Uzbekistan: Water Supply and Sanitation Services Investment Program (Tranche 1)

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Lessons

Implementation delays could be minimized if project feasibility review, consultant recruitment, procurement, and government approval procedures are streamlined.

The project became effective more than 6 months after ADB approval because of longer-than-expected internal government review and approval procedures for the project feasibility study. Following this, a 28-month delay was incurred in the engagement of the project management consultant (PMC). The delay pushed back the completion of the subproject detailed designs that, in turn, delayed the procurement of civil works. The long delay in PMC recruitment was caused by (i) the lengthy evaluation of proposals, which was required to settle a conflict of interest of the first-ranked firm; and (ii) lengthy government contract registration procedures. To address the delays, ADB approved the executing agency’s (EA) request to engage 2 additional staff at the program preparation and management unit (PPMU) for 2 months to assist in preparing procurement and consultant recruitment documents before the start of PMC services. The project was able to catch up at a later stage; however, actual completion was 2.5 years behind the schedule set at appraisal.

Project Cycle Stage:

Implementation

Having dedicated and skilled project staff with strong ownership and commitment will help ensure the proper and timely delivery of desired results.

Following the issuance in November 2015 of a government resolution to streamline the implementation of projects funded by international financial institutions, the project EA, the Agency “Kommunhizmat,” established a project coordination unit (PCU) to take charge of overall project implementation, in lieu of the PPMU. The PCU, like the EA, had previously implemented water supply and sanitation (WSS) projects financed by ADB and other development partners, and its capacity to manage projects was generally effective, although insufficient in relation to environmental management. A dedicated PCU environmental expert trained by ADB would later coordinate the implementation of the project’s environmental management activities. This combined with the thorough field-level supervision exercised by the project supervising engineer to ensure compliance to ADB safeguards requirements. Supervisory insistence from the PCU was particularly noted to have ensured contractor compliance to the occupational health and safety standards for workers. (Implementation: ADB-assisted projects, project staffing, commitment and leadership)

Project Cycle Stage:

Implementation

Keeping designs simple and focused will make projects more manageable and planned outputs more likely to be achieved.

This project only partially achieved its nonphysical targets, including the implementation of the performance-based service contracts and lease contracts, district water utility rationalization study, performance benchmarking, tariff study, and capacity development of responsible government agencies. Technical and systemic constraints such as inadequate EA capacity, changes in the country’s WSS institutional and legal framework and changing government’s priorities in WSS, and the availability of grant funding for WSS institutional reforms, accounted for their incomplete attainment. Moreover, most of these activities were complex and could not be implemented under the circumstances. Nevertheless, more effort from the EA to coordinate donor activities engaged in the sector may have achieved better results.

Project Cycle Stage:

Preparation

Implementation

Accurate assessment of project implementation progress requires adequate monitoring and reporting systems at all levels, and this needs to be ensured in all future projects in Uzbekistan.

Although the PPMU established a project performance and monitoring system (PPMS), as required by ADB, it did not maintain regular PPMS updates on project progress. Progress reports were limited to consultant quarterly reports, which dealt mostly on physical progress. At midterm and subsequent review missions, ADB underscored the need for compliance to the PPMS requirement as one of the loan covenants. ADB also continuously reminded the EA that the PPMS is an important tool that should be regularly updated to better monitor actual progress and identify and undertake preventive actions as needed. Notwithstanding this, the PPMS loan covenant has remained only partially complied with as of project completion. Compliance to ADB’s PPMS requirement should be ensured in future tranches of the multitranche financing facility for this project as well as in other ADB-financed initiatives in Uzbekistan.

Project Cycle Stage:

Preparation

Implementation

A thorough discussion during project processing of the covenants to ensure the operational and financial sustainability of WSS utilities could help improve compliance.

Covenants to promote the operational and financial sustainability of the suvokavas are embedded in both the project and loan agreements for this intervention. But for largely technical and systemic reasons, these covenants have not yet been fully complied. For example, while the project suvokavas have adjusted the tariffs to reflect full operation and maintenance (O&M), debt servicing and capital depreciation costs, these adjustments as well as the reviews underpinning them have yet to be formally communicated to ADB. Policy and institutional reforms to give more autonomy to the suvokavas and introduce performance-based management practices have not progressed. Although the suvokavas have developed arrangements for using and sharing maintenance equipment, the preparation of a comprehensive O&M manual for the project facilities, as covenanted, is still pending. Continuing partial compliance to these covenants, despite project completion, highlights the need for ADB to ensure that all covenants are thoroughly discussed and properly understood by the borrowing governments and the EAs during project preparation. Close monitoring and mitigation measures should be undertaken in future tranches to ensure that the covenants are operational at the close of the investment program.

Project Cycle Stage:

Preparation

Implementation

Delegating project administration to ADB resident missions early enough could improve project performance.

ADB headquarters initially administered the project in close liaison with the Uzbekistan Resident Mission. But in February 2015, it delegated project administration to the resident mission. Like most other ADB delegation experiences, the move has facilitated closer communication and monitoring and supervision, resulting in faster implementation progress. Had this delegation been done earlier, project performance and results may have been better. (Implementation: ADB-assisted projects, administration ADB-assisted projects, delegation ADB-assisted projects, delegation, ADB resident missions)

Project Cycle Stage:

Implementation

Background

Under its Welfare Improvement Strategy, 2008–2010, the government of Uzbekistan identified

improving water supply and sanitation (WSS) services as a national priority. The Asian Development Bank (ADB) aligned the Water Supply and Sanitation Services Investment Program with the national WSS policy framework, which called for greater institutional effectiveness, better service performance and management, improved operational and commercial efficiencies, higher cost recovery rates, and tighter financial controls. In August 2009, it approved a multitranche financing facility (MFF) not exceeding $300 million to finance the program, and in October 2009 approved tranche 1 of the MFF for a loan of $60 million to Uzbekistan.

The tranche 1 project aimed to improve the living standards, environment, and public health of urban centers in Bukhara, Navoi, and Surkhandarya provinces. Its expected outcomes were (i) safe, reliable, and sustainable water supply for 360,000 residents in 11 district centers in Bukhara and Navoi; and (ii) improved sanitation services and hygiene for people living in Termez. Besides physical rehabilitation and construction works, the project also intended to provide the executing and implementing agencies with necessary support in project management and institutional strengthening of WSS operators.

At completion, the project achieved all its planned physical outputs, in some cases surpassing targets. Against a target of 13.2 kilometers (km), the water trunk mains delivered reached 25.6 km. Water distribution networks reached 318.1 km, compared to a target of 286 km. With large physical improvements, the number of beneficiaries reached nearly 797,000. The water treatment and distribution capacity of the project suvokavas (water operators) also substantially rose, and system leakage in all the suvokavas dropped to less than 30%. Water quality has improved significantly and is compliant with national drinking water standards.

However, despite significant improvements in infrastructure and the number of beneficiaries, as of project completion review, water was being supplied only for six hours in some Bukhara and Navoi project areas. Household connections were insufficient and some suvokavas have been prompted to supply water intermittently to prevent the excessive use of water for irrigation. By rehabilitating the existing wastewater treatment plant (WWTP), the project helped improve wastewater treatment and sewage collection in Termez, albeit 9% short of the targeted 70% operational capacity.

The project also encountered significant shortfalls in achieving its nonphysical targets. Designed policy and institutional reform measures, such as the implementation of performance-based service contracts and lease contracts, the district water utility rationalization study, performance benchmarking, tariff study, and capacity development of responsible government agencies—were only partially achieved. Reasons for their partial attainment were largely technical and systemic, and included (i) significant delays in consultant recruitment; (ii) insufficient capacity in the executing agency (EA); (iii) changes in the WSS institutional and legal framework; (iv) availability of grant funding for WSS institutional reforms, resulting in EA reluctance to use loan funds for the same purpose; and (v) the government’s evolving priorities, particularly toward reform efforts in billing, collection, and fiscal discipline and controls. Most nonphysical activities were also complex and could not be implemented within the given circumstances.

Because of inadequacies in WSS provision and shortcomings in policy and institutional reforms and capacity building, the project only partially achieved its outcome targets. Nevertheless, as it improved the supply of safe and reliable drinking water to the project areas and those connected to the Damkhoja interregional trunk main, the development impact of the project has been significant. The government reported a major decline in the incidence of infectious diseases in the project provinces from 2011 to 2016, partly because of the project. Cost and time savings due to better access to water supply have been most important for the poor. Improvements in the health and quality of life of the poor have been remarkable particularly in the rural settlements served by the Khatirchi district suvokava where people used to consume untreated canal water for lack of other sources.

The project had the Agency “Kommunhizmat” as executing agency (EA). A program preparation and management unit (PPMU) and three project implementation units (PIU), one each in the three project provinces, initially took charge of day-to-day project activities. Following government decision to streamline the implementation of projects funded by international financial institutions, and with prior ADB approval, the EA restructured and combined the PPMU and the PIUs into a new project coordination unit in 2015.

Project Information

Project Name:

Water Supply and Sanitation Services Investment Program (Tranche 1)

Report Date:

January, 2020

Main Sector:

Water and Other Urban Infrastructure and Services

Country:

Uzbekistan

Project Number:

42489-023

Report Type: