Water Supply and Sanitation Project.

Manila; and ADB. 2006. Secondary Towns Water Supply and Sanitation Sector Project. Manila.

7 ADB. 2002. Dhaka Integrated Flood Protection Project. Manila; ADB. 2001. Dhaka Urban Infrastructure Improvement Project. Manila (para. 67: “DWASA component is generally sustainable, although DWASA cannot maintain good levels of services in the lower-income plots where unauthorized users have broken water supply pipes.”).

8 As per the DWASA PCR. This activity was part of the contractor’s scope to ensure water availability.

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and pourashavas; (ii) a study on the water supply regulator; (iii) preparation of a 5-year capacity building program for staff of pourashava water sections and WASAs; (iv) preparation of DWASA guidelines on water meters; (v) definition of new rules and regulations on O&M and staff appropriation reflected in a revised organization chart; and (vi) streamlined manuals for quality assurance and control of tube well installation. Capacity building training continues, and water meter guidelines and manuals are still in use. The local government division (LGD) and the DWASA board still govern as the water supply regulators.

8. Output 2: Improved sector strategy and plan. This output had two targets, and both were achieved: (i) signing a memorandum of understanding on development of the water supply and sanitation sector in partnership with development partners; and (ii) developing and implementing a water conservation program.9

9. Output 3: Improved financial sustainability in urban water supply sector. This output has three targets, and all were achieved: (i) reform of the tariff structure to cover O&M after inflation adjustment has been implemented (para. 31); (ii) WASA budgets are updated on the basis of actual expenditure needs; and (iii) a debt repayment plan is being implemented.

10. Output 4: Strengthened DWASA organizational structure and financial management. All 14 output targets were achieved. Suboutput 1‒Strengthened institutional, governance and managerial structure and capacity of DWASA: (i) a new organization chart adopted (6 December 2007); (ii) a new managing director with at least a 3-year tenure appointed, as per the WASA Act, 1996; (iii) full approval of rules and regulations under the WASA Act, 1996;

(iv) an official circular prepared, delineating responsibilities of the board and the managing director; (v) a 5-year business plan prepared and approved along with an operational manual for DWASA, 2009–2013, being updated at the time of writing this report; (vi) a streamlined strategy prepared, approved and being implemented for private sector participation or O&M outsourcing;

(vii) a 5-year projection from tariff adjustment prepared and approved; (viii) an anticorruption ethics committee established, which remains fully staffed in DWASA; and (ix) the consumer grievance redress mechanism enhanced. Suboutput 2‒Improved financial management capacity and performance of DWASA: (i) a financial management improvement plan developed and is operational; and (ii) past accounts converted to accrual-based double-entry accounts. Suboutput 3‒Reduced illegal connections: (i) a baseline survey on illegal connections conducted;

(ii) guidelines on installing water connections and meters updated and operational; and (iii) NRW reduced from 40–50% in 2007 to 2–14% in 2016 by detecting and reducing illegal connections.

11. Project loan. Project loan outputs were categorized in three components. Most project outputs were achieved, as discussed in Appendix 1 and summarized below.

Component A: Distribution System and Quality Improvement

12. Water supply. Five of nine indicators were fully achieved, and four were partly achieved.

Achieved indicators are (i) approximately 600 bulk water meters and sluice valves installed; (ii) 14 new storage reservoirs provided and 24 existing reservoirs rehabilitated (though not reflected in the DMF, this activity was replaced with community tap installation, thus achieving the primary objective to provide water to communities); (iii) assistance provided to about 20,000 temporarily affected persons (the maximum envisaged, but minimized disruption meant that assistance was required for only 739 temporarily affected persons, thus achieving the target); (iv) a two-tier

9 The water conservation plan was implemented after its endorsement in 2010 and is being implemented as DWASA is focused on utilizing surface water rather than groundwater. In 2009, the shares of surface water and groundwater were 13% and 87%, respectively. In 2021, they are 35% and 65%. DWASA seeks to achieve 70% and 30%.

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system established to monitor water quality; and (v) an existing water quality laboratory upgraded and water quality monitoring equipment provided. Due to cost overruns, the district metered areas (DMA)—the breakdown of a large network into small, hydraulically isolated areas for better management and monitoring—have been reduced. Hence, the indicators partly achieved are (i) 2,456 kilometers of water supply pipes laid in water distribution and tertiary networks, against the target of 3,136 kilometers; (ii) 106,662 service connections rehabilitated with new water meters, against the target of 157,000; (iii) water connections and supply points improved for about 1,274 registered slum areas, against the target of 2,000; and (iv) 200 chlorination units provided, against the target of 300. NRW was reduced from over 50% before the project to less than 10%

at commissioning in most of the 48 completed DMAs. Covered areas improved from low water quality at unreliable and low pressure to more than 20 hours per day of safe water supply with proper pressure. An additional 46 new DTWs were completed, and 18 existing wells were rehabilitated (para. 5). Cost and time frame analysis are reflected in sections C and E of the DMF.

13. Social infrastructure. Consistent with the socially inclusive and gender-sensitive approach of ADB and the government, the project targeted physical works to serve people in low- income areas of Dhaka. Community-based organizations (CBOs) were formed to facilitate smooth project implementation and legal water connections.10 Social inclusion components to connect 2,000 slum houses in low-income communities to the water supply network were only partly achieved due to the reduction in DMAs, with 1,274 new connections reaching 150,000 people.7F11

Component B: Capacity Building and Institutional Strengthening

14. Only one minor indicator of 13 indicators was not achieved. The following were achieved:

(i) accounting staff trained on and using an accrual-based, double-entry accounting system; (ii) a one-zone management contract piloted; (iii) a customer database established and fully functional;

(iv) 90% accuracy in billing and payment collection; (v) receivables minimized to 5 months’

collection equivalent; (vi) the training center rehabilitated; (vii) all operational staff trained in O&M procedures; (viii) a minimum of 80% of plumbers working for DWASA trained; (ix) zone offices strengthened to provide one-stop services to customers; (x) all zone distribution network technicians trained on leak detection and emergency response techniques; (xi) water meter testing and repair units established and functional at zone offices; and (xii) mass media campaign conducted through television, radio, or cinema on water consumption and the importance of correct billing.8F12 Procurement of tools for leak detection and other O&M was not achieved.13

Component C: Project Management and Implementation Support

15. Three of four indicators were partly achieved, and one was fully achieved. Delays were observed in two indicators: (i) key consultants were short-listed in January 2009, but due to procurement delays were fielded only in July 2009, against the target of January 2009; and (ii) bidding and contract award documents were processed in a manner and time frame agreed by the government and ADB, but civil works and capacity building subcomponents were implemented with delays (para. 18). The indicator achieved on time was a technical,

10 The project worked with a CBO (with 45 members, 23 of them (51%) women) that was responsible for identifying the beneficiaries (particularly in slum areas) and selecting sites for water points, the reservoir and collection of bills.

11 The slum-oriented initiative benefited the Korali and Sattala slums. Reports indicate that billing and regular payment are occurring without defaults. These successful interventions are being replicated in other informal settlements.

12 Zone level orientation programs covered gender inclusion. The 126 training programs conducted reached 2,244 staff.

Workshops were held for 660 pump operators in water quality monitoring, reporting, and test kit usage. NGOs conducted awareness on reducing NRW, discouraging illegal connections, and encouraging water conservation and the economic and hygienic use of water. Automated billing systems were implemented.

13 Procurement of leak detection tools was targeted to be made under a subsequent loan (footnote 5).

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environmental, and social safeguards study completed on the impact of improved raw water intake. The indicator partly achieved was bidding, detailed design, and request for proposal documents approved by the government and ADB on the new water treatment plant; only the detailed feasibility study was completed under the program in 2011. Due to complex bidding documents and government clearances, the procurement process was done under another loan (footnote 5).

C. Project Costs and Financing

16. The estimated cost at appraisal was $265.25 million, with an ADB loan of $200.0 million, attached technical assistance (TA) amounting to $2.5 million, and a government contribution of

$62.75 million. At completion, the actual cost was $253.68 million.14 Costs, at appraisal and actual, are in Appendix 2, and costs by financier in Appendix 3. Cost estimates suffered from (i) significant procurement delays, with late recruitment of design and management consultants to prepare detailed designs and bidding documents and, inevitably, late contract awards; (ii) extended evaluation of bids and complaints received during the tender; (iii) delays and late approvals owing to the lengthy government process; (iv) prolonged delays in and excessive increased charges from Dhaka city corporations for issuing road-cutting permission; (v) increased pipe diameters, quantities, and prices to accommodate population growth; and (vi) taka depreciation and domestic inflation.9F15 The civil works cost estimate at appraisal was low, as contracts awarded were 30.6% ($28.9 million) higher. Contract management is nevertheless assessed satisfactory as the actual cost diverged by only 1.08% ($1.3 million), on average, above the awarded amount; three packages averaged 38.5% above and three averaged 16.8% below, with DMA reduction. These variations were accommodated by reallocating loan funds and through another loan approved in June 2016.11F16 Loan funds were reallocated in 2011 to accommodate DWASA’s decision to procure some equipment separately, and in 2013 to accommodate the increase in pipeline length over that in the detailed design and cover additional consulting services with the extension of the loan..17 Analyses of the civil works cost and reallocation of funds are in Appendix 8.

D. Disbursements

17. By project completion, $189.5 million, or 98.7% of the $192 million allocated, had been disbursed. After program loan effectivity in December 2007, tranche disbursements were executed as intended but not as scheduled. The first tranche was disbursed with a nominal delay of 3 days on 17 December 2007. The program disbursement plan was considered ambitious, as the second tranche was disbursed with a delay of 23.5 months on 14 December 2011 (para. 18).

After project loan effectivity in December 2007, disbursements were low during the initial years of implementation. In 2007, only $1 million was disbursed as replenishment of the imprest account.

In 2008, disbursement was $0.3 million, limited to the project management unit (PMU) operational

14 In 2020, $0.61 was cancelled from ADB financing due to foreign exchange fluctuations that affected a past withdrawal application.

15 Cumulative domestic inflation in FY2006–2009 was 25.7%, despite little change in the exchange rate to the US dollar.

The Dhaka North and South city corporations arbitrarily changed road-cutting charges, affecting project costs.

16 After project concept preparation in 2005 under TA4651-BAN, Dhaka Water Supply and Sanitation, additional zonal areas were created for DWASA operations, and significant cost escalation and inflation occurred. Although 63 DMAs were envisaged, the program executed only 48. The balance was implemented under another loan (footnote 5).

17 Cost category variations in SDRs and percentage terms compared with the originally approved allocations are as follows: (i) Cat.1 increased SDR5.75 million (8.5%), Cat. 2 increased SDR14.01 million (3,818.3%), Cat.3A decreased SDR0.35 million (100%), Cat.3B decreased SDR0.09 million (70.9%), Cat.4A decreased SDR2.40 million (92.3%), Cat.4B decreased SDR0.31 million (94.9%), Cat.5 decreased SDR2.76 million (25.1%), Cat.6 decreased SDR1.40 million (64.5%), Cat.7 decreased SDR1.79 million (74.9%), and Cat.8 decreased SDR10.49 million (100%).

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costs and the procurement of minor office equipment. In 2009–2010, disbursements increased to

$2.1 million, with consulting firms recruited in mid-2009 and the acquisition of water supply equipment. In 2011, with the first civil works contract awarded in February, disbursements grew to $7.8 million. In 2012–2014, annual disbursements averaged $19.5 million, reaching 38% of the loan amount by the loan closing date of 30 June 2014. With the closing date extended to 30 June 2016, annual disbursements rose to $33.7 million in 2015–2016. The project loan disbursement plan is deemed ambitious, as only 38% of disbursement was reached by the original loan closing date, and the loan had to be extended by 2 years. The reasons for disbursement delays are in section H. Yearly disbursement and contract award data are in Appendixes 4 and 5.

E. Project Schedule

18. All program loan policy conditions were complied with by the original loan completion date of 30 June 2014. To enable interdepartmental review and completion of the second tranche policy, it was extended marginally, to 6 October 2014. The first tranche was released 3 days after program effectivity. The second release was delayed by almost 2 years (14 December 2011), due to issues related to recruiting support consultants and in some actions. The project loan completion date was delayed by 2 years. The closing date was from June 2014 to June 2016.

Delays were due to (i) slow start-up associated with procurement delays as some packages were retendered for lack of technically qualified bidders; (ii) lengthy processes for obtaining permits from local authorities, including road-cutting permission; (iii) additional pipeline length and service connections; (iv) the binding contract effective date, by performance guarantee and advance payment submission; (v) late payment of taxes and duties, constraining contractor financial availability and cashflow; (vi) civil and political unrest; (vii) a shortage of the employer’s supplies;

(viii) lack of technical personnel and poor contract management by contractors; (ix) several detailed design revisions; and (x) a water shortfall for commissioning due to low-yielding DTWs.18 F. Implementation Arrangements

19. Implementation arrangements were unchanged during implementation and found to be satisfactory. For the program loan, the Finance Division of the Ministry of Finance and the LGD of the Ministry of Local Government, Rural Development, and Cooperatives were the executing agencies, and DWASA was the implementing agency for certain activities identified in the policy matrix. For the project loan, DWASA was both the executing and the implementing agency. An interministerial project steering committee provided policy guidance and project coordination. A PMU was established and led by a project director reporting to the DWASA deputy managing director. Project coordination units were formed in the four project zones, each headed by a zonal executive engineer for management, operation, and distribution services (MODS). Design and management consultants supported the PMU and project coordination units.19 Safeguard specialists were mobilized by the PMU.

18 With delays in submitting the last withdrawal application, and corrections caused by foreign exchange fluctuation, the winding-up period needed to be extended several times, and the loan was financially closed on 22 January 2020.

19 These units handled day-to-day project implementation in MODS zones. Design and management consultants helped prepare detailed designs and bidding documents, supported the tender process, and supervised civil works.

Though complex, these arrangements ensured clear delineation of roles and responsibilities and helped generate government–community collaboration. However, progress was affected by delays in recruiting the DWASA managing director and by staff turnover, including frequent changes of key personnel.

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G. Technical Assistance

20. Attached TA worth $2.5 million funded by the Technical Assistance Special Fund was approved on 10 December 2007 and became effective on 13 April 2008. The original closing date of 31 January 2011 was revised to 15 June 2011 but occurred on 31 August 2011. The TA used

$0.97 million, or 39% of its funding. Implementation arrangements matched those of the program.

Intended TA outcomes aligned with government priorities and ADB corporate, country, and sector strategies. TA objectives were to (i) help the government comply with tranche 2 policy actions; (ii) assist DWASA technically prepare to optimize existing water sources; and (iii) support smooth project implementation start-up. The TA is rated relevant as it helped LGD and DWASA improve and strengthen the organizational, regulatory, and financial management framework of urban water supply and sanitation services and helped DWASA ensure smooth project start-up, including pilot testing and measures to optimize existing water sources. The TA is rated effective as most of all outcomes were fully achieved.20 The TA also supported the implementation of 13 other policy actions that were not conditions for release. It is rated less than efficient because of time extension and unutilized funds. Overall, it is rated successful (Appendix 9).

H. Consultant Recruitment and Procurement

21. ADB Guidelines on the Use of Consultants (2007, as amended from time to time) were followed to recruit consultants. A total of 16 out of 17 contracts were awarded. Of these, 3 followed international competitive bidding (ICB) with a quality- and cost-based selection ratio of 80–20, and 13 followed consultant qualification selection. ICB was used to recruit the design and management consultants, financial and capacity building consultants, and project performance monitoring and evaluation consultants. Nongovernment organizations (NGOs) and individual consultants were hired using consultant qualification selection. The procurement method and quantity are rated satisfactory. Estimated costs are satisfactory, as the final cost of major ICB contracts was only 5% ($0.7 million) above the estimate. Consultant recruitment was lengthier than the typical time frame. Delays can be attributed to the long technical evaluation period, prolonged contract negotiations, and extended time required for approval from the DWASA board and LGD and for final clearance by the Cabinet Committee on Government Purchase.

22. ADB Procurement Guidelines (2007, as amended from time to time) were followed for the procurement of goods and civil works. A third-party pre-shipment inspection was adopted to ensure the quality of goods and equipment. Initially, 49 goods and works contracts were expected, but because of the addition of many small contracts which were impossible to predict during appraisal, 89 were contracted.21 The expected and actual quantity of contracts is considered satisfactory. Eight large works packages were foreseen, but with contracted amounts above the engineer’s estimate, only six were contracted. These packages were to follow item-rate contracting, with detailed designs provided by DWASA; but to expedite procurement, ADB and the government agreed during implementation to use design-build contracting, with contractors submitting detailed designs for DWASA approval after contract award.4F22 This decision improved

20 Most of the outcomes were fully achieved by (i) supporting government implementation of the 14 policy conditions that were required for the release of the second tranche; (ii) confirming that Dhaka’s groundwater resources were severely extracted; (iii) examining potential surface water sources; (iv) supporting the pilot testing of DMAs; and (v) supporting the pilot testing of trenchless technology.

21 Of the 89 contracts, 45 were for goods, 25 for works, and 19 for other purposes. Of the 45 goods contracts, 24 followed ICB, 11 national competitive bidding (NCB), and 10 shopping. Of the 25 works packages, 9 followed ICB (including the 6 large works packages), 11 NCB, and 5 shopping.

22 The contract modality change was approved through a minor change memo on 9 September 2010. For packages 2.4 and 2.5, financial bid evaluation was halted as the government requested retendering, to which ADB disagreed.

After several months, the government allowed financial evaluation to resume.

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the timeliness of procurement. Awards of large contract packages needed to be endorsed first by the minister of the Ministry of Local Government, Rural Development, and Cooperatives following endorsement by the Cabinet Committee on Government Purchase. Complaints during tendering delayed procurement (Appendix 10). To minimize delays, DWASA directly procured some equipment such as water meters, valves, chlorinators, and data loggers. However, some of these packages were retendered as they did not attract sufficient bidders that were technically responsive. The original projections for contract awards were ambitious as contracts were awarded above the estimates and with delays (Appendix 5).

23. Design and management consultants were engaged to develop detailed design and bidding documents and supervise construction. Initially, bidding documents took time to prepare, as extensive correspondence between DWASA and ADB was required to reach agreement on contract clauses and compliance with ADB guidelines. Their contract was extended by 2 years following loan extension to ensure appropriate construction supervision. Financial and capacity building consultants (i) prepared a capacity building program; (ii) conducted public awareness campaigns for customer sensitization; (iii) prepared a corporate plan; (iv) built capacity in financial management; and (v) prepared a gender strategy.15F23 Six NGOs were responsible for public consultations to build awareness on legal compliance and billing and payment methods; for teaching users how to use new meters and interpret billing statements; and for advising users on wastage effects and water availability. Overall, consultant performance was satisfactory. The six large civil contracts were filled by international contractors. Scope of three contracts were reduced (para. 12). These contracts were delayed mainly by (i) late issuance of road-cutting permits; (ii) late payments of taxes and duties that affected contractor cashflow; (iii) general strikes and political unrest that obstructed installation; (iv) lack of commissioning water; (v) late completion of DMAs and delayed defect rectification by contractors; and (vi) lack of qualified staff and poor contract management by contractors. The contractors’ performance is assessed satisfactory, as majority of reasons are beyond their responsibility.

I. Gender Equity

24. The project was categorized effective gender mainstreaming. A gender action plan (GAP) was developed and implemented in accordance with the ADB Policy on Gender and Development (1998).24 A gender consultant was engaged to (i) support the development and finalization of a strategy and action plan for mainstreaming gender equity in DWASA, approved in 2015; (ii) prepare a training module on gender in the water sector; and (iii) conduct training and workshops with DWASA and NGOs. An assistant engineer in the PMU was assigned as the focal point.

J. Safeguards

25. The requirements for the program loan were met, in accordance with Operations Manual section F1 issued on 25 September 2006. The project was category B for environment and involuntary resettlement, and C for indigenous peoples, in accordance with ADB policies on environment (2002), involuntary resettlement (1995), and indigenous people (1998). An initial environmental examination report using field surveys, secondary information, and discussion with

23 Besides institutional strengthening, financial and capacity building consultants conducted 34 training modules and prepared guidelines and manuals on general management, technical operation, financial management, project management, public awareness, gender and development, information technology, and training of trainers.

24 Through the GAP, DWASA was introduced to gender issues. The GAP incorporated women’s organizations during appraisal and implementation and ensured their sustained involvement in (i) identifying vulnerable households, particularly single-earner households headed by women; (ii) locating sites for community and domestic water points and meters; (iii) identifying water-related issues; and (iv) conducting the O&M of constructed water assets.

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stakeholders was prepared to assess project impacts. The report concluded that the project would have no significant adverse environmental impacts and that site-specific impacts would be mitigated by the environmental management plan built into the bidding and contract documents.

The project included mitigation measures to address potentially significant environmental impacts.16F25 A grievance redress mechanism was established.17F26 The institutional safeguards arrangements at appraisal are considered effective. Semiannual monitoring reports were not required based on legal agreements. Thus, regular reporting and disclosure in the ADB website only started in the second half of 2012. The project had no unresolved grievances and did not require land acquisition. A resettlement framework was prepared during appraisal to guide the elaboration of individual resettlement plans for each affected zone. Initially, consultants were to prepare individual resettlement plans for each zone following detailed design, and ADB would approve these plans prior to contract award. With the transition to design-build contracts (para.

22), ADB approved six resettlement plans after contract award.27 NGOs supported PMU compliance with social safeguards, community mobilization, public awareness, and surveys for preparing a citizens’ report card. Overall, safeguard compliance is rated satisfactory (Appendix 12).

K. Monitoring and Reporting

26. All of the program loan’s 20 policy actions6 for first tranche release and 14 for second tranche releasewere fully complied with. In addition, 13 other policy actions to strengthen water resource conservation and governance were accomplished. Of the 62 loan covenants, the project fully complied with 60, albeit with delays on 28. Two were partly complied with, as the project steering committee did not hold regular meetings owing to difficulty in scheduling members, and an audited entity financial statement (AEFS) for FY2013 was not submitted. No covenants were modified, suspended, or waived (Appendix 6). Compensation for all entitlements was paid in full as specified in the approved resettlement plans. Delays were observed in the recruitment of supporting consultants. ADB fielded 14 project review missions and one midterm review mission during implementation. DWASA submitted project quarterly progress reports of acceptable quality on a regular and timely basis. All audited financial reports, except the AEFS for FY2013, were submitted annually throughout FY2008 to FY2016, with three audited project financial statements (APFSs) submitted on time and six were delayed. All AEFS were delayed except for one (2008).28 ADB reviewed the auditor’s reports and provided guidance for improvement. Baseline and end- line surveys were performed as mandated in the legal agreement.

III. EVALUATION OF PERFORMANCE A. Relevance

25 Mitigation measures included (i) trenchless technology to reduce excavation and disturbance; (ii) laying pipes within roads and locate assets on government-owned land to avoid land acquisition; (iii) prohibition of asbestos cement pipes to avoid health risks; (iv) reduction of waste disposal by finding useful uses for waste soil and stone; (v) covering stored soil and sand or when on trucks to control dust; and (vi) traffic management plans to minimize traffic disruption.

26 DWASA also opened a help and complaints desk in January 2011 on a pilot basis and later expanded it to full scale.

27 Of 739 affected persons, 696 were compensated, while the remaining 43 did not receive compensation as they did not show up to collect their payment. The main reason for this could be migration.

28 The APFS of FY2008 and AEFS for FY2007 to FY2009, though accepted, could not be retrieved from the system, highlighting the importance of uploading all reports immediately upon receipt and completing reviews within the stipulated time. Recent system modifications and regular monitoring activities are likely to prevent similar problems in the future. Delays in APFS submission ranged from 0.6 to 115 months. All APFS were issued audit opinions within a maximum of 10 months after each fiscal year end. All APFS opinions issued were clean or unqualified except for the final report which gave a qualified opinion and identified 49 medium- to high-risk audit observations that are pending (22 audit observations for the final report of FY2016 and 27 outstanding from previous years).

References

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