Uzbekistan: Water Supply and Sanitation Services Investment Program–Project 2

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Lessons

Project feasibility reviews, consultant recruitment and procurement, and government approval procedures in Uzbekistan need to be streamlined to minimize implementation delays.

Completion of this project was delayed by 18 months because of lengthy government review and approval of project feasibility studies and long delays in consultant recruitment, contract registration, and civil works procurement. Loan effectivity itself was pushed back by 4 months, completion of the major civil works by 6 to 24 months, and consultant recruitment by up to 28 months. Against an elapsed implementation period of 98.5% as of December 2015, the progress in the project’s physical targets was only 82% and nil in the other components. Mainstreaming of government review and approval processes relating to projects is a must to improve the pace of implementation of future ADB-financed interventions in the country.

Project Cycle Stage:

Implementation

Multiple contract variations, which could delay construction and project implementation, can be avoided by ensuring high-quality detailed designs.

Contract variations were made in some of the project’s reservoir works to meet actual site conditions during implementation. While these did not significantly hold back project implementation, they were an unnecessary and avoidable situation, highlighting the importance of high-quality detailed designs in future projects.

Project Cycle Stage:

Implementation

Contractors’ capacities need to be carefully examined to avoid potential delays in civil works execution.

All the major civil works of this project encountered significant delays due to the late engagement of the detailed design consultants and slow and lengthy procurement processes. Two large civil works contracts also had to be rebid because of non-responsiveness of the bids to the works’ experience and qualification requirements. The capacities, especially of national contractors, need to be carefully examined in future projects to ensure that they are adequate to meet the project requirements. Failure to do so could put at risk the timely execution not only of civil works but the whole project.

Project Cycle Stage:

Implementation

Financial covenants need to be realistic and clear about all the financial reporting and documentation requirements of ADB.

A covenant of this project required participating provincial governments and project vodokanals to increase collection efficiency to 90% by July 2013. This was complied with, albeit late. Following major institutional reforms, and with the help of unified financial systems supported by the project, the tariff collection efficiency levels of the vodokanals in the project provinces reached 95% in the first quarter of 2016. The covenant requiring the participating provincial governments and project vodokanals to ensure that water tariffs are reviewed semiannually, incorporating full operation and maintenance costs and debt servicing, was also complied with. However, as it was not explicitly covenanted or reflected in any project legal document, ADB’s requirement for the submission of audited financial statements was not addressed properly under the project. The experience underscores the need for financial covenants in ADB projects to be realistic and clear about the financial reporting and documentation requirements of ADB.

Project Cycle Stage:

Preparation

Implementation

Completion and Evaluation

The ADB requirements for a project performance monitoring system (PPMS) to be set up and regularly updated, and for a quarterly progress report to be submitted need to be strictly implemented.

Although the project coordination unit, and before it, the project preparatory and management unit, maintained good coordination among ADB, contractors, and consultants, both units failed to produce quarterly project progress reports using the PPMS approved by ADB. Quarterly progress reports were mainly prepared by the project management consultant and submitted to ADB only on request. The performance targets in the PPMS were also not updated, despite the continuous reminder from ADB that the PPMS was an important tool that needed regular updating to better monitor actual progress and trigger corrective actions as needed. Implementation of the ADB requirements for a PPMS to be established and regularly updated and for quarterly progress reports to be submitted needs to be ensured in future projects.

Project Cycle Stage:

Implementation

Completion and Evaluation

Background

On 28 August 2009, the Asian Development (ADB) and the Uzbek government signed a financing framework agreement for a multitranche financing facility (MFF) of up to $300 million to support Uzbekistan’s Water Supply and Sanitation Services Investment Program. On 21 April 2010, ADB approved the second tranche of the MFF, totaling $140 million to finance project 2, which was designed to improve the living standards, environment, and public health in five cities—Fergana, Kokand, Margilan, and Rishtan in Fergana province, and Andijan in Andijan province.

At project appraisal, all the five cities suffered from poor levels of water service delivery with frequent interruptions in supply, low pressure, lack of disinfection, and high leakage. The obsolete pumps in wells, water treatment plants, pumping stations, and water distribution units were highly inefficient, resulting in high power consumption. Frequent mechanical and electrical equipment breakdowns led to uncertainty in the availability of services and costly repairs. This was exacerbated by the lack of both system and service connection meters, making it difficult for vodokanals (water supply institutions) to properly bill for water services, or measure leakages which meant treating and pumping at least twice of what was consumed. The unlined steel pipes in the distribution systems—most of which were installed in the 1960s—were outworn and corroded, causing large leakage losses.

The project’s expected outcome was safe, reliable, and sustainable water supply, and improved sanitation services and hygiene for 1.1 million people living in the project cities. It comprised two parts: (i) water supply and sanitation (WSS) infrastructure improvement, and (ii) capacity development and investment program management. Part 1 aimed to improve (i) the quality and quantity of water supply in the project cities, (ii) the sewerage systems and wastewater management in Andijan and Kokand cities, and (iii) the sanitation practices and hygiene awareness among women and school children. Part 2 included (i) transaction advisory services for the due diligence, design, and implementation of public–private partnership (PPP) contracts for the Andijan, Fergana, Kokand, and Margilan vodokanals and a performance-based service contract for the Rishtan vodokanal; (ii) benchmarking to improve the availability of information to facilitate accountability, regulation, management decisions, and PPP transactions; and (iii) capacity development to enhance vodokanals’ management capacity and efficiency, foster professionalism, and develop better and more responsive customer services.

Planned physical outputs under part 1 were fully delivered, albeit with significant delays. As a result, the vodokanals’ water production and supply capacity increased. Water became available in the project cities 20 hours a day, as targeted. System leakage was reduced to less than 30%. Water quality has improved significantly and became compliant with national drinking water standards. Over 23,000 existing water connections were improved, and more than 4,800 new households were connected to water supply. Adequate sewerage systems have been provided to the cities of Andijan and Kokand, and 4,500 new households were connected to these systems. School latrine facilities were constructed with piped water supply and sewerage systems, and hygiene promotion activities were undertaken in schools in all the project cities. Exceeding its outcome target thus, the project has provided 1.2 million people access to safe, reliable, and sustainable WSS services.

However, unlike its performance under part 1, the project only partially achieved its planned outputs under part 2. The designed activities, particularly the implementation of PPP contracts, performance-based service contracts, and performance benchmarking, did not eventuate, largely because of technical and systemic reasons, including (i) significant delays in the recruitment of the necessary consultants, (ii) insufficient capacity in the executing agency (EA), and (iii) significant changes in the WSS institutional and legal framework. Nevertheless, a unified automated billing system (ABS) was developed for nationwide upscaling. Serving as platform for integrated financial management information systems, including reporting and monitoring to improve vodokanal operations and financial performance, the ABS became operational in all project vodokanals in December 2017.

The project had the Uzbekistan Communal Services Agency as EA. City-level project implementation units (PIUs) were established to take charge of day-to-day activities. These PIUs were later merged with the investment program’s project preparatory and management unit to comprise the project coordination unit (PCU). The PCU managed the project through to completion.

Project Information

Project Name:

Water Supply and Sanitation Services Investment Program–Project 2

Report Date:

April, 2018

Main Sector:

Water and Other Urban Infrastructure and Services

Country:

Uzbekistan

Project Number:

42489-033

Report Type: