The World Bank Solomon Islands Roads and Aviation Project (P166622) REPORT NO.: RES39514 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SOLOMON ISLANDS ROADS AND AVIATION PROJECT UNDER THE PACIFIC AVIATION INVESTMENT PROGRAM APPROVED ON MARCH 28, 2019 TO SOLOMON ISLANDS TRANSPORT EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Regional Director: Ranjit J. Lamech Practice Manager/Manager: Almud Weitz Task Team Leader(s): Dung Anh Hoang, Naoki Kakuta The World Bank Solomon Islands Roads and Aviation Project (P166622) ABBREVIATIONS AND ACRONYMS GBV Gender-Based Violence IDA International Development Association IDC Indefinite Delivery Contract IOC Incremental Operating Cost MCA Ministry of Communication and Aviation MID Ministry of Infrastructure Development PAIP Pacific Aviation Investment Program PASO Pacific Aviation Safety Office PDO Project Development Objective PRIF Pacific Region Infrastructure Facility PST Project Support Team SIG Solomon Islands Government SIRAP Solomon Islands Roads and Aviation Project STEP Systematic Tracking of Exchanges in Procurement TAIP Tonga Aviation Investment Project TAL Tonga Airports Limited TFSU Technical and Fiduciary Services Unit TOR Terms of Reference US$ United States Dollars UXO Unexploded Ordnance VSAT Very Small Aperture Terminal The World Bank Solomon Islands Roads and Aviation Project (P166622) BASIC DATA Product Information Project ID Financing Instrument P166622 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 28-Mar-2019 31-Dec-2024 Organizations Borrower Responsible Agency Ministry of Communication and Aviation,Ministry of Solomon Islands Finance and Treasury,Ministry of Infrastructure Development Project Development Objective (PDO) Original PDO Improve operational safety and oversight of air transport and associated infrastructure, strengthen the sustainability and climate resilience of the Project Roads, and in the event of an Eligible Crisis or Emergency, to provide an immediate response to the Eligible Crisis or Emergency. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-63780 28-Mar-2019 11-Apr-2019 23-May-2019 31-Dec-2024 30.50 1.56 28.44 IDA-D4370 28-Mar-2019 11-Apr-2019 23-May-2019 31-Dec-2024 20.50 0 20.24 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Solomon Islands Roads and Aviation Project (P166622) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This Project Paper seeks the approval of the Country Director for a Level 2 Restructuring of the Solomon Islands Roads and Aviation Project (SIRAP) under the Pacific Aviation Investment Program (PAIP) to change the project’s institutional and implementation arrangements/support mechanism. 2. There are no changes to the Project Development Objectives (PDO) and project risk ratings. No additional safeguard policies will be triggered. No changes in the financial management arrangements are needed. The financial management arrangements and key internal controls have been implemented as agreed, and there are no outstanding Interim Unaudited Financial Reports. A. Regional Program and Project Background 3. In December 2011, the International Development Association (IDA) approved PAIP, a regional, horizontal Adaptable Program Loan that consists of a series of projects designed to ensure that critical aviation infrastructure meets operational safety requirements and to strengthen regulatory compliance of international air transport of participating countries in the region. Major elements of the now US$277.61 million equivalent program focus on the upgrading of airport infrastructure and aeronautical equipment, and the strengthening of policy and regulatory capacity. Phase I (US$110.79 million equivalent) included projects in Kiribati, Tonga and Tuvalu. Phase 2 (US$41.92 million equivalent) and Phase 3 (US$73.90 million equivalent) included Samoa in April 2014, and Vanuatu in March 2015, respectively. Phase 4 (US$51.00 million equivalent) included Solomon Islands in March 2019. 4. PAIP also identified a need to strengthen international safety regulatory compliance and the Pacific Aviation Safety Office (PASO) in the amount of US$6.65 million equivalent was recognized as a PAIP beneficiary of regional IDA funding during Phase 1.1 5. The IDA credit in the amount of US$30.5 million equivalent and IDA grant in the amount of US$20.5 million equivalent for SIRAP was approved on March 28, 2019. This will be complemented by US$3.6 million counterpart funding from the Solomon Islands Government (SIG).2 B. Summary of Project Status 6. SIRAP is in its first year of a six-year implementation period. Implementation progress has been rated Satisfactory and progress has been made on a number of activities, specifically with (i) the completion of airline strategy review and Munda terminal building concept design; (ii) the mobilization of the design and supervision consultant (for all aviation and road investments), the Honiara control tower advisor, the Honiara and Munda airports master planning study consultant, the unexploded ordnance (UXO) specialist, and the UXO survey and removal contractor; (iii) the signing of contracts on 1 The Phases 1-3 countries of PAIP have been supported with grant funding from the Pacific Region Infrastructure Facility (PRIF) to purchase regulatory oversight and advisory services from PASO as the regional entity responsible for fulfilling inspection and certification requirements for international aviation. These funds have helped to ensure the continuation of regional aviation safety and security oversight in the respective Member States and was also intended to improve PASO’s cash flow. Additionally, the PRIF resources were made available to support the preparation of a new PASO business plan (2013) and facilitated the implementation of restructuring measures agreed to under the IDA-financed PASO Reform Project. PRIF resources amounting to approximately US$3.55 million have been committed, directly or indirectly, to the PASO reform process. 2 This is to cover the costs of the Fiu bridge which is on the main road between the airport and Auki town and is in urgent need for replacement. The bridge will be procured by the project using financing from National Transport Fund, with the supervision undertaken by the SIRAP supervision consultant. The World Bank Solomon Islands Roads and Aviation Project (P166622) design validation, supply and installation supervision for the Very Small Aperture Terminal (VSAT) point to point aeronautical network, and hub management for the VSAT point to point aeronautical network; (iv) the gazetting and declaration of East and South Roads on Malaita as public roads in June 2019 under the Roads Act; (v) the establishment of the Project Support Team (PST) and its office with the Ministry of Communication and Aviation (MCA) at Ranadi, Honiara in June 2019; and, (vi) the convening of the Project Launch Workshop jointly by the World Bank and SIG in Honiara on September 4, 2019. As of December 12, 2019, project’s overall IDA disbursement is US$1.44 million, which represents 2.9% of the project’s total IDA financing. C. Project progress by Component. 7. Component A: Honiara and Munda Airports Infrastructure Investments. Progress has been made on several activities, specifically with (i) the delivery of the final concept design report for the Munda terminal building in August 2019; (ii) the mobilization of the design and supervision consultant and the submission of the inception report for all aviation and road investments (see the next paragraphs for road-related deliverables); (iii) the release of the terms of reference (TOR) and bid documents for renovation works for Honiara control tower to potential contractors; (iv) the clearance of UXO at the majority of sites; and, (v) the signing of contracts on design validation, supply and installation supervision for the VSAT point to point aeronautical network, and hub management for the VSAT point to point aeronautical network. 8. Component B: Malaita Road Improvement and Maintenance Program. The SIRAP Malaita road upgrade works will only be undertaken on public roads which have been declared and gazetted under the SIG Roads Act. At project approval, declarations of only North Road and the Gwaunaru’u Aerodrome Road on Malaita had been made. The gazetting and declaration of East and South Roads on Malaita as public roads was done in June 2019 under the Roads Act. Progress made under the design and supervision consultancy that is related to road investments includes the undertaking of their first site visits and the submission of the inception report and the draft reports on modular bridge evaluation, geosynthetic reinforced soil abutment evaluation, and Fiu Bridge design review. 9. Component C: Institutional Strengthening. The final report for the airline strategy review (i.e., strategic plan for the sustainability of Solomon Airlines) was delivered in October 2019, while airport master planning studies for both Honiara and Munda Airports are underway with the interim report issued in November 2019. There are two ongoing procurements under this component: (i) an aviation sector strategy; and, (ii) activities to address gender-based violence (GBV). TOR for technical assistance for supporting asset management is currently being finalized. The establishment of an office of the Ministry of Infrastructure Development (MID) in Auki, Malaita is currently scheduled for January 2020. 10. Component D: Project Implementation Support. A PST has been established. It currently comprises the Project Manager, National Safeguards Specialist, Community Liaison Officer, Project Accountant, and Administrative Assistant. The Deputy Project Manager will be seconded from MID prior to the commencement of civil works on Malaita. To date, the Technical and Fiduciary Services Unit (TFSU) has provided support to the PST for, among others, procurement, financial management, safeguards, contract management, monitoring and evaluation, and technical guidance, particularly for aviation matters. 11. Component E. Contingent Emergency Response. The Contingency Emergency Response Component Operations Manual (CERC OM) has been largely drafted; however, the CERC Environmental and Social Management Framework (ESMF) needs to be prepared and included as an annex to the manual. The CERC OM will be submitted to the World Bank not later than December 31, 2020. The World Bank Solomon Islands Roads and Aviation Project (P166622) D. Rationale for Restructuring 12. The project restructuring is in response to the request received from SIG, on December 27, 2019, to restructure SIRAP and amend the project’s documents to reflect the revised implementation arrangements as presented below. 13. PAIP established the TFSU as a central project management unit to support the individual countries implementing the program. Hosted by the Tonga Airports Limited (TAL), the TFSU structure is as shown below. Each PAIP country (and PASO) had their own PST to implement their respective projects with support from TFSU. TAL Technical Program Director Support (FT, remote) Program Manager (FT, HQ) TAIP Project Manager Lead Procurement Finance Manager Specialist Contracts Manager Team Assistant Specialist (FT, HQ) (FT, HQ) (FT, HQ) Consultants (PT, remote) PASO Project Snr Project Procurement Contracts Infrastructure / Coordinator Accountant Specialist Administrator Construction (FT, HQ) (FT, HQ) (FT, HQ) Technical Specialist Periodic Procurement Specialist ADS-B Technical Specialist (PT, remote) TvAIP Project Procurement Manager Officer (FT, HQ) Policy/Regulatory Contracts/Finance Administrative Manager Assistant Procurement Officer (FT, HQ) Others programmed as necessary (safeguards, procurement, technical needs) SAIP Project KAIP Project 14. TFSU is currently hosted by TAL and is providing project management, technical Manager and fiduciary support services Manager to KFSU Manager SIRAP in accordance with the Service Agreement between TAL and SIG. However, Project with the Tonga Aviation Administrative Investment Snr Project Team Assistant and it is hence necessary Project (TAIP) closing on December 31, 2019, TAL will not host TFSU anymore Accountant Assistant to make Officer alternative Finance Procurement arrangements for the provision of project and contract management, technical and fiduciary support for SIRAP until December 31, 2024. 15. Table 1 summarizes the revised management roles and responsibilities of the various participants in SIRAP. Table 1: SIRAP Revised Roles and Responsibilities Organization Management Roles and Responsibilities Solomon Islands Ministry of Finance and Sign Financing Agreement Treasure (MOFT) (Executing Responsible for overall project execution Agency) Ministry of Communication Responsible for the overall implementation of the aviation components of the project and Aviation (MCA) Sign contracts for investment activities (Implementing Agency) Provide aviation technical inputs, as required Houses the PST Provides staff for MCA PST Office The World Bank Solomon Islands Roads and Aviation Project (P166622) Responsible for aviation environmental and social safeguards compliance MCA PS participates in the PAIP Program Steering Committee to guide activities across the program. Ministry of Infrastructure Responsible for the overall implementation of the road components of the project Development (MID) Sign contracts for investments activities (Implementing Agency) Provide roads technical inputs, as required Provides staff for Malaita PST office Responsible for road environmental and social safeguards compliance SIRAP Project Support Team Undertake procurement and financial management with support and MID TIMS (PST) Monitor progress of project activities and oversees day-to-day implementation Responsible for all procurement advertising, bid document preparation and procurement processing Manage contracts for all activities under SIRAP, including payments Operates the project Grievance Redress Mechanism (GRM) Operates the project web site with Open Contracting and GRM Monitor environmental and social safeguards compliance for MID and MCA Provide quarterly reports to MCA, MID as well as project Monitoring and Evaluation data SIRAP National Steering Provides oversight to the project, and PST, with obligatory responsibility to the MCA and MID ministers, and MOFT Committee (NSC) Advises national government of issues or concerns affecting project implementation and proposes remedial actions Chair represents SIG on the PAIP Program Steering Committee Civil Aviation Authority of Responsible for providing technical inputs for the scope of works and services as appropriate. Solomon Islands (CAASI) Participate in capacity developing activities. Regional Coordination PAIP Program Steering Oversees and monitors overall Program implementation Committee (PSC) Advises the SIRAP-SC and National Steering Committees of other participating countries of any issues or concerns affecting project implementation and proposes remedial actions Resolve any disputes that may arise in the Program Regional Procurement Consists of technical specialist from each IA. Evaluation Committee (RPEC) Conducts bid/proposal evaluation and make civil works contract award recommendation. Pacific Aviation Safety Office Performs mandated regional oversight in Program countries (PASO) 16. The only change is related to the replacement of TFSU regarding the provision of project and contract management, procurement and financial management support. Alternatives Considered 17. The project investigated whether it would be possible to replicate the current arrangements with TFSU hosted another agency within a PAIP Country or PASO. It was ultimately decided to have the remaining PAIP Recipients that need continued technical and fiduciary support (i.e., PASO, Solomon Islands and Tuvalu) recruit directly individual consultants, likely to be from the existing TFSU staff, to provide this support. The World Bank Solomon Islands Roads and Aviation Project (P166622) II. DESCRIPTION OF PROPOSED CHANGES 18. Proposed implementation arrangements. The remaining three PAIP participants will adopt new arrangements for the TFSU services. Rather than having TFSU recruited through a single entity (i.e., TAL under the earlier arrangements), essentially fiduciary support services will be provided by individual consultants with separate contracts for PASO, Solomon Islands and Tuvalu. These individual consultants are likely to be drawn from the existing TFSU staff to ensure continuity. 19. The core support team would consist of three consultants (PAIP Program Manager, PAIP Finance Manager, and PAIP Procurement Specialist). They will be engaged by SIRAP, as part of their PST, through direct contracting while separate contracts will likely be entered into by these same consultants with PASO and Tuvalu to provide support to the PAIP projects in those countries. Each PAIP Recipient will be directly in charge of the management and payment of their respective consultants’ time and costs. 20. Technical Specialists may be engaged as necessary, on Indefinite Delivery Contracts (IDC) to provide on-call delivery of services. As with the core individual consultants, PASO, Solomon Islands and Tuvalu will have individual contracts for each consultant. There are no retainer costs, and relevant consultants will be remunerated for actual work completed in accordance with the relevant approved Task Order. 21. Taxation. Core consultant costs have been prepared on the basis of being inclusive of local tax requirements as at December 1, 2019 and are subject to amendment if these requirements are subsequently revised or updated based on the SIG’s taxation law. 22. Support costs. From January 1, 2020, support to SIRAP will comprise of the following items: (a) Core Consultants – Consisting of the PAIP Program Manager, PAIP Finance Manager, and PAIP Procurement Specialist. (b) Incremental Operating Cost (IOC) Allowance – This is a recommended budget allowance within the SIRAP IOC that SIRAP should set aside to cover the costs of approval travel, reimbursable expenses and associated costs for the Core individual consultants relating to SIRAP. (c) IDC Technical Pool – Consisting of selected technical expertise to be utilized by SIRAP on an on-call basis. Inputs will be determined and coordinated by the PAIP Program Manager in consultation with SIRAP. An estimated budget of US$120,000 has been proposed to cover IDC inputs and approved travel and associated costs. 23. It is important to note that Items (b) and (c) are budget estimates based on anticipated workplan as at December 2019 and are dependent on usage by the remaining PAIP participants, including SIRAP. 24. The SIRAP Financing and Procurement Plans have been updated in the Systematic Tracking of Exchanges in Procurement (STEP) to reflect the above. TFSU Costs have been updated resulting in a net saving to SIRAP. Previous TFSU Costs were not subject to SIG taxes. Table 2 that summarizes the estimated costs for continued support to SIRAP under PAIP reflects current rates with the addition of the applicable tax value. The World Bank Solomon Islands Roads and Aviation Project (P166622) Table 2: SIRAP Cost Estimate Average Monthly Cost Total Annual Budget Item (US$) (US$) Core Individual Consultants 37,833 454,000 IOC Allowance 4,997 59,960 Technical Specialists 12,868 154,420 III. SUMMARY OF CHANGES Changed Not Changed Legal Covenants ✔ Institutional Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ The World Bank Solomon Islands Roads and Aviation Project (P166622) Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action The Recipient shall maintain, in collaboration with the Program Countries, until the Closing Date, a Program IDA-63780 Steering Committee, with a mandate, composition and Complied with No Change resources satisfactory to the Association. (Section I.A.1 of Schedule 2 to the Financing Agreement) To ensure proper oversight of the Project at the national level, the Recipient shall establish, by not later than three (3) months after the Effective Date (or such other date which the Association has confirmed in writing to the Recipient is reasonable and acceptable IDA-63780 under the circumstances, as determined by the Complied with No Change Association in its sole discretion) and maintain until the Closing Date, a National Steering Committee with a mandate, composition and resources satisfactory to the Association. (Section I.A.2 of Schedule 2 to the Financing Agreement) The Recipient shall, in collaboration with the other Program Countries, ensure that the Regional Procurement Evaluation Committee, is maintained throughout the Project implementation period, IDA-63780 comprised of representatives the Program Countries, Complied with Revised TAL (through TFSU) and PASO to be responsible for, inter alia, evaluating regional level procurement activities under the Project. (Section I.A.3 of Schedule 2 to the Financing Agreement) The World Bank Solomon Islands Roads and Aviation Project (P166622) The Recipient shall, in collaboration with the other Program Countries, ensure that the Regional Procurement Evaluation Committee, is maintained throughout the Project implementation period, Proposed C comprised of representatives the Program Countries and PASO to be responsible for evaluating regional level procurement activities under the Project. (Section I.A.3 of Schedule 2 to the Financing Agreement) The Recipient shall ensure that the Project is carried out IDA-63780 in accordance with the Operations Manual. (Section I.C Complied with No Change of Schedule 2 to the Financing Agreement) The Recipient shall establish, by not later than three (3) months after the Effective Date (or such other date which the Association has confirmed in writing to the Recipient is reasonable and acceptable under the circumstances, as determined by the Association in its sole discretion) and maintain until the Closing Date, a Project Support Team within the Ministry of Communication and Aviation, with a mandate, composition and resources satisfactory to the IDA-63780 Complied with Revised Association, to: (a) implement the project; (b) represent the Recipient on the Regional Procurement Evaluation; (c) report to the Permanent Secretary of the Ministry of Communication and Aviation; and (d) be comprised of, inter alia: (i) a project manager; (ii) a deputy project manager; (iii) a national safeguards specialist; (iv) a community liaison officer; (v) a project accountant; and (vi) an administrative assistant. (Section I.A.4 of Schedule 2 to the Financing Agreement) The Recipient shall maintain until the Closing Date, a Project Support Team comprised of, inter alia: (i) a program manager; (ii) a project manager; (iii) a deputy project manager; (iv) a finance manager; (v) a Proposed procurement specialist; (vi) a national safeguards Expected soon specialist; (vii) a community liaison officer; and (viii) a project accountant.(Section I.A.4 of Schedule 2 to the Financing Agreement) IDA-63780 The Recipient shall maintain, until the Closing Date, a Complied with Revised Service Agreement with TAL, with terms and conditions The World Bank Solomon Islands Roads and Aviation Project (P166622) satisfactory to the Association. (Section I.B.1 of Schedule 2 to the Financing Agreement) The Recipient shall maintain, until December 31, 2019, a Service Agreement with TAL, with terms and conditions Proposed C satisfactory to the Association. (Section I.B.1 of Schedule 2 to the Financing Agreement) The Recipient shall ensure that the Project is implemented in accordance with the Annual Work Plans and Budgets approved by the Association for the IDA-63780 respective fiscal year, and inform the Association prior Complied with No Change to making or allowing to be made any change to the Annual Work Plans and Budgets. (Section I.D of Schedule 2 to the Financing Agreement) The Recipient shall maintain, until the Closing Date, a focal point within the Ministry of Communication and Aviation, with terms of reference, qualificaitons and experience satisfactory to the Association. (Section I.A.5 of Schedule 2 to the Financing Agreement) IDA-63780 Complied with No Change The Recipient shall maintain, until the Closing Date, a focal point within the Ministry of Infrastructure Development, with terms of reference, qualificaitons and experience satisfactory to the Association. (Section I.A.6 of Schedule 2 to the Financing Agreement) Without limitation of the provisions of Section 5.03 of the General Conditions, the Recipient shall allocate adequate funds to cover the full cost of financing Part 2(b) of the Project. To this end, the Recipient shall ensure that by no later than June 30, 2020, counterpart IDA-63780 Not yet due No Change financing in an amount of not less than three million six hundred thousand Dollars ($3,600,000) shall be either: (a) deposited in a separate bank account acceptable to the Association; or (b) shall be otherwise allocated in a . manner acceptable to the Association.