Facility Administration Manual Loan Number: 2561 October 2009

ARMENIA: North–South Road Corridor Development Program ─ Tranche 1 Important Note: This Facility administration manual is an active document. It will be updated and revised progressively as and when necessary during each review mission and following any changes in project investment costs, scope, or implementation arrangements. The contents herein are intended to assist and facilitate project management and implementation. If there is any conflict with any other legal agreement(s) related to this Investment program, the provision(s) in the legal agreement(s) will prevail.

Contents I. INTRODUCTION ................................................................................................................ 3 II. PURPOSE .......................................................................................................................... 3 III. KEY PERSONS INVOLVED IN THE PROGRAM.............................................................. 4 IV. PROCESSING HISTORY................................................................................................... 6 Annex 1: Program Definition..........................................................................................6 I. Sponsors, Stakeholders and External Agencies ................................................................ 6 II. Impact and Outcomes ........................................................................................................ 7 III. Outputs ............................................................................................................................... 7 Annex 2: Program Management ....................................................................................7 2.1 Program Implementation Organization Chart..................................................................... 8 8 2.2 Roles and Responsibilities ................................................................................................. 9 Annex 3: MFF Tranches and Approvals......................................................................10 3.1 MFF Tranches .................................................................................................................. 10 Annex 4: Safeguards Plan............................................................................................12 Annex 5: Financing Plan ..............................................................................................13 5.1 ADB Financing, Fund Flow and Disbursement Arrangements......................................... 13 5.2 Allocation Table ................................................................................................................ 17 ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS ....................................................... 17 CATEGORY................................................................................................................................... 17

Amount Allocated ............................................................................................................................... 17 Percentage and ................................................................................................................................... 17 Basis for Withdrawal........................................................................................................................... 17 Number ............................................................................................................................................... 17 Item..................................................................................................................................................... 17 Category.............................................................................................................................................. 17

5.3 Government Financing ..................................................................................................... 17 Annex 6: Investment Plan (Tranche 1 Project)...........................................................18 6.1 Detailed Costs by Expenditure Category and Financiers................................................. 18 6.2 Forecast of Cost to Complete ($ million) .......................................................................... 19 Annex 7: Procurement Plan (Tranche 1 Project)........................................................20 7.1 Process Thresholds and Reviews .................................................................................... 20 7.2 Procurement Plan............................................................................................................. 20 Annex 8: Implementation Plan.....................................................................................23 8.1 Responsibility Allocation by Activity ................................................................................. 23 8.2 Execution Plan (Gantt Chart)............................................................................................ 24 24 8.3 Annual Work Plan (Tranche 1 Project)............................................................................. 25 Annex 9: Performance Monitoring and Evaluation....................................................26 9.1 Deliverables..................................................................................................................... 26 9.2 Performance Indicators .................................................................................................... 26 9.3 Monitoring and Evaluation Report................................................................................ 26 Annex 10: Major Covenants .........................................................................................27 I. Sector Covenants ............................................................................................................. 27 II. Financial Covenants ......................................................................................................... 28 III. Safeguards Covenants ..................................................................................................... 28 Annex 10: Appendixes..................................................................................................30

3

Main Text )

I. INTRODUCTION

The Agarak-Kapan-Yerevan-Bavra route (M1 and 2 roads) crossing Armenia from south to north is further connected to Georgian's east-west highway that leads to Poti and Batumi at the Black Sea. This route provides Armenia with the shortest access to the seaports linked to Europe, the Russian Federation, and Turkey. In parallel, the government of Georgia is improving the east-west highway and plans to improve the Bavra-Zhdanov-Akhaltskha-Batumi road as an alternative connectivity to Black Sea ports from Tbilisi. This will enable the Armenia cargoes to be transported to Black Sea ports easily through a shorter route. On the basis of this potential, the Government has developed a North-South Road Corridor Development Program (the Investment Program) as a priority and ADB will support it through a Multitranche Financing Facility (MFF). The Investment Program aims to improve the 550-km road corridor, and modernize border and customs infrastructure and facilities It involves 3 tranches. ADB approved Tranche 1 (the Project) on 6 October 2009 for $60 million. Tranche 2 Project components will include upgrading the 88-km two-lane Ashtarak–Gyumri road, and Tranche 3 will improve the Goris-Kapan road and upgrade the remaining parts of the north-south road corridor. Tranche 1 will start tentatively in April 2010 and end in August 2013. Design and monitoring framework of the Investment Program and the Tranche 1 Project is in Appendix 1.

II. PURPOSE

The Investment Program will promote regional cooperation and trade by improving the north-south road corridor and related border crossings in Armenia. It is the Government's top priority to stimulate the national economy and gain shorter and more efficient access to nearest sea ports of the Black Sea. It will be complemented by the ADB-assisted regional road corridor development programs in Azerbaijan and Georgia to link the subregion to international markets more closely. It is thus in line with ADB's regional cooperation and integration theme under the Strategy 2020, COBP for Armenia, and the regional cooperation strategy in Central Asia and Caucasus. This FAM focuses on the essentials for implementing the first tranche project and will be updated as needed. The FAM contains project data and information that allows the Borrower, the executing agency (EA), the implementing agency (IA), and ADB to monitor project implementation and evaluate project impact.

4

III. KEY PERSONS INVOLVED IN THE PROGRAM

A. ADB Staff

The department responsible for the implementation of the Project is the Central and West Asia Department (CWRD), represented by the Transport and Communications Division (CWTC). CWTC has the overall responsibility for the implementation of the Investment Program in ADB.

Transport & Communications Division (CWTC) Central and West Asia Department (CWRD)

Mr. Hong Wang Director, CWTC Tel No. (632) 632 6765 Email: hwang@adb.org Mr. Rustam Ishenaliev Transport Specialist / Project Officer Tel No. (632) 632 6776 Email: rishenaliev@adb.org Mr. Arto Ahonen Transport Specialist / Project Officer Tel No. (632) 632 4444 Email: aahonen@adb.org Ms. Leonor P. Alejandro Assistant Project Analyst, CWTC Tel No. (632) 632 6507 Email: lalejandro@adb.org Ms. Maria Cecilia Villanueva Administrative Assistant Asian Development Bank Tel (632) 632-6807 Email: mcvillanueva@adb.org Mr. L. Blanchetti-Revelli Sr. Social Development Specialist (Resettlement), CWOC Tel No. (632) 632 6231 Email: lblanchetti@adb.org Mr. Mark Kunzer Sr. Environment Specialist, CWOC Tel No. (632) 632 6369 Email: jweinstock@adb.org Mr. Areg Barseghyan, AARM Sr. Country Coordination Officer, Armenia Resident Mission Tel No. (374 10) 560 793 Email: abarseghyan@adb.org Ms. Gohar Mousaelyan Project Implementation Officer, Armenia Resident Mission Tel No. (374 10) 560 793 Email: gmousaelyan@adb.org

5

Office of the General Counsel Mr. B. Konysbayev, Counsel Tel No. (632) 632 4907 Email: bkonysbayev@adb.org

Controller's Department Loan Administration Division (CTLA-2)

Mr. V. Sefesi, Financial Control Specialist, CTLA2 Tel No. (632) 632 6934 Email: vsefesi@adb.org

Central Operations Services Office Consulting Operations Services Division 1 (COS1)

Mr. Walter Poick Senior Procurement Specialist Tel No. (632) 632 6462 Email: wpoick@adb.org

Address: Asian Development Bank No. 6 ADB Avenue, Mandaluyong City 1550 Metro Manila P.O. Box 789 0980 Manila, Philippines

Facsimile (CWTC): Website Address:

(632) 636 2428 http://www.adb.org

B. Executing/Implementing Agency

Ministry of Transport and Communications

Mr. Gurgen Sargsyan Minister Mr. Hrant Beglaryan First Deputy Minister Mr. Gagik Gevorkyan Head, Foreign Relation Department Fax No: +374 10 524282

Armenia Road Directorate Mr. Karen Gevorkyan, Director General Mr. Karen Badalyan Deputy Director General / Program Director Fax No. +374 10 562435 Email: ahpiu@netsys.am

6

IV. PROCESSING HISTORY

(a) Approval of PPTA 12 December 2008 (b) TA Completion 31 October 2009 (c) Fact-Finding Mission 3-30 July 2009 (d) Management Review Meeting 19 August 2009 (e) Appraisal Mission waived (f) Staff Review Committee Meeting waived (g) Loan Negotiations (1st tranche) 31 August-1 September 2009 (h) Board Circulation 8 September 2009 (i) Board Consideration and Approval 29 September 2009 (ii) Approval of Tranche 1 Project 6 October 2009 (j) Loan Agreement Signing 12 October 2009 (k) Loan Effectiveness, including Conditions 24 February 2010

Annex 1: Program Definition )

I. Sponsors, Stakeholders and External Agencies

(i) Sponsors: - Ministry of Economy (MOE) - Ministry of Finance (MOF) - Ministry of Transport and Communications (MOTC) - Armenian Roads Directorate (ARD), - Asian Development Bank (ADB)

(ii) Stakeholders: - Project Governing Council including central Government, representative from project sponsors, Ministry of Territorial Administration, Ministry of Nature Protection, National Road Safety Council, State Revenue Committee, and others. - Yerevan, Ashtarak and Ararat local self-government bodies (for

Tranche 1), - marzes (regions) of Shirak, Aragatsotn, Ararat, Vayots Dzor and

Sunik for other tranches, - transport and trade unions, freight forwarders, road users, affected

people. (iii) External Agencies/IFIs

- Japan International Cooperation Agency - European Bank for Reconstruction and Development - World Bank - USAID

7

II. Impact and Outcomes

Impact

The impact of the Investment Program will be increased regional trade and accelerated economic development in Armenia.

Outcomes:

The outcome will be efficient, safe, and sustainable transport on the north-south road corridor as part of the Caucuses subregional road network.

III. Outputs

Tranche 1 Project will reconstruct 18.4 km four-lane section of the Yerevan–

Ashtarak road, and strengthen and implement components of the road subsector plan.

Annex 2: Program Management

8

2.1 Program Implementation Organization Chart

Ministry of Transport and

Communication – Executing Agency

Project Governing Council of Armenia

(Internal Stakeholders)

Asian Development Bank

C ofinancing Organization s

External Stakeholde sr (NGOs, civil societies,

trade and transport unions, road users and

affected people

Armenian Roads Directorate

Operational M onitoring and Evaluation Desk

performance monitoring, (evaluation, reporti ng and

results measureme t) n

C ontractors

Implementation Consultants (supervision)

Advisory policy reform

Consultants s and (

capacity building)

Strategic and Management Le elv

Operational Level

Program Management

Director

Technica l Team ( project feasibilities and tranche

preparation)

- H ighway E gineen r - -

Economis t Financial nd Costing aSpecialis t

Safegu rdaTeam (

s Compliance resettlement and

environment)

- Environment Specialist

- R esettlementSpecialist

- Legal Expert

Contract Administration Team (procurement,

project supervisionandmanagement)

- Highway Engineer rocurement Speciali t- P s roject Management - P

Specialist - Legal Expert

Fiduciary and Legal Complianceagreemen

Team (l oan ts and financial

accounting)

- -

Financial Specialis

Accountan t Legal Expert -

Project Preparation Consultants (feasibility

and designs )

t

9

2.2 Roles and Responsibilities

Strategic and Management Level

The Project Governing Council (PGC) in Armenia, consisting of members

from ministries of economy, finance, justice, transport and communication, territorial administration, and civil societies will provide overall oversight, decision making and monitoring of the Investment Program. PGC will be co-chaired by the ministers of economy and transport and communication and its key functions include (i) guiding the overall policy and strategic direction of the Investment Program, (ii) reviewing and evaluating its performance, and (iii) coordinating with other donor-funded projects.

Operational Level

MOTC will be the executing agency (EA) responsible (First Deputy Minister)

for overall planning and implementation of the Investment Program and coordination with PGC. MOTC will sign and act as an Employer for contracts with consultants and contractors.

Implementation and monitoring of the Investment Program will be delegated to ARD (Director General), which will serve as the implementing agency (IA). ARD will set up a program management unit (PMU) to manage day-to-day activities for coordination, implementation, and administration of individual projects under the Investment Program. PMU head will serve as a Program Director and report the Director General, ARD.

Key functions include (i) screening and approving individual tranche projects; (ii) planning and executing procurement; (iii) reviewing and approving final project designs; (iv) managing contractors and supervising consultants; (v) maintaining financial management controls, including project accounts; (vi) monitoring and reporting on project implementation performance and results; (vii) dealing with all warranties and representations made to ADB, including full compliance with environmental and social safeguard policies and action plans; and (viii) managing the institutional effectiveness program.

ARD will appoint a program implementation team comprising expertise in highway engineering, tunneling, procurement, project management, financial accounting, and social and environmental safeguards and legal issues. The legal specialist will provide his/her services to all program implementation team members.

10

Annex 3: MFF Tranches and Approvals )

3.1 MFF Tranches

The First Periodic Financing Request (PFR) for Tranche 1 Project was

approved by ADB on 6 October 2009 (Appendix 1). The Loan Agreement for Tranche 1 Project amounting to $60 million equivalent was signed on 12 October 2009. The loan is now under the ratification by the Parliament of Armenia. The loan is expected to be ratified by end-December 2009. The Government will request extension of loan effectiveness beyond 60 days from the date of loan signing, if not ratified on time.

The Government selected 88-km Ashtarak–Guymri road as the Tranche 2 Project preliminarily estimated at $210 million. TA 7208-ARM is preparing the preliminary design and resettlement planning documents, after which the Government will send ADB the PFR 2 for Tranche 2 Project. Tranche 2 Project also involves full Environmental Impact Assessment which will be undertaken independently by ADB. Tentatively, the Government will submit PFR 2 by April 2010.

The Government plans to improve Goris/Sisan to Kapan road as part of the Tranche 3 Project. This will be assessed in detailed after completion of TA 7208-ARM and affirmed by the Government during the MFF inception mission.

All other projects/subprojects to be included in the MFF will follow the selection criteria and approval procedures detailed in sections below.

3.2 Selection Criteria

To be financed under the multitranche financing facility (MFF), each proposed project or subproject shall: construct, upgrade, or rehabilitate roads of high development priority,

assessed from their contribution to implementation of the Investment Plan 2009–2017 (Appendix 2) and to achieving the objectives of the road subsector road map;

be in line with the approved feasibility assessment meeting the engineering,

financial, economic, environmental, and social requirements of Armenia and ADB;

have detailed engineering designs completed;

have been allocated counterpart funding sufficient to implement the project or

subproject as scheduled and maintain such project/subproject facilities upon completion; and

have been granted government approvals and endorsements.

11

3.3 Approval Procedure Approval procedures for projects proposed for financing under the MFF will follow the required Government review and approval processes as supplemented by the requirements of the Armenian Roads Directorate (ARD) attached to Schedule 5 of the FFA (Appendix 3). For the Tranche 1 Project proposed for financing under the MFF, all necessary government approvals have been obtained as of the date of the FFA. For all projects intended for financing under subsequent tranches of the MFF, the approval procedures will be as follows:

ARD will have all the engineering designs reviewed and finalized; ARD will review the project proposals to confirm compliance with eligibility

criteria and then submit those eligible projects or subproject proposals to the Ministry of Transport and Communication (MOTC) for endorsement;

ARD will prepare a periodic financing request (PFR) in a format agreed with

ADB to finance specific projects, and submit it to the Project Governing Council for review and approval. Upon approval, the Ministry of Economy will submit, through MOTC, the PFR to ADB, with those eligible project and subproject proposals;

For projects or subprojects that are added in the course of updating the

Government’s Investment Plan, all statutory clearances should be sought prior to submission of the PFRs to ADB;

MOTC, the Ministry of Economy, ARD, and ADB will maintain contact through

periodic ADB review missions and quarterly progress reports, and in so doing may effect advanced consultation on PFRs prior to submission to ADB;

Subject to satisfactory compliance with the selection criteria and approval

procedures, and in compliance with ADB’s relevant policies, ADB will approve the proposals of the projects; and

Upon receipt of ADB approval, ARD will proceed with tendering in

accordance with ADB’s Procurement Guidelines (2007, as amended from time to time).

12

Annex 4: Safeguards Plan )

4.1 Environment.

ARD will be responsible to review, supervise implementation and monitor compliance with the environmental covenants of the Investment Program. An environmental assessment and review framework (EARF) covering environment safeguard tasks for the Investment Program in compliance with national laws and ADB's Environment Policy (2002) has been prepared and approved by the Government (Appendix 1)

Tranche 1 Project will not have significant environmental impacts, hence

category C classification. An Initial Environmental Examination (IEE) was carried out included in Appendix 2 together with initial Environmental Management Plan (EMP). ARD will ensure that the contractor(s) prepare EMPs and obtain approval of the Resident Engineer (RE), ARD/MOTC and necessary government permits/approvals prior to commencing site preparation and construction. Key areas of environmental management, that ARD will monitor and ensure that contractors' contracts and EMPs include provisions and execution of works comply to, are:

(i) storage and handing of diesel and waste oil (including vehicle and

equipment servicing);

(ii) transporting materials;

(iii) operating work camps and facilities;

(iv) asphalt plant site development and operation;

(v) quarry and borrow-pit site development, operation and restoration;

(vi) traffic management during construction in consultation with affected communities and traffic police;

(vii) community consultation and communications during construction;

4.2 Involuntary Resettlement

A Land Acquisition and Resettlement Framework (LARF) regulating land acquisition and resettlement activities for the Investment Program was prepared (Appendix 3).

Tranche 1 Project will improve the existing four-lane dual carriageway

highway and all works will take place within the existing right-of-way or on unused state-owned land. No relocation of households or acquisition of productive land is expected. Borrow pits or quarries are also available in state-owned empty land, within easy access and away from residential areas. Hence, Tranche 1 Project's classification for resettlement impact is category C. No action will be required, unless land acquisition and/or resettlement

13

becomes necessary during construction, for which principals laid in the LARF will apply and ARD will ensure compliance.

4.3 Indigenous People

In Armenia there are no groups with characteristics fitting the definition of indigenous peoples of the ADB’s Policy on Indigenous Peoples (1998). Therefore, the entire Investment Program and all tranche projects will be categorized as C for impact on indigenous peoples. No action will be required in this regard.

Annex 5: Financing Plan )

5.1 ADB Financing, Fund Flow and Disbursement Arrangements

A. Program Investment Plan

Table 3: Financing Plan for the Investment Program

Source Amount

($ million) %

A. Asian Development Bank 1. Ordinary Capital Resources 2. Special Fund Resources B. Government and other Cofinanciers Total

440.0 60.0

462.0 962.0

46 6

48 100

Source: Asian Development Bank estimates.

The Government has requested ADB to finance the Investment Program through

an MFF up to $500 million. Financing will be provided in tranches through individual loans from ADB’s Special Funds resources and ordinary capital resources (OCR) in accordance with relevant ADB policies and the framework financing agreement (FFA) signed between ADB and Armenia, subject to modifications that may be included under individual financing agreements. An OCR loan will have an interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per annum, and such other terms and conditions set forth in the related loan agreements. A loan from the Special Funds resources will have a term of 32 years, including a grace period of 8 years, and interest of 1.0% per annum during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the related loan agreement.

14

Table 4: Financing Plan for Tranche 1 Project

Source Amount

($ million) % A. Asian Development Bank Special Fund Resources B. Government Total

60.0 10.0 70.0

86 14

100 Source: Asian Development Bank estimates.

The Government submitted the first Periodic Financing Request for tranche 1 to

ADB for $60 million to help finance Tranche 1 Project. The ADB loans will finance 86% of the total cost of Tranche 1 Project. The loan from Special Funds resources will have a term of 32 years, including a grace period of 8 years, and interest of 1.0% per annum during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the related draft Loan Agreement. The Government will finance the remainder of the total project cost in an amount of $10.0 million in the form of local taxes and duties. Government's taxes and duties include value-added taxes and importation duties. These will be budgeted annually and either exempted and/or reimbursed to the contractor's and consultants based on the Government's fiscal regulations in effect at the time when such exemptions and/or reimbursements are due. There are no cash counterpart funding required for the Tranche 1 Project from the Government. If such becomes necessary, the Government will allocate these funds to MOTC's account and disburse through Treasury.

15

B. Funds Flow

MOF

Asian Development

Bank

Ministry of Transport and

Communication (EA)

Claims/ Invoices

Other Vendors

and Payees

(ex. resettlem

ent)

Treasury Service (MOF)

Armenian Road Directorate

IA

Consultants/ Contractors

To Imprest Account

WA

Imprest Account

AP & IPC

Budget Allocation WA

Transfer to Imprest Account

Payment Request

Payment Request Check

Payment

Direct Payment

lending AP : Advance payments EA : executing agency IA : implementing agency IPC : interim payment certificates MOF : Ministry of Finance WA : Withdrawal applications

loan repayment

payment to consultants/contractors

coordination/monitoring

16

C. Disbursement Arrangements

The loan proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007) and subject to the provisions of Schedule 3 of the Loan Agreement. ARD will establish and maintain imprest accounts immediately after the loan takes

effect in accordance with ADB’s Loan Disbursement Handbook. ARD will be responsible for the use, management, replenishment, and liquidation of the project imprest accounts, under the supervision of the Ministry of Finance.

An imprest account will be established at the central bank or a commercial bank in Armenia acceptable to ADB after the loan effectiveness, and will be liquidated and replenished in accordance with ADB’s Loan Disbursement Handbook. The imprest accounts will be exclusively used to finance the ADB's share of eligible expenditures.

The total advance will not exceed ADB’s estimated share of eligible project expenditures to be financed through the imprest account for the next 6 months, or 10% of the amount of the loan, whichever is lower.

The statement of expenditure (SOE) procedures will be followed to reimburse expenditures and liquidate the imprest account for any individual payment transaction of $100,000 equivalent and below.

Direct payment procedures will be used for civil works expenditures, progress payments to consultants, and procurement of goods.

Required actions prior to initial withdrawal include (i) authorized signatory letter from the Ministry of Finance addressed to ADB, (ii) specimen signatures of authorized signatories, and (iii) submission of withdrawal application (initial advance) and duly accomplished estimate of expenditures sheet.

Note: Withdrawal applications and other loan disbursement information are available at ADB Controller's Department's website http://lfis.adb.org.

17

5.2 Allocation Table

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS

(North–South Road Corridor Development Program – Project 1)

CATEGORY ADB FINANCING

Amount Allocated

SDR [$] '000 Number Item Category

Percentage and Basis for Withdrawal

from the Loan Account*

1 Works [38,000] 100 percent of total expenditure

2 Consulting Services [5,000] 100 percent of total expenditure

3 Goods [1,000] 100 percent of total expenditure

4 Project Management Support [1,000] 100 percent of total expenditure

5 Interest during construction [2,000] 100 percent of amount due

6 Unallocated [13,000]

TOTAL [60,000] * Exclusive of taxes and duties imposed within the territory of the Borrower.

5.3 Government Financing

The remaining $10.0 million equivalent will be financed and/or reimbursed by Government in the form of local taxes and duties.

18

Annex 6: Investment Plan (Tranche 1 Project) )

6.1 Detailed Costs by Expenditure Category and Financiers

A

DB

Gov

ernm

ent

Tot

al C

ost

% o

f Tot

alIte

m($

mill

ion)

($ m

illio

n)($

mill

ion)

Bas

e C

ost

AD

BG

over

nmen

tA

.B

ase

Cos

ts a

1.C

ivil

Wor

ks fo

r Roa

d Im

prov

emen

ta.

Yer

evan

–Ash

tara

k R

oad

(km

11.

8–km

30.

2)33

.70.

033

.761

.310

00

b.R

oad

Saf

ety

Impr

ovem

ent f

or Y

erev

an–A

rara

t R

oad

4.3

0.0

4.3

7.8

100

02.

Pro

ject

Man

agem

ent S

uppo

rta.

Pro

ject

Man

agem

ent U

nit b

0.9

0.0

0.9

1.6

100

0b.

Ext

erna

l Fin

anci

al A

udit

0.1

0.0

0.1

0.2

100

03.

Pro

ject

Impl

emen

tatio

n C

onsu

ltant

sa.

Det

aile

d D

esig

n fo

r Tra

nche

10.

10.

00.

10.

210

00

b.C

onst

ruct

ion

Sup

ervi

sion

and

Des

ign

for T

ranc

he 2

3.

90.

03.

97.

110

00

4.S

uppo

rt fo

r Im

plem

enta

tion

of R

oad

Sub

sect

or P

lan

a.C

onsu

lting

Ser

vice

s1.

00.

01.

01.

810

00

b.Tr

affic

Man

agem

ent a

nd M

onito

ring

Equ

ipm

ent

1.0

0.0

1.0

1.8

100

05.

Taxe

s an

d D

utie

s c0.

010

.010

.018

.20

100

Sub

tota

l (A

)45

.010

.055

.010

0.0

8218

B.

Con

tinge

ncie

s d

1.P

hysi

cal C

ontin

genc

y9.

00.

09.

016

.410

00

2.P

rice

Con

tinge

ncy

4.0

0.0

4.0

7.3

100

0S

ubto

tal (

B)

13.0

0.0

13.0

23.6

100

0

C.

Fina

ncin

g C

harg

es D

urin

g Im

plem

enta

tion

e2.

00.

02.

03.

610

00

Tot

al60

.010

.070

.012

7.3

8614

AD

B =

Asi

an D

evel

opm

ent B

ank.

aIn

mid

-200

9 pr

ices

. b

Incl

udes

pro

ject

man

agem

ent a

nd a

dmin

istra

tion

cost

of t

he m

anag

emen

t uni

t und

er th

e M

inis

try o

f Tra

nspo

rt an

d C

omm

unic

atio

n.c

Incl

udes

val

ue-a

dded

tax

and

impo

rt du

ties.

dP

hysi

cal c

ontin

genc

ies

are

com

pute

d at

20%

of b

ase

cost

s. P

rice

cont

inge

ncie

s ar

e co

mpu

ted

at 2

% o

n fo

reig

n ex

chan

ge c

osts

and

12%

on

loca

l cur

renc

y co

sts.

Incl

udes

pro

visi

on fo

r pot

entia

l exc

hang

e ra

te fl

uctu

atio

n un

der t

he a

ssum

ptio

n of

a p

urch

asin

g po

wer

par

ity e

xcha

nge

rate

.e

Incl

udes

inte

rest

cha

rges

dur

ing

cons

truct

ion.

Sou

rce:

Asi

an D

evel

opm

ent B

ank

estim

ates

.

% o

f Fin

anci

ng

DE

TA

ILE

D C

OS

T E

ST

IMA

TE

S B

Y E

XP

EN

DIT

UR

E C

AT

EG

OR

Y A

ND

FIN

AN

CIE

R (T

RA

NC

HE

1 P

RO

JEC

T)

19

6.2 Forecast of Cost to Complete ($ million)

CONTRACT AWARDS Total Years

Cost 2009 2010 2011 2012 2013 2014 Total

A. Base Cost

1. Civil works 38.0 0.0 38.0 0.0 0.0 0.0 38.0

2. Consulting Services 5.0 0.2 4.0 0.5 0.2 0.1 5.0

3. Goods 1.0 0.0 1.0 0.0 0.0 0.0 1.0

4. Project Management Support 1.0 0.1 0.3 0.2 0.2 0.2 1.0

Subtotal (A) 45.0 0.3 42.3 1.7 0.4 0.3 45.0

B. Contingencies

Subtotal (B) 13.0

C. Interest during construction 2.0

Total Project Cost 60.0 DISBURSEMENTS Total Years

Cost 2009 2010 2011 2012 2013 2014 Total

A. Base Cost

1. Civil works 38.0 0.0 5.0 12.0 12.0 6.0 3.0 38.0

2. Consulting Services 5.0 0.2 1.2 1.2 1.2 1.1 0.1 5.0

3. Goods 1.0 0.0 1.0 0.0 0.0 0.0 0.0 1.0

4. Project Management Support 1.0 0.1 0.2 0.2 0.2 0.2 0.1 1.0

Subtotal (A) 45.0 0.2 6.4 14.4 13.4 7.4 3.2 45.0

B. Contingencies

Subtotal (B) 13.0

C. Interest during construction 2.0 0.1 0.7 0.7 0.3 0.2 2.0

Total Project Cost 60.0

20

Annex 7: Procurement Plan (Tranche 1 Project) )

7.1 Process Thresholds and Reviews

Thresholds. Except as the ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold International Competitive Bidding for Works Above $1,000,000 International Competitive Bidding for Goods Above $500,000 National Competitive Bidding for Works Below that stated for ICB, Works Shopping for Works Below $100,000 Shopping for Goods Below $100,000 Reviews. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the Project.

Procurement of Goods and Works Procurement Method Prior or Post Comments International Competitive Bidding for Works Prior International Competitive Bidding for Goods Prior National Competitive Bidding for Goods Prior National Competitive Bidding for Works Prior Shopping for Works Prior Shopping for Goods Prior

Recruitment of Consulting Firms Quality- and Cost-Based Selection Prior Other selection methods: QBS, CQS, LCS, or SSS

Prior To be determined during implementation.

Recruitment of Individual Consultants Individual Consultants Prior CQS = consultant's qualification selection, LCS = least cost selection, QBS = quality-based selection, SSS = singe source selection.

7.2 Procurement Plan

(i) Goods and Works Contracts Estimated to Cost More Than $1 Million

The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description

Contract Value

($ million)

Procurement

Method

Prequalification of Bidders (Yes/No)

Advertisement

Date (quarter/year)

Comments

Civil Works 38.0 ICB Yes Q4/2009 ICB = international competitive bidding.

21

(ii) Consulting Services Contracts Estimated to Cost More Than $100,000

The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description

Contract Value

($ million)

Recruitment Method

Advertise-ment Date (quarter/yea

r)

International or

National Assignmen

t

Comments

Detailed Design for Tranche 1

0.2 CQS and international

individual consultant

Q4/2009 International or National

with international

individual consultants

Construction Supervision and Design of Tranche 2 and 3

3.8 QCBS Q4/2009 International quality-cost ratio 80/20

Consulting Services for Implementation of Road Subsector Plan

1.0 QCBS Q1/2010 International quality-cost ratio 80/20

QCBS = quality- and cost-based selection; CQS = consultants qualification selection

(iii) Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100,000

The following table groups smaller-value goods, works, and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description

Value of Contracts

Number of Contracts

Procurement/ Recruitment

Method

(cumulative ) Comments Traffic Management and Monitoring Equipment

$1.0 million Up to 10 Shopping

(iv) Indicative List of Packages Required Under the Project

The following table provides an indicative list of all procurement (goods, works, and consulting services) over the life of the project. General Description

Estimated Value

($ million, cumulative)

Estimated Number

of Contracts

Procurement

Method

Domestic Preference Applicable

Comments

Works Civil works contract package for improvement of Yerevan-Ashtarak road (km 11.8–30.2) and road safety improvement of

38.0 1 ICB One-envelope single stage with prequalification

No

22

General Description

Estimated Value

($ million, cumulative)

Estimated Number

of Contracts

Procurement

Method

Domestic Preference Applicable

Comments

Yerevan-Ararat road Goods Traffic management and monitoring equipment

1.0 several Shopping No

Consulting Services Design of Civil Woks Tranche 1

0.15 0.05

several CQS and individual

consultant

Construction Supervision for Tranche 1 and Design of Tranche 2 and 3

3.8 1 QCBS with FTP

quality-cost ratio 80/20

Project Management Unit

0.9 several Individual consultants

To be determined depending on need.

External Financial Audit

0.1 1 LCS Yes

CQS = consultant's qualification selection, FTP = full technical proposal, ICB = international competitive bidding, LCS = least cost selection, QCBS = quality- and cost-based selection.

23

Annex 8: Implementation Plan )

8.1 Responsibility Allocation by Activity

Activities Responsible Parties

EA PMU CON CNT ADB 1. Pre-Start Up 1.1 Board Approval * 1.2 Loan Signing * 1.3 Loan Effectiveness * 1.4 Establish Imprest Account * 1.5 Issue CSRNs * 2. PMU established 2.1 Set up PMU office * 2.2 Recruit PMU office staff * 2.3 Procure office equipment and materials * TRANCHE I (18.4 KM) – YEREVAN – ASHTARAK ROAD 3. Preparation & Review of Detailed Design & Bid Documents

3.1 Engage Detailed Design Consultants & mobilize by

November 2009 *

3.2 Complete detailed design by 31 Jan 2010 * 4. Construction Supervision

4.1 Recruitment of Supervision Consultants by April 2010

*

4.2 Supervision of Project 1 * 4.3 Prequalification for Civil Works * 5. Contract 1 – Yerevan Ashtarak Road 5.1 Bid Documents and ADB's Approval * 5.2 Civil Works Procurement * 5.3 Civil Works Implementation * 6. Support for Implementation of Road Subsector Plan 7. Project Management and Administration 7.1 Project Administration * 7.2 Construction Supervision * 7.3 Project Performance Monitoring * 7.4 Withdrawal and Disbursement * 7.5 Accounting and Auditing * 7.6 Covenant Compliance * 7.7 Midterm Review * 7.8 Project Completion * 7.9 Loan Account Closing * ADB = Asian Development Bank, CNT = Contractors, CON = Consultants, CSRN = Consulting Services Recruitment Notice, EA = Executing Agency (ARD), PMU = Project Management Unit * with primary responsibility

8.2 Execution Plan (Gantt Chart)

Activity A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Tranche 1

Construction Supervision - Tranche 1 (procurement period)

Document Preparation by ARD

Approval Period (MOTC, ADB)

Advertisement for EOI - (4 weeks)

Evaluation

Approval of Shortlist

Proposal Period - (6 weeks)

Evaluation

Approval Period (MOTC, ADB)

Award of Supervision Contract

Detailed Design - Tranche 1, including Road Safety

Selection of Design Consultant - Local

Detailed Design

Civil Works Prequalification - Tranche 1

Prequalification Document Preparation

Approval Period (ADB)

Announcement and Prequalification Period (6 weeks)

Prequalification Evaluation and Short-listing

Approval Period (MOTC, ADB)

Civil Works Procurement - Tranche 1

Bidding Document Preparation

Approval Period (MOTC, ADB)

Invitation and Bidding Period (6 weeks)

Bid Evaluation and Approval Period (MOTC, ADB)

Contract Negotiations

Award of Civil Works Contract

Civil Works Contract Period - Tranche 1 (30 months,a plus 12 months Defects Liability Period)

Consultants for Institutional Support

Selection of Consulting Firm (QCBS)

Phase 1 - Finalizing Road Subsector Plan and Approval

Phase 2 - Assist Implementation of Key Components

Detailed Design - Tranche 2

Prequalification of Bidders - Tranche 2

Implementation - Tranche 2

Bidding and Award Period

Civil Works Contract Period (33 months,a plus 12 months Defects Liability Period)

Detailed Design - Tranche 3

Prequalification of Bidders - Tranche 2

Implementation - Tranche 3

Bidding and Award Period

Civil Works Contract Period (48 months,b plus 12 months Defects Liability Period)

ADB = Asian Development Bank; AMJ = April, May, June; ARD = Armenian Roads Directorate; EOI = expression of interest; JAS = July, August, September; JFM = January, February, March; MOTC = Ministry of Transport and Communication; OND = October, November, December; TA = technical assistance.a The construction period has been determined in consideration of prevailing climatic conditions and allows for a complete construction season at the end of the construction period. b 48months, in consideration of complexity of works.

Q4

2015

Q1 Q2 Q3 Q4

March

Q2 Q3

October November December January

Q4

February

2014

Quarter 4 Quarter 1 Q2 Q3 Q4 Q1 Q2

2012

Q1

2013

Q4 Q1 Q2 Q3 Q3 Q4

2009 2010 2011

Q1 Q2 Q3

2016

Q1 Q2 Q3 Q4

2017

Q1 Q2 Q3 Q4

25

8.3 Annual Work Plan (Tranche 1 Project)

Activity Target Responsibility Approvals

Year 2009

Loan Effectiveness 11 Dec MOE/MOTC ADB Fielding Design Consultants 1 Nov

- Prepare EOI documents Done ARD - Post EOI 20 Oct ARD/MOTC PGC/ADB - Evaluate EOIs 5-10 Nov Bid Committee PGC - Issue RFP 15 Nov MOTC PGC - Evaluate and award contract 20 Nov Bid Committee MOTC - Execute contract 25 Nov-31 Dec ARD MOTC - Contract variation/extension -- ARD MOTC/ADB

Year 2010

Fielding Supervision Consultants - Prepare EOI documents 15 Dec ARD - Post EOI 16 Dec ARD/MOTC PGC/ADB - Evaluate EOIs and Shortlist - Issue RFP - Evaluate and award contract - Execute contract - Contract variation/extension --

Prequalification of Bidders - Prepare EOI documents 15 Dec ARD - Post EOI 16 Dec ARD/MOTC PGC/ADB - Evaluate EOIs and Shortlist - Issue RFP - Evaluate and award contract - Execute contract - Contract variation/extension --

Fielding Advisory Consultants 1 June 2010 MOTC/ARD PGC/ADB - Prepare EOI documents 15 Dec ARD - Post EOI 16 Dec ARD/MOTC PGC/ADB - Evaluate EOIs and Shortlist - Issue RFP - Evaluate and award contract - Execute contract - Contract variation/extension --

Civil Works - Prepare bidding documents - Bidding - Evaluate bids - Award contract - Execute contract - Contract variation/extension

26

Annex 9: Performance Monitoring and Evaluation (Performance indicators and monitoring mechanisms will be detailed and agreed with

MOTC/ARD during the Inception Mission) )

9.1 Deliverables

Increase in Armenia's exports from $300 million in 2007 to $600 million in 2017 Increase in Armenia's imports from $1.1 billion in 2007 to $2.0 30% increase in cross-border freight traffic by 2015 from 1.0 million tons in

2008

9.2 Performance Indicators

Outcome:

Reduced freight charges per ton-km in Georgia by 10% from 2009 to 2015 Increased share of subregional roads in good and fair condition from 80% in

2008 to 90% in 2015 Increased funding for road maintenance from $35 million in 2009 to $70 million

in 2013 Decrease in road accident rate from 1.3 per million vehicle-km on the existing

road to 0.68 on the bypass road in 2014 Outputs: Implementation of performance maintenance contracts on a PPP basis Adoption of the intelligent traffic system within 5 years after project completion IRI value for the improved roads maintained at no higher than 3.0 within 5 years

after project completion

9.3 Monitoring and Evaluation Report

Project Performance Report (PPR) – the PPR is part of overall project performance management system, which will be updated during the ADB's review missions together with the EA and IA of the Investment Program.

27

Annex 10: Major Covenants

I. Sector Covenants

Road Subsector Plan. MOTC will finalize the Road Subsector Plan (2010–2020) prepared under the ADB-assisted Transport Sector Strategy, obtain endorsement of various government and external stakeholders and submit for approval of the Government by mid-2010.

Transport Policy and Sector Management. (i) the policies under the PCA with

the EU governing the road subsector development and operations are harmonized in a way that road subsector roadmap and investment plan under the Investment Program are implemented coherently; (ii) best efforts are used to facilitate cross-border transit of road transport consistent with the European Agreement on Main International Traffic Arteries of 15 November 1975, and (iii) developing the human resources, technical, managerial and administrative capacity in the road subsector to achieve greater efficiency in planning, developing and operating the infrastructure financed under the Investment Program is of high priority.

Transparency and Good Governance. All contracts financed by ADB under

the Investment Program include provisions specifying the right of ADB to audit and examine the records and accounts of the implementing agency and all contractors, suppliers, consultants, and other service providers as they relate to a Investment Program.

Construction Quality. (i) road corridor under the Investment Program is

improved to comply with the international standards, particularly international agreements to which Armenia is a contracting party; (ii) sound contract management and quality control procedures are performed in accordance with internationally acceptable standards; and (iii) completed works comply with the design drawings, construction specifications and other documents stipulated in the bidding documents.

Change in Ownership and Operation. Seek ADB's consent at least 6 months

prior to: (i) changing ownership of the road, road facility, or structure financed under the Program; (ii) selling, transferring, or assigning the interest or control over the road, road facility, or structure financed under the Investment Program; (iii) leasing or other contract or modification of the functions and authority of the ARD over operation and maintenance of any road, road facility, or structure financed under the Investment Program; and (iv) such changes will be carried out in a legal and transparent manner.

Compliance with International Agreements. Built, equip, operate, maintain

and manage the facilities financed under the Investment Program in compliance with all international agreements and conventions to which Armenia is a party.

28

II. Financial Covenants

Accounting, Auditing and Reporting. ARD will maintain separate project records and accounts adequately to identify the (i) goods and services financed from the loan proceeds, (ii) financing resources received, (iii) project expenses incurred on the components of each project, and (iv) use of counterpart funds. ARD will engage independent external auditors acceptable to ADB to audit project accounts including the imprest account and the statement of expenditure procedures annually. ARD will submit to ADB certified copies of audited annual project accounts with a separate audit opinion on the imprest account and the statement of expenditure procedures as well as the auditor’s report in English within 6 months of the end of each fiscal year during implementation. ARD was advised of ADB’s requirement for timely submission of audited annual project accounts, and the suspension of disbursements of ADB loans in case of noncompliance with the requirement.

Transparency and Good Governance. All contracts financed by ADB under

the Investment Program include provisions specifying the right of ADB to audit and examine the records and accounts of the implementing agency and all contractors, suppliers, consultants, and other service providers as they relate to a Investment Program.

Counterpart Funding and Resources. (i) financial, technical and human

resources shown in the Investment Program and Tranche 1 financing plan, and the implementation arrangements will be provided on a timely basis; (ii) adequate funds to sustainably maintain the road corridor throughout its service life will be allocated; (iii) financial, human, and technical resources to implement the road subsector plan will be made available; and (iv) it will use its best efforts to obtain additional external financing as may be necessary for the reconstruction and rehabilitation of the north-south road corridor in accordance with the agreed Investment Plan.

III. Safeguards Covenants

Environment. (i) projects under the Investment Program are designed, carried out, maintained, and monitored in compliance with (a) all applicable environmental laws and regulations of Armenia; (b) ADB’s Environment Policy (2002), or, if applicable, the Safeguard Policy Statement (2009); (c) environmental assessments (IEEs/EIAs) prepared for each individual project; (d) EMPs, including the mitigation measures and monitoring requirements arising from the implementation of the IEEs/EIAs; and (e) a strategic assessment of potential interactions between the Investment Program and the environment; (ii) civil works contractors’ specifications include requirements to comply with the environmental mitigation measures contained in the IEEs/EIAs and EMPs, and (iii) civil works contractors are supervised to ensure compliance with the requirements of the IEEs/EIAs and EMPs.

Land Acquisition and Resettlement. (i) in the event that any land acquisition or resettlement becomes necessary, appropriate land acquisition and

29

resettlement plans (LARPs) will be prepared in accordance with the national laws and regulations, the resettlement framework and the ADB’s Policy on Involuntary Resettlement (1995), or, if applicable, the Safeguard Policy Statement (2009) in consultation with the affected people; (ii) endorse and disclose all LARPs to the public and submit them to ADB for approval; (iii) all land and right-of-way required for the project implementation are made available in a timely manner, (iv) land acquisition and resettlement are carried out promptly and efficiently following the LARPs agreed with ADB and monitored, evaluated, and reported to ADB as required in the LARPs; and (v) any civil works will be commenced only after the required land has been acquired and affected households have been compensated at full replacement cost.

Local Consultation and Gender. (i) all local consultations to address safety, social, and cultural issues during implementation of the Investment Program are carried out as recommended in the summary poverty reduction and social strategy; (ii) men and women are given equal employment opportunities directly, or indirectly, arising from the Investment Program and without any differentiation of wages for equal work; (iii) mechanisms for maximizing local employment benefits will be included in the bidding documents.

Employment and Labor. All civil works contracts under the Investment Program will (i) comply with applicable labor laws of Armenia, and (ii) use best efforts to employ women and local people, including disadvantaged people living in the vicinity of the project area. Each civil works contract will contain provisions (i) prohibiting use of child labor and differentiation in wages between men and women for work of equal value or type, (ii) requiring dissemination of information on the risks of sexually transmitted diseases to those employed at the construction sites, and (iii) requiring health, sanitation and appropriate working conditions at the construction sites. Compliance with these assurances will be recorded in the project performance monitoring system and monitored during implementation.

Health Risks and Prevention. All civil works contracts include a requirement to conduct an information and education campaign on sexually transmitted diseases and HIV/AIDS for construction workers as part of the health and safety program at campsites during the construction period.

Illegal Trafficking. Undertake concrete and adequate measures to detect and prevent trafficking of humans, wildlife, endangered species, and illegal substances through the road corridor.

30

Annex 10: Appendixes

Appendix 1 Periodic Financing Request for Tranche 1 Project Appendix 2 Road Subsector Road Map and Investment Plan Appendix 3 Environment Assessment Review Framework Appendix 4 Land Acquisition and Resettlement Framework Appendix 5 Initial Environmental Examination Appendix 6 Terms of Reference for Detailed Design of Tranche 1 Appendix 7 Terms of Reference for Construction Supervision (Tranche 1) and Preparation of Tranche 2 and 3 Appendix 8 Terms of Reference for Implementing Road Subsector Plan Appendix 9 Detailed Breakdown of Costs by Financier and Expenditure Categories