Implementation Plan - rapnepal.comrapnepal.com/sites/default/files/report-publication/Inception...

Government of Nepal

Implementation Plan

Rural Access Programme (RAP) Phase 3

Inception Phase Milestone 4

October 2013

Implementation Plan Main Report

Page i

Implementation Plan

................................................................................................ ii DOCUMENT CONTROL

........................................................................... iii ACRONYMS AND ABBREVIATIONS

1. Inception Phase Deliverables ................................................................................ 1

2. Programme Overview ............................................................................................ 2

3. Implementation Plan ............................................................................................ 12

3.1. LRN Asset Management ............................................................................................................................ 12

3.2. Income Generation .................................................................................................................................... 22

3.3. Economic Infrastructure ............................................................................................................................ 33

3.4. Capacity and Institutional Development ................................................................................................... 37

3.5. LRN Policy and Harmonisation .................................................................................................................. 44

3.6. Disaster Risk Reduction ............................................................................................................................ 46

3.7. Performance Management and Verification ............................................................................................. 47

4. Work Plan .............................................................................................................. 53

5. Results .................................................................................................................. 55

6. Financial Management ......................................................................................... 56

6.1. Payments for Results (P4R) ....................................................................................................................... 56

6.2. Financing Maintenance ............................................................................................................................. 60

7. Budget and Payment Schedule ........................................................................... 65

7.1. Overall and Annual Budgets ...................................................................................................................... 65

7.2. Results Based Payments ............................................................................................................................ 66

7.3. Year 1 Payment Schedule .......................................................................................................................... 67

8. Risks and Assumptions ....................................................................................... 69

8.1. Transfer of Manageable Risk .................................................................................................................... 70

8.2. Transferable Risk matrix ............................................................................................................................ 71


Page ii

Annex 1: Procurement Process ................................................................................ 75

Annex 2: DLI’s for Year 1 Implementation ............................................................... 79

Annex 3: Invoicing and Payment Procedures ......................................................... 86

DOCUMENT CONTROL

Document revisions and

authorisation Details Signature and Date

Version 22 October 2013

Summary of revisions made Main Report Submission

Revisions prepared by Michael Green

Revisions checked by Kirsteen Merrilees

Version authorised by Michael Green


Page iii

ACRONYMS AND ABBREVIATIONS

AAMP

ADB

Annual Asset Management Plan

Asian Development Bank

AFSP

AMS

ARAMP

ARMP

ASP

CFUG

Agriculture and Food Security Project

Asset Management System

Annual Road Asset Management Plan

Annual Road Maintenance Plan

Annual Support Plan

Community Forest User Group

CIM

CMO

COST

DADO

DAG

DAME

DDC

DDF

DFID

DFO

Continual Improvement Matrix

Community Monitoring Officer

Construction Sector Transparency Initiative

District Agricultural Development Office

Disadvantaged Group

District Asset Management Engineer

District Development Committee

District Development Fund

Department for International Development (UK Aid)

District Forestry Office

DIPECHO

DLI

DLSO

DOLIDAR

Disaster Preparedness European Commission Humanitarian Aid Organisation

Disbursement Linked Indicator

District Livestock Officer

Department of Local Infrastructure Development and Agricultural Roads

DOR Department of Roads

DRCN

DRILP

District Road Core Network

Decentralised Rural Infrastructure and Livelihoods Programme

DRR

DRSP

DTL

DTMP

Disaster Risk Reduction

District Road Support Programme

District Team Leader

District Transport Master Plan

DTO

EI

District Technical Office

Economic Infrastructure


Page iv

EU

ERDRR

FCGO

FRA

FRRAP

European Union

Earthquake Recovery and Disaster Risk Reduction Project

Financial Comptroller General Office

Fiduciary Risk Assessment

Fiduciary Risk Reduction Action Plan

GAFSP

GBP

Global Agricultural Food Security Programme

Great Britain Pound

GIZ Gesellschaft fur Internationale Zusammanarbeit (used to be GTZ))

GON

hh

HIMALI

HTN

HQ

HVAP

IATA

ICS

IDE

IDSS

IG

IFAD

ILO

IMC

IRI

ISAP

ISO

KISAN

KEP

LAPA

LB

LBES

LBFAR

LGCDP

Government of Nepal

Households

High Mountain Agribusiness and Livelihoods Improvement

DFID How To Note

Head Quarters

High Value Agriculture Project

International Association for Transparency and Accountability

Improved Cooking System

International Development Enterprise

Integrated decision Support System

Income Generating

International Fund for Agricultural Development

International Labour Organisation

International Management Consulting

Interim Results indicator

Institutional Strengthening Action Plan

International Standards Organisation

Knowledge Based Integrated Sustainable Agriculture and Nutrition Project

Karnali Employment Project

Local Adaptation Plan of Action

Labour Based

Labour Based Equipment Supported

Local Body Financial Administration Regulations

Local Government and Community Development Programme


Page v

LINK

LRN

LRP

LRBP

LB

LBES

Linking Smallholders with Local Institutions and Markets

Local Road Network

Local Resource Person

Local Road Bridge Programme

Labour Based

Labour Based Equipment Supported

LBFA

LSAR

Local Bodies Fiscal Commission

Light Search and Rescue

M&E Monitoring and Evaluation

MCPM

MEL

MF

MOFALD

Minimum Conditions Performance Measure

Monitoring Evaluation and Learning

Managed Fund

Ministry of Federal Affairs and Local Development

MUS

NEA

NGO

NRs

NRRC

NRSAS

Multiple Use System

Nepal Engineers‟ Association

Non-Governmental Organisation

Nepali Rupee

Nepal Risk Reduction Consortium

Nepal Road Sector Assessment Study

NTFP

OJT

P4R

PA

PCP

PDO

PEFA

PFM

PMCA

Non Timber Forest Products

On the Job Training

Programme for Results

Practical Action

Project Control Plan

Programme Development Objective

Public Expenditure and Financial Accountability

Public Financial Management

Participatory Market Chain Analysis

PMM

PMV

PR

RAIDP

Programme Management Manual

Performance Management and Verification

Programme Results

Rural Access and Improvement and Decentralisation Project


Page vi

RAP Rural Access Programme

RBG

RBN

Road Building Group

Roads Board of Nepal

RIA

RMG

RMO

RMUC

RRRSDP

Road Influence Area

Road Maintenance Group

Risk Management Office

Road Maintenance User Committee

Rural Reconstruction and Rehabilitation Sector Development Project

RTI

SAME

Rural Transport Infrastructure

Sub Asset Management Engineer

SBG

SDC

Special Building Group

Swiss Agency for Development and Cooperation

SED

SEDO

SHS

SRN

Socio- Economic Development

Socio- Economic Development Officer

Solar Home System

Strategic Road Network

SWAp Sector Wide Approach

TA Technical Assistance

TOR

UC

Terms of Reference

User Committee

UK

UKaid

UNRA

USAID

VDC

United Kingdom

UK Aid

Uganda National Roads Authority

US Agency for International Development

Village Development Committee

WB World Bank


Page 1

1. INCEPTION PHASE DELIVERABLES

There are five key milestones in the Inception Phase each one linked to a milestone/results payment

as shown below. The Implementation Plan is the fourth milestone of the Inception Phase. It builds on

the “Baseline, milestone and outcome report”, which was submitted to DFID on 23rd

August 2013. The

Implementation Plan incorporates a series of subsequent decisions by DFID concerning budget

options and related results and outcomes. This means that the TA team has now completed 90% of

the results based total budget for the Inception Phase.

Inception Phase Milestones Dates 1and % of budgeted results

1. Mobilisation of Team 31st May (Done) 10%

2. Inception Report 28th June (Done) 30%

3. Baseline, milestone, outcome Report 16th August (Done) 40%

4. Implementation Plan 30th August 10% (Done but 25

th Sept)

5. Contract Agreement Signed 27th September 10% (By end of October)

Inception Phase Milestones

The Implementation Plan includes budgeted implementation plans and revised indicators and results

as required by the TOR. The Plan begins by outlining the Implementation Strategy for each of the

seven RAP3 components followed by programme-wide sections on Implementation Plan, Results,

Budget Estimates and Risks and Assumptions. It provides the basis for DFID to allow the

Implementation Phase of RAP3 to start in October 2013. An extension to the inception phase to the

end of October has been approved to enable preparation for implementation phase to proceed, using

unused inception phase funds, to allow sufficient time for this to happen. DLI‟s for the extension to the

Inception Phase are as follows:

1. Implementation Plan Report £16,163 2. Implementation start-up Workshop in KTM UK£12,350 3. Stage 1 Design Consultants mobilisation UK£11,650 4. Appointment of District teams (excluding those still to be recruited) and induction training

UK£43,004.612.

In the Inception Phase a consultant has reviewed the implementation strategy to ensure that climate

change, environment and disaster resilience are taken into account within all the component

implementation plans. Recommendations for doing this will be embedded within the RAP 3

Management Manual.

1 Submission dates shown in Microsoft Project may be +/- 5 days

2 These amounts are inclusive of the 1.99% fund handling and administration charge.


Page 2

DFID have meanwhile reviewed a Results and Options Briefing Paper to decide their preferred budget

strategy. With a clear budget and programme duration in place the Plan sets annual and four year

targets, work programmes, results and payment schedules.

2. PROGRAMME OVERVIEW

Why UKaid is required – As identified in the DFID Business Case for RAP3, high levels of chronic

poverty make Nepal the 15th poorest country in the world, and one of the most unequal. Economic

growth is hampered by geography and lack of investment, with Nepal having the lowest road access

in South Asia. The poor in Nepal are also highly vulnerable to natural, economic, social and political

shocks that trap them on or near the poverty line. In Nepal all of these indicators are worse in the Mid

and Far Western regions. The government‟s capacity is limited to address these issues, so DFID

support is required to develop government and private sector capacity to stimulate economic growth in

the poorest area of Nepal.

RAP3 Implementation £31.5m –The DFID Business Case for RAP3 states that RAP will increase the

economic opportunities available to the poorest and most vulnerable people in seven of the remotest

Districts in Nepal3. It will do this by providing employment for the poor maintaining and upgrading

existing roads and constructing rural roads and economic infrastructure where these are lacking. It will

also develop agricultural and other small businesses to put in place the foundations for sustainable

economic development in the area. This Implementation Plan is for the RAP3 Implementation contract

under IMC.

Rural Employment Guarantee Programme Support £3.6m – This component will improve the

effectiveness of the Government‟s Karnali Employment Program (KEP) in the Mid and Far West of

Nepal. Technical assistance will be provided in two pilot districts and at the national level. Support will

focus on improving targeting and awareness, wage payment systems, registration, planning and

monitoring, transparency, capacity and coordination with local government. The TA will also ensure

that lessons learned from RAP pilots inform the roll out of a National Employment Guarantee Scheme,

part of Nepal‟s wider social protection framework.

Results, Evaluation and Policy support, £1.35m – To provide DFID with assurances that

implementation is being delivered effectively DFID will contract a third party to undertake continuous

monitoring of the programme including financial and administrative arrangements overseen by DFIDN.

DFIDN will also undertake an independent evaluation. This component will also ensure that separate

studies can be conducted to capture lessons on specific issues specified by the RAP Steering

Committee and used to inform the design of future donor and government programmes.

Lessons learned from RAP2:

Labour-based works programmes are effective in reaching the poorest, lifting people directly out of

poverty, and simple targeting is effective at reaching the poorest. Direct targeting of women is

necessary to ensure they benefit. RAP has had to enforce quotas to ensure women do not lose out.

3 An eighth district Doti was added later.


Page 3

Savings groups, literacy training and income generation training schemes are all effective in giving

workers access to increased economic opportunities but support needs to be extended to include

traders and agricultural input suppliers if production is to be scale up significantly and sustainably.

Government Support for maintenance is available if the systems and incentives are in place to support

its allocation and implementation but institutional development is required not just for government but

also for the private sector and community groups. Climate change and disaster resilience can be

integrated into RAP relatively easily, improving infrastructure and increasing the awareness of

communities.

Delivering safely and securely is possible as long as „safe and effective development‟ approaches are

used to resolve disputes over resources quickly. Third party anti-corruption measures that provide

oversight at all levels of implementation do improve accountability, but do not replace the need for

improved government and private sector led and owned anti-corruption measures.

Longer Term Strategy - This phase of RAP continues to focus on delivery but with support to build

government and private sector capacity so that subsequent stages can rely less on direct DFID

implementation. It recognises that the required institutional changes to make this happen will take time

and in the current context may not be possible to make sustainable. For these reasons a four year

implementation period is recommended, after which Nepal‟s political direction and approach to

Federalism may be clearer and a new phase of support can be designed which can reflect the new

context and political scenario.

Theory of Change - RAP's theory of change relies on a simple core narrative as shown below:

RAP3 Theory of Change

Context The rural poor in Nepal lack access to capital and markets to invest in economic activities, locking them in chronic poverty

Inputs RAP will provide employment, transport infrastructure and income training

Outputs RAP inputs generate savings that can be invested in cash crop production combined with increased access to markets provided by improved infrastructure

Outcome Increased investment and private sector income generation

Impact Increased growth and poverty reduction in RAP Districts

Expected Results – One of the purposes of the Inception Phase is to review the DFID Business

Case, TOR and LogFrame indicators and results for RAP3. Of the eight outcomes listed in the TOR

for RAP3 some 80% are achievable without any modification. However, the expected number of days

of employment at 7.5 million was derived from RAP2 results over a five year period whereas RAP3 is

only four years duration. This result has been reduced to 5.3 million days using both direct and

indirect employment days. Secondly, while RAP3 will be able to increase 40,000 farmers‟ incomes the

size of the increase will be smaller at around GBP70 per annum.

Business Case Outcomes Comments

20,000 people lifted out of poverty Achievable

7.5 million days of employment generated (In LogFrame as HH) Adjusted to 5.4 million

200 economic infrastructure investments Achievable


Page 4

600km of roads maintained per year for 4 years Achievable

800,000 people benefiting from improved access (In LogFrame) Achievable

40,000 farmer’s incomes up by GBP130 p.a. (In LogFrame) Adjusted to GBP 70 p.a.

500 GON staff and 200 RMGs trained Achievable if private sector & NGOs

Output based, contracted maintenance finance adopted Achievable

MEL is working on the theory of change/evaluation strategy/ revision to the LogFrame. Assumptions

for the results during the design will also be revisited. We hope this will help to focus attention and

might even identity areas where indirect results can be expected. A detailed version of this should be

available in November.. MEL will also help to refine jobs and poverty reduction results and the short

term jobs figures.

Challenges –For RAP3 the biggest challenges are likely to be bridging the gap between being results

driven and the operating realities on the ground in some of the remotest and most difficult terrain in

Nepal. This translates into a battle to combat high costs and slippages in delivery timescales in a

climate which will certainly be hostile to the pressures of a results based programme. However, RAP2

has operated in nine of the RAP3 districts and the IMC central and district teams therefore have

practical experience of these challenges of delivering the programme on the ground and tried and

tested coping mechanisms.

Budget- The recent move by the British Government to fix its aid budget at 0.7% of GDP has doubled

DFID N‟s budget for the current financial year which has allowed a speeding up of disbursement to

GBP14.4 million for the first year of RAP3 up to the end of September 2014. Comparing RAP3‟s

budget of GBP31.5 million for 14 districts to RAP2‟s budget of GB33 million for just 7 districts, shows

the average allocation per district is half that of RAP2. This suggests that RAP3 has plenty of scope

for spending additional budget in tackling poverty in the west of Nepal.

The breakdown of the budget by

Road related and Socio Economic

Development (SED) activities shows

60% of the budget will go on roads,

21% on SED and trail bridges, 14.%

on Technical Assistance (TA), 4% on

Other activities. It also shows the

length of roads involved, related

labour days generated and districts

involved.

Districts – District Transport Master

Plans (DTMPs) have been prepared for all RAP3 districts by the RTI Pilot. These identify the District

Road Core Network (DRCN) on which RAP3 funds will be spent. There are 8 core districts in the west

of the country which will receive both road related activities and SED activities. Four of these have

little or no existing LRN networks so Humla, Mugu, Kalikot and Bajura will have new road

construction. The remaining four districts of Jumla, Achham, Doti and Dailekh, together with a further

6 former RTI Pilot districts will receive funds for maintenance and upgrading of existing LRN networks

if warranted by their DTMPs.


Page 5

It is recommended that Dadeldhura be upgraded from a Pilot district to core district in the second year

of the programme as next to and has poverty levels similar to those of the other core districts.

Programme Inputs – Proposed programme inputs will vary between core districts, core and pilot

districts and central government and the private sector. For easy reference programme inputs are

shown below in detail.

Core districts of Humla, Mugu, Bajura and Kalikot with new road construction and SED

inputs, economic infrastructure, capacity building, annual support plans, training and TA.

Core districts of Jumla, Doti, Achham, and Dailekh with maintenance, upgrading and SED

inputs economic infrastructure, capacity building, annual support plans, training private sector

capacity building and TA.

Humla Mugu Kalikot Bajura Jumla Achham Doti Dailekh

Core District

Pilot District

Road Maintenance

Road Improvement

Road Construction

Labour Based

Pro Poor Selection

Labour Equip Assisted

RBGs

Consultants

Contractors

RMGs

Income Generation


Capacity Building

District Support Plans

Centre Support Plan

Private Sector Support Plan

Training

Policy Harmonisation

Road Sector Assesm'nt Study

Techncial Assistance

Districts


Page 6

Pilot districts with maintenance and upgrading plus capacity building, annual support plans,

training, private sector capacity building and TA.but no SED or economic infrastructure

Central GON based on the 2013-2015 action plan of the Nepal Road Sector Assessment

Study (NRSAS) plus annual support plans, capacity building, training, policy harmonisation

and TA.

The private sector including annual support plan, capacity building, training, NRSAS and TA

Dadl'hura Parbat Sankhu'haSind'chowkMorang Jhapa

Core District

Pilot District

Road Maintenance

Road Improvement

Road Construction

Labour Based

Pro Poor Selection


RBGs

Consultants

Contractors

RMGs

Income Generation


Capacity Building


Centre Support Plan


Training




Districts

DOLIDAR MOFALD Consultants Contractors

Core District

Pilot District

Road Maintenance

Road Improvement

Road Construction

Labour Based

Pro Poor Selection


RBGs

Consultants

Contractors

RMGs

Income Generation


Capacity Building


Centre Support Plan


Training




GON Centre Private Sector


Page 7

Asset Management – In the last fifteen years an estimated 45,000 km of LRN has been built. By

2011 55% of this was not usable because of a lack of maintenance, the equivalent of US$1 billion

worth of lost investments. By the end of 2012, RAP2‟s RTI Maintenance Pilot had assisted GON to

revise the District Transport Master Plans (DTMP). These guide LRN investment and identify the

minimum network required to link VDC and District headquarters - the so called District Road Core

Network (DRCN). The new policy is to put maintenance of existing assets first, upgrade existing

assets to all weather status with bridges and put new construction last. DTMPs for RAP3 districts

were conducted in the first half of 2013 by the RTI Pilot. DTMPs for the entire country should be ready

by the end of the year and will guide short, medium and long term investment by donors and GON in

the future.

Working with Government - An important theme of RAP3 will be working with GON at both the

central and district levels where it will have offices embedded in GON institutions and TA staff ready to

assist with the business of government and build capacity using annual support plans. These are

reviewed each year and their impact measured in terms of an ISO9004 style Continual Improvement

Matrix (CIM) designed to measure progress towards LRN SWAp compliance.

Sector Wide Approach - RAP3 is the first of a

new generation of Local Road Network (LRN)

projects that are a part of a Government of Nepal

(GON) sector wide approach (SWAp). The

intention is to introduce a new model of

development cooperation to promote greater

harmonisation of donor and government activities

in the sub sector. This will be achieved by GON

and its development partners adopting a single,

Government-led, RTI policy with common

approaches to RTI development. This is to be

matched by improving governance and capacity

building at local and central levels of government

to allow progressively greater reliance to be placed

on government procedures for implementing future

RTI investments. Outsourcing to the private sector is a key part of building capacity and technical

harmonisation in the sector, with the role of GON officials shifting away from technical implementation

to planning and overall management. The framework for this is the 5 year DTMP and the annual

ARAMP which, since their adoption as national policy, will be followed by all new LRN projects in all

75 districts.

Programme for Results (P4R) – This instrument will link disbursement to the achievement of results

that are tangible, transparent and verifiable. This means that financial forecasting will be linked directly

to annual work plans, results targets and milestones for disbursement. Work plans and budget

forecasts will take into account anticipated delays as identified in the RAP3 Risk Matrix. A new

component in RAP3 called Performance Management and Verification (PMV) has been set up to

deliver P4R and track budgets that will be disbursed through District Development Funds for

maintenance and those that will be disbursed directly by RAP3 itself


Page 8

How P4R disbursement is linked to results - Below are the steps needed to link P4R

disbursements to results by means of Disbursement Linked Indicators (DLIs).

Define Programme Results (PR)

Finalise the Programme LogFrame based on defined PRs

Prepare overall work programme and annual budget for each component

Define Disbursement Linked Indicators (DLIs) for all components

These first 4 steps plus the associated TA cost calculations form the Implementation Plan for

each year.

Sign annual agreements with delivery and implementing partners

Execution of planned activities,

Expenditure incurred and tagged against DLIs

Reimbursement claims filed with RAP3 office

RAP3 makes payments upon delivery of results

RAP3 invoices DFID based on pre-agreed DLIs

DFID pays RAP3 consultant

Annual Review

RAP3 has proposed a rolling advance mechanism for works implementation in which an advance of

part of the annual budget is transferred, with top-ups linked to actual progress. Where possible, DLIs

will include successful completion of pre-defined progress results and outputs. The DLIs and their

target dates will define the annual DFID payment schedule for RAP3. The payment schedule will

include details of the „evidence‟ that will be provided to confirm that each DLI has actually been

achieved. The time taken to draw down on these tranches will vary between districts and will be used

to inform second year advances. Unused DFID funds can be rolled over to the next financial year and

used for emergency maintenance up to December as has happened in the RTI Pilot districts and with

the Helvetas Trail Bridge SWAp.

Integrated Decision Support System - Trimesterly reviews will be held to track progress and results

achieved against the programme LogFrame, Work Programme and Annual Budget and variations

between the Commitment Accounting, P4R Accounting and Accrual Accounting. Where significant

variations against plans and between accounts are found, RAP3 and DFID will decide jointly whether

an adjustment needs to be made to the next trimester‟s plans and budgets. RAP3 will use an

Integrated Decision Support System (IDSS)4 so that any variations are highlighted as soon as they

occur and appropriate adjustments agreed with DFID sooner rather than later. There should be „no

surprises‟ at the time of the reviews. Interim reviews can be held at any time during the

implementation year should the IDSS identify actual or potential delays in achieving DLIs or results

targets. (See Section 6 on Financial Management for further details.)

DLIs for Output 2 – Worked example - Output 2 is concerned with improved and sustainable access

due to climate resilient RTI infrastructure works. The output‟s Programme Development Objective

(PDO) is the implementation of the LRN Asset Management Component and there are three DLIs.

These are

4 Modules will be put in place during the period October 2013 – March 2014.


Page 9

%of fund transfers to DDF for maintenance

% payments for procurement of goods, materials, tools and equipment

% LRN Asset Management DLIs.

Against each DLI are a series of monthly payments to the IMC consultants. These are derived from

planned results such as the amount of funds transferred to the DDF for maintenance or planned

payments for procurement. The example below shows expected payments by DFID up to March 2014

against the three DLIs.

% Fund Transfers to DDF for Maintenance - These are shown below and in general all DLIs have a

a small number of one-off implementation DLIs such as that for the transfer of emergency

maintenance followed by a series of % transfers to top up the expenditure forecast. The size of these

transfers will reflect an annual district risk assessment, including the GON‟s Local Bodies Fiscal

Commission‟s (LBFC) Minimum Conditions Performance Measure (MCPM) for Districts ability to

absorb based on last year‟s performance and district CIM. Smaller transfers for more risky districts are

also possible but so far in the Pilot districts once deposited in the DDF risk mitigation is linked to

proper management of works rather than financial risk within GON Public Financial Management

(PFM) systems. Under RAP2 financial forecasting was affected severely by monthly variations in

works progress which in turn impaired financial forecasting. The use of DLIs allows for much more

certain financial forecasting and monthly disbursement targets, but they are not immune to slippages

from one month to the next. One way of dealing with this is to spread DLI‟s into smaller packages and

spread them over time and districts as shown below.

Yr1 Amount £ Oct Nov Dec 1-7 Dec 8-31 Jan Feb Mar

Output 2: Improved sustainable access due to climate resilient RTI infrastructure

works (30%)

PDO 2: Implementation of LRN Asset Management Component 9,595,237

% Fund transfers to DDF for maintenance 4,060,000 196000 483000 0 764,750 603,750 966,000 684250

% payments for procurement of goods (materials, tools, equipment) 1,500,000 150000 337,500 - 56,250 56,250 56,250 123,750

% LRN Asset Management DLIs 4,035,237 262290.426 423,700 - 522,563 560,898 508,440 326,854

Output 2: Improved sustainable access due to climate resilient RTI infrastructure works (30%)

PDO 2: Implementation of LRN Asset Management Component

% Fund transfers to DDF for maintenance

Transfer for emergency maintenance 35000 35000

Transfer for other maintenance 4025000

first tranche 20% to 2 districts 161000



second tranche 50% to 3 districts 603750




third tranche 30% to 3 districts 362250



4060000 196000 483000 764750 603750 966000 684250 362250 0

5% 12% 19% 15% 24% 17% 9% 0%


Page 10

Disbursement Targets for March 2014 - In September DFIDN selected a budget option that will

allow GBP10.6 million to be disbursed by March 2014. By accelerating spending early in the

programme the hope is for RAP to have an immediate impact and speed up progress towards

achievement of programme outcomes and build on RAP2‟s established presence in nine of the RAP3

districts.

The accelerated spend will be achieved firstly by undertaking early, bulk procurement of equipment

and materials of GBP1.5 million for the LRN component. The remaining GBP2.2 million will be

disbursed for maintenance through the district development funds (DDF) using the fund flow

mechanism tried and tested under the RTI Pilot. This consists of a rolling advance for maintenance

works in which we would expect to have made three tranches by May 2014. At the end of March

2013, the total transfer will be 80% against estimated works progress of 50% - equivalent to an

advance of 30%.

First Year Fund Flow - The cumulative expenditure for the first year of the Programme is shown

below broken down by outputs and showing the relative size of the different budgets and the

dominance of Output 2 and the LRN Component. This shows that RAP3 will spend GBP 10.42 million

by the end of DFID‟s financial year, ending on 31st March 2014 (including the inception phase). The

year 1 implementation budget, from 1st October 2013 to 30

th September 2014, is GBP 14.4 million.

Also shown is the month by month expenditure profiles which reach almost GBP2 million in the

months of November 2013 and February 2014.

First Year Cumulative Expenditure First Year Monthly Expenditure Profile

Annual Expenditure - Based on the current budget of GBP31.5 million the expenditure pattern over

the four years of the programme is shown below. The level of spending in the first year gives some

idea of the potential of what RAP3 can achieve and opportunity for additional spending in what are the

poorest areas of the country in years two, three and four in years is quite obvious. This should be

addressed during the first year of the programme once DFID are satisfied with the progress and

impact of implementation.


Page 11

.


Page 12

3. IMPLEMENTATION PLAN

3.1. LRN ASSET MANAGEMENT

3.1.1. Intervention Planning

The implementation strategy for the LRN component is guided by the investment strategies of each

District‟s 5 year District Transport Master Plan (DTMP) revised under the RAP2 RTI Maintenance Pilot

SWAp as recommended in the Nepal Road Sector Assessment Study (2012) and adopted by

MOFALD as official policy nationally at the beginning of 2013. The previous DTMP model was

comprehensive, slow (eight months), expensive and designed back in 1998 for districts without roads.

Since then the LRN has expanded such that only one district remains unconnected by road to the rest

of Nepal. By cutting the time by 75% for undertaking a DTMP to eight weeks and the cost by 80% to

GBP 7,000 by the end of 2013 GON will have a medium and long term investment tool for both GON

and donors for the entire DRCN in all 75 districts of the country.

DTMPs for all 14 RAP3 Districts were prepared in 2012/13 under the Pilot and certified by their

respective District Councils who identified a District Road Core Network (DRCN), the minimum length

of district roads required to connect each VDC headquarter by a single all-weather road to the District

Headquarters. At least 80% of all available LRN budgets are linked to interventions on the DRCN

starting with the maintenance of existing roads before any balance is applied to upgrading /

improvements of existing roads to all weather status and finally any new construction. The remaining

budget (up to 20%) may be applied at the discretion of the DDC to roads not covered under the DTMP

or for new construction of DRCN roads.

This maximum 20% facility is a feature built into DoLIDAR‟s approved DTMP procedural guidelines.

The facility is intended largely to cover non DRCN, village roads but can also cover other DRCN

works such as new construction if identified as a special priority by the DDC. The rational for any

special discretionary prioritisation should be presented in the DTMP and ARAMP. RAP3 does not

intend to give any assurance of funding works prioritised through this facility but may consider cases

promoted by the DDCs on a case-by-case basis.

The LRN Asset Management Component does not differentiate roads between „core‟ and „non-core‟

Districts. Rather a distinction has arisen based on the present network status of the District. Humla,

Kalikot, Bajura and Mugu have little or no existing networks, nothing to maintain and the DTMP

therefore focusses on new construction. The remaining 10 districts have more extensive networks that

need to be maintained. The large first year spend in the maintenance districts means that a great deal

of ‟backlog maintenance‟ can be addressed with the aim of bringing roads to a maintainable condition

so that the lower cost interventions of routine / recurrent maintenance by RMG can take place from

Year-2 onwards. RAP-supported maintenance works are expected to feature on all roads within the

14 District‟s DRCN total of 3,000 km. This shift to a network approach to access in the 10

maintenance districts means that the impact of the programme will be widespread with the potential to

affect all connected VDCs in the participating districts. The RAP2 concept of a Road Influence Area

(RIA) will continue to apply in the four new construction districts in terms of those people living along

the alignment of the new road corridors.


Page 13

3.1.2. Far Western Regional Connectivity

New construction will be

concentrated in Districts that

have little or no existing DRCN

such as Humla, Kalikot, Mugu

and Bajura. These works will be

based on the pro-poor, labour

based (LB) approach adopted by

RAP2, through Road Building

Groups. However, most of

RAP3‟s 1st year budget will be

spent on conservation and

maintenance. RAP3‟s budget up

to March 2014 is large enough to

cover much of the annual

requirement for all 14 District‟s

DRCNs at just over 3,000 km,

most of it going to „specific /

spot-improvements‟ and some

„periodic‟ interventions.

The current RAP3 budget of GBP31.5 does not support construction of a link from Mugu into Humla

which could avoid a very difficult SRN route up the Karnali valley from Kalikot. The Mugu-Humla route

would require a bridge which, again, the current budget prohibits.

3.1.3. Typical Unit Cost / Labour Intensities used in RAP3 Planning

The following table indicates typical unit costs and labour intensities which have been used as a basis

during the planning of LRN interventions. Where applicable, reference has been made to RAP2

experiences and other local norms. The figures are indicative averages only as they vary considerably

depending on the exact nature and severity of the intervention. LRN budget allocations have been

made to maximise short term employment days whilst remaining in line with DTMP priorities.

RTI Work Category Typical Unit Cost NPR/Km

Typical Labour Intensity* Remarks

% of cost Days / Km

Emergency Maintenance

30,000 20% 20 Usually equipment intensive

Routine / Recurrent Maintenance

35,000 85% 99 By RMG assuming 1 per 3 - 5km average

Specific Maintenance 250,000 45-55% 417 Typically „spot improvements‟ at critical locations. Varies greatly.

Periodic Maintenance 250,000 30% 250 e.g. re-gravelling

Improvements / Upgrading

6,500,000 7,000,000

40% – 70%

8,000 – 16,000 Depending on approach

Bridge Construction 1,500,000 per m

20% 800 per m Varies based on span and number of lanes etc.

New Road construction (RBGs)

9,500,000 –15,500,000

70% 20,000 – 25,000 For very remote mountainous Districts

Notes: * as a proportion of cost, and assuming NPR 375 / day average wage


Page 14

3.1.4. Maintenance/Conservation

Some 80% of the maintenance budget is likely to be spent on „specific‟ maintenance requirements

including „spot-improvements‟ such as localised gravelling / stone soling, retaining walls, missing pipe

culverts and stone causeways. The requirements identified for each existing road on the DRCN,

except those to be taken up by other projects or that require rehabilitation or upgrading to get them

into a maintainable condition, will lead to a set of detailed and costed interventions that can then be

packaged into works contracts. Where appropriate, RAP will advise DDC on options for undertaking

labour-based works with a view to maximising labour days generated. RMGs will be a continuously

mobilised resource attending to routine / recurrent maintenance and the majority of „specific‟ inputs

will be beyond their capacity. Depending on size and whether labour-based (LB) or labour based

equipment supported (LBES) approach is used, a decision will be taken whether these are to be done

by User Committees or Small-Works-Contractors.

For the maintenance / conservation sub-component RAP3 funds will be applied through the existing

Government system of District Development Funds in each District. This method was tested and

established under the RAP2 RTI Pilot and incorporates a set of additional procedural checks.5 This

system is already established in the 7 ex-RTI Pilot Districts and will need to be set-up in the 3 new

„maintenance districts‟ of Jumla, Doti and Achham.

To manage the large RAP3 maintenance budgets and additional Upgrading projects, District teams

will need to be supported by Local Road Asset Management Support Consultants in each of the 10

„maintenance districts‟. The consultant will support the DDC to carry out all the planning, management

and works supervision under the direction of the RAP3 district TA teams. They will provide the SEDO

support needed for RMG works in RAP3 non-core districts and help develop a system of quality

control by providing basic laboratory support. The RAP3 implementation team‟s role will be more

focussed on assisting the DTO to develop their procurement and management roles and promote the

outsourcing of survey, design and technical supervision to private consultants in line with NRSAS

recommendations. Terms of Reference for the Support Consultants in each of the 10 maintenance

districts include provision of flexibly sized works supervision teams and basic laboratories with field

capability provided though inclusion of a support vehicle.

Emergency maintenance is mainly concerned with post-monsoon road opening to enable people to

travel to their homes in time for the festival season and typically involves the clearing of landslides and

removal of other blockages such as fallen trees or re-fording river crossings. It is traditionally

performed by rapid deployment of hired machinery in small packages of work. It is unplanned and

often performed using a limited carry-over of DDC‟s unspent budget from the previous year to the end

of July. RAP3 budget may be used to support any shortfall in funds as the amount required is

relatively small, typically 5-10% of the total conservation needs.

For routine and recurrent maintenance, activities such as grass cutting, ditch culvert cleaning, pothole

filling, this will be carried out by local maintenance workers formed into a system of Road

Maintenance Groups (RMG) which has been successfully piloted in Ramechhap and Dhabusha

districts with the support of the International Labour Organisation (ILO). This team-based approach

uses „length-persons‟ formed and equipped to work as a group of typically 5-10 people living in the

locality of the road. The system includes elements of a partial performance-based approach to set and

5 Please see Financial Management Section


Page 15

monitor outputs related to targets. The cost of this intervention is typically not more than 10% of the

total conservation needs of the road.

In the ARAMP, routine / recurrent maintenance works have the highest priority after emergency works

and will be carried out by Road Maintenance Groups (RMG). DOLIDAR‟s Technical Committee is

currently considering a long-term full-scale trial across all RAP3 maintenance districts. Selection

criteria for membership of RMG include being between 18 and 50 years old, being physically and

mentally fit, living near the road concerned and being from the poorest people along the road.

Prioritisation criteria may include preferences for women, for disadvantaged groups such as Janajati

and Dalits, unemployed youth, and those with maintenance experience. RMG members do not need

to be very skilled, and experience in agriculture is generally sufficient. The participation of women

should be actively promoted. A full briefing note has been prepared setting out the intended modality.

The Support Consultants that will feature in each of the 10 maintenance districts will include a social

mobiliser on their team.

„Specific‟ maintenance can also be viewed substantially as „back-log‟ maintenance. This fits well with

the current spending profile where RAP3 is aiming to use the majority of its 4 year budget in the first

year. The existing roads in RAP3 districts are in poor condition and an intense intervention of backlog

maintenance will bring roads quickly to a good „maintainable standard‟. Thereafter RMGs can step in

with their routine / recurrent maintenance duties.

Whereas the routine / recurrent maintenance work of RMGs is continuous that of „specific‟ is localised

and short lived. For „Specific‟ we shall be use the current DDC procedures as previously supported

and strengthened under RTI Pilot whereby works are done through User Committee or small-works

contractor. Generally we shall target the use of UCs because they support use of locally available

labour and this will be the approach whenever small labour-based interventions are suitable. For the

larger localised constructions where use of equipment (e.g. roller) cannot be avoided, small

contractors will be engaged through competitive tendering. Typically these small interventions might

last only 1-2 months to construct. RMGs will be appointed year-round.

Although RMGs will be mainly involved in continuous routine / recurrent works they can also respond

to minor emergency works such as the clearance of minor landslides. Generally they will not be

involved in the „specific‟ category as the intense peak in work-load is unsuited to the approach. RAP3

envisages being able to have roads under continuous RMG maintenance with external specific

interventions being brought in to supplement their work on demand in parallel in the majority of cases.

3.1.5. Upgrading/Improvements

This category of road upgrading / improvements is only allowed by DTMPs once all the maintenance /

conservation of the existing DRCN are completed. Since the costs of this work are high it would be

expected that only 1 or 2 roads (or possibly sub-sections of more roads) would be affordable given

RAP3‟s budget. Only Morang and Jhapa have significant DRCN gravel roads (255km and 168km)

with Parbat and Sindhulpalchowk having moderate gravel networks (50km and 43km); the other RAP3

programme districts have little or no gravel roads. Out of the total DRCN network in RAP3‟s 14

districts (3,024 km) approximately 2,450 km (80%) are still earthen. The extent of required

„improvements / upgrading‟ from DTMPs is NRs 15,300 million (GBP 110M) and the DTMP approach

means that this would generally be implemented before constructing any more new roads.

The majority of upgrading / improvement works (gravelling / black-topping / new bridges) are

substantially mechanised works requiring contractors who possess significant construction plant,


Page 16

rather than being labour-based or labour-based-equipment-supported. However, the Swiss funded

District Road Support Programme (DRSP) is piloting greater use of labour based methods to promote

employment generation for upgrading and improvement works.

3.1.6. New road construction

A review of the DTMPs for the 14

RAP3 Districts has yielded a clear

distinction of two categories of

District with respect to network

planning. These are: i) Humla, Mugu,

Kalikot and Bajura with little or no

existing DRCN roads to maintain and

where road construction is the

priority; ii) The 10 maintenance

districts‟ with significant existing

DRCNs whose conservation and

upgrading priorities prevent most

new construction, except within the

maximum of 20% permitted for new construction.

The Implementation Strategy for new roads will follow that of RAP2 which adopts a phased approach

to road construction, using labour-intensive methods. This phased approach normally takes three

years and begins with track opening in the first year of construction, is followed by track widening,

road construction and structure followed by finalisation and bio engineering. Where topography

allows, in areas of moderate cross slope, the phases of construction are combined. Road Building

Groups (RBGs) and special Building Groups (SBG) carry out all new road construction activities

Management of all the activities at District Level is provided by the District Technical Assistance team,

with the support of Supervision Consultants and NGOs

Road Building Groups (RBGs) are selected from the poorest households and endorsed by community

gatherings organised at strategic locations of road alignments. Each RBG has up to 20 men and

women, who walk from their homes each day for work, with a maximum travel time for any RBG

member set at 2 hours. They work on average for 5-6 hours per day.

Special Building Groups (SBGs) are male only groups that camp close to the construction sites. They

are used in selected locations where there are not sufficient RBGs, or where there is significant

quantities if rock excavation or other more difficult work. They are selected from remaining households

within the area of influence, households from neighbouring Village Development Committees and

other Districts.

RAP3 works will be designed and supervised by locally procured firms of consultants. Although first

year „track opening‟ is expected to be performed by RBGs it is likely that special groups or even

contractors will have to be supplemented in subsequent years to assure adequate output in difficult,

largely rocky terrain.

New roads constructed by labour-based environmentally friendly approaches do not use mechanised

compaction plant with the result that the earthen road structure needs several years of consolidation

and trafficking before it can adequately support a gravel pavement. On roads built within the planned

time-frame of RAP3, pavement works are likely to focus on localised critical sections where short


Page 17

lengths of gravel or stone pavements will make a significant contribution to safety and access in areas

which are particularly soft, slippery or waterlogged.

District DCRN Ref Route

Approx. Length (Km)

Design Consultant Package

Mugu 65DR003 Gamgadhi – Dhaina - Dulachaur 21 1st

Humla 66DR017 Sallisalla – Darma VDC 15 2nd

66DR012 Galphagad – Kalika Road 12 3rd

Bajura 67DR003 Maure – Kailashmandu Road 8 4th

67DR011 Maure – Toli – Chhatra Road 15 4th

Kalikot 64DR007 Sanighat – Phukot – Syuna - Shipkhana 19 5th

TOTAL LENGTH (Km) 90

3.1.7. Additional scope for a road link between Humla and Mugu:

Humla remains the last of the nation‟s Districts without a road connection to its headquarters and is

presently connected only via China. DoR are presently pursuing a SRN connection along the Karnali

river corridor entering the district from its south western corner and then joining to the national network

via either Kalikot or Bajura to the south-west. However although this SRN link is under construction in

parts its progress has been very slow and the terrain is extremely challenging.

This planned SRN route from Kalikot to Humla District HQ at Simikot is long at around 185 Km and

based on their DTMP and feedback during RAP3 engagement workshop the people of Humla have

lost confidence in seeing this connection completed for many years. Instead they have pressed for a

connection via the construction of new District Roads in Humla and Mugu making this district road

Humla‟s top priority road.

The total link length to build would be around 60 Km, of which about 36 Km is within Humla District

and terminates at the junction with an incomplete section of SRN 55 Km from Simikot. The planned

new RAP3 road to Darma VDC (66DR017) forms the first part of the route and its completion would

leave 45Km further to reach Mugu District Headquarters at Gamgadi. There is also a substantial ~

60m span bridge to cross the river near Gamgadi and there may be issues regarding winter road

closure on the higher sections due to snowfall.

3.1.8. Bridges Programme

The current RAP3 budget rules out any bridges programme, although the provision of new bridges to

provide all-weather connectivity is included in the DTMPs for road improvement / upgrading projects

on the basis of linear metre average cost and approximate length. Under the existing budget option

selected by DFIDN some 67 kilometres of upgrading can be afforded under RAP3.6 Within the DTMP

6 As part of the inception phase, RAP3 has explored several initiatives aimed at starting a bridges programme early, including: i)

purchase and stockpiling of temporary, modular transportable bridges (typically Bailey Bridges) for future use in case of emergencies and wash-outs; ii) partnering with DoLIDAR‟s SDC supported Local Road Bridges Programme (LRBP) to take over new bridge


Page 18

new bridge construction falls within the category of „Improvements‟ so that their costs are taken into

the overall cost of upgrading roads to all-weather standard such as gravelling and construction of

missing bridges. In case DDC‟s seek RAP3 support for bridge works reference would be made to

DoLIDAR‟s Local Road Bridge Support Unit‟s system of bridge prioritisation. However, bridge

construction has a very low labour generation rate so RAP favours road improvements over new

bridge construction.

3.1.9. Procurement Procedures

Procurement will be managed either at the district level or centrally for both LRN activities and SED

activities such as:

Consultants for LRN Design/Supervision for new road construction in 4 districts; support

consultants for asset management in 10 districts, improvement design consultants in up to 10

districts,

Works Implementation for both LRN and EI construction, maintenance and improvements

Materials and Equipment such as tools and safety gear for RBGs / RMGs, small equipment to

support RBGs such as rock drills/mini-dumpers, gabion wires and baskets for LRN and trail bridge

materials for SED.

RAP3 will set up safeguards to minimise the occurrence and impact of poorly performing

suppliers. The project has already undertaken expressions of interest by consultants to enter onto

a RAP3 standing list of firms. This list will be revisited based on Consultant‟s performance. With

multi-year consultancy appointments, services will be reviewed annually and depend on

evaluated performance of the year before. In the case of works contractors, RAP will be advising

and supporting DDC evaluation committees to strengthen their pre-award checks and

safeguards. We will actively support awareness raising and the firm application of contract

clauses by timely well considered interventions.

3.1.10. District Level Procurement

The procurement process will fully follow existing GoN Procurement Acts and Regulations or Local

Body Financial Administration Regulations (LBFAR), and our District staff will be present on Tender

Evaluation Committees and assist with all steps of the procurement process. Additional assistance in

supporting workload will be drafted in from the district Support Consultant when these are appointed

from the end of 2013.

It is expected that funding through the DDF will apply to all small contracted works arranged at local

level including:

RMG payments through Road Maintenance User Committee (RMUCs) (payment modality for this

has yet to be confirmed),

UCs contracted to perform labour-based specific maintenance activities

Small-works Contractors engaged for specific & periodic, LBES maintenance activities,

construction where designs are completed and ready to go, iii) pre-purchase of modular steel permanent bridge deck parts in span range up to 35 linear metres for use on sites identified by RAP3 under new construction / improvement road projects.


Page 19

Small-scale equipment and materials purchases to support UC works/ contracted maintenance

works,

District-level procurement contracts will be entered into by the DDC and signed by the LDO / DTO as

appropriate. In all cases above a stated threshold value, full particulars of the procurement process

and proposed contract will have to be sent to RAP centre for scrutiny and issue of a „No Objection

Certificate‟ before the contract may be signed.7

3.1.11. Central Level Procurement

Central level procurement will be used for all cases which are not thought suitable for funding through

the DDF at District level. This will vary between Districts due to factors such as their prior experience

of working with RAP, their capacity and demonstrated level of proficiency and levels of fiduciary risk.

Central level procurement will generally focus on larger contracts where the GoN Acts and

Regulations impose more stringent and time consuming rules. RAP will follow these procedures but

look for areas where time savings and greater efficiency can be found, such as reducing the time for

review stages or value-for-money issues such as for consulting services required in 10 Districts or

bulk purchase of gabion baskets for all 4 new-construction Districts.

Typical activities requiring central procurement will include:

Hiring of Consultant Services,

Hiring of contractors for medium sized works such as Improvement Projects,

Procurement for bulk supplies such as RBG tools and equipment, gabion wires / baskets for new

construction, and trail bridges materials.

Procurement of mechanical equipment such as rock drills, mini-dumpers to support RBG new-

construction works.

The RAP3 Central Team will form its own bid evaluation committees who will use existing GoN

procedures supported by alternative EU / DFID published procedures. For central-level procurement,

evaluation committees will be formed by drawing members from the LRN component team and will

usually be led by the Engineering Team Leader and generally comprise a 3-person team. Contracts

will be entered into by the „RAP Programme‟ and signed by the Programme Manager. Flow charts

showing the anticipated procurement processes are included in Appendix 1

3.1.12. Embedding Resilience in LRN Asset Management

All resilience and climate change adaption considerations will be incorporated in the RAP3 manual

through the technical procedures. For LRN component these include:

Resilience in road building, upgrading and maintenance - The main hazards are earthquake and

rainstorm induced landslip and flooding. The nature of labour intensive, mainly earth roads, in a

highly unstable mountain environment is that 100% protection from earthquake or landslide would be

prohibitively expensive and probably quite environmentally damaging. RAP3 will design for an

appropriate level of resilience backed up by appropriate measures to protect road users and repair

damage in a timely fashion. The following steps will be taken:

7 See page 43 for further details about district procurement and financial management of RAP funds


Page 20

Design new roads to avoid unstable areas as far as possible;

Design the road and associated infrastructure (e.g. bridges) with an appropriate level of multi

hazard resilience (including making allowance for climate change). Design documents will explain

why certain design decisions in relation to DRR were taken and by whom.

Develop simple sustainable community based systems for closing dangerous sections of the road

when danger of landslip is particularly high (based on observing the condition of the upper slope

or on rainfall patterns).

Develop rapid cost-effective systems for keeping maintenance levels high and rapidly repairing

damage after it has occurred.

Most of these steps have already been developed in previous RAP phases and are already covered in

the RAP3 manual.

Reducing accidents in labour intensive road-building - Previous phases of RAP have developed

good procedures for reducing accidents (e.g. with the provision of training and safety equipment) and

managing them when they occur (e.g. with first aid provision and insurance). RAP3 will build on the

lessons from RAP3 and strengthen accident prevention and response procedures to improve incident

reporting and investigation documentation for all accidents, not only serious ones. Accident

prevention mechanisms will be included in the internal audit programme. All accidents or near misses

will be managed in a manner similar to non-conformances and will require root cause analysis,

corrective measures and measures to prevent recurrence. The procedures will include provision for

analysis and learning about the risk factors and for continual improvement. RAP3 will investigate the

feasibility of developing a Continual Improvement Matrix (CIM) of safety standards against which we

can monitor and compare safety standards in different locations and for different components and

work elements.

Reducing Road traffic Accident Risk - Although traffic accidents are often neglected in conventional

Resilience initiatives, they are of significant concern in RAP3. There are 2,500 recorded road traffic

deaths in Nepal per year . Analysis suggests that a significant number are due to dangerous roads,

poor vehicle maintenance and driver error – often all working in tandem. RAP3 will support the

development of national Road Safety Audit guidelines for the LRN sector through component 5 Policy

and Harmonisation. LRN works designs will also include provisions to reduce accident risk, where

possible, through:

Design for safety – with reduced gradients, sightlines and avoiding ribbon development;

Maintain for safety – cut sightlines, good surface on steep sections etc.

Manage for safety – community early warning system to close or warn drivers when conditions are

dangerous, signage on dangerous sections;

Educate for safety – lessons in schools before a new road is opened?

Incorporating Climate Change in intervention design - The projected effect of climate change on

western RAP3 districts is summarised in a separate technical note. The design implications for LRN

include:

Design for probably higher temperatures – affects choice of species for bio-engineering, may

affect some structures.

Design for possible increased intensity and frequency of high intensity precipitation – increased

attention to storm water management in drainage design and in road and drain maintenance,


Page 21

particular attention to outfall design and potential downstream impacts. Awareness that landslips

may become more common as well as peak river flow rates and exceptional flood levels (including

the risk of bishyaris – landslip induced floods).

Design where necessary with awareness of specific glacial lake outburst flood risk.

Rainfall variability combined with increased temperatures means greater drought risk – need to

consider this in relation to landslip risk and bio-engineering due to reduced vegetation cover

(including due to forest fires) or bio-engineering species selection.


Page 22

3.2. INCOME GENERATION

3.2.1. Accelerated and equitable development in new road corridors

Improved road access in itself ultimately leads to improvement of livelihoods and increased incomes,

but developments will take time and will not reach everyone equally. Wealth creation opportunities

provided by better road access may not be taken up at all or only by a few people or after a long

delay. The awareness, skills, linkages and services required for commercial production, processing

and marketing take a long time to develop by themselves. Many poor and disadvantaged groups do

not have the means, awareness, and levels of organisation and access required to use opportunities.

In addition, by not addressing lack of awareness, linkages and bottlenecks throughout the whole

market system or by poor planning, opportunities can be lost or abandoned.

At present livelihoods of poor people in the area are only sustainable because of remittances and, in

the Karnali, cash- and food for work. Projects focused on temporary income and employment however

only have temporary economic impacts and even have had discouraging effects on economic

development. In line with this, one of the findings of RAP2 has been that income generation in the

west has not been as successful as in the eastern districts. Rather, the extra income from off farm

employment in road construction has produced a three year improvement in incomes but this has not

been sustained after construction. The main economic alternative for the area lies therefore in

commercial agriculture, livestock, forestry and related agribusiness for export to Nepal‟s urban areas

and India. Once road access is realised, many people can start participating in economic development

if projects help them identify and address bottlenecks in the concerned commodity value chains.

3.2.2. Sustainable Socio Economic Development Framework

This component aims to assist the project area population, and especially its poorest inhabitants, to

capitalise on new opportunities created by improved road access, and thereby to accelerate and

increase economic development and to ensure a more equitable distribution of sustainable

development benefits using the framework outlined below.

The inception period fell in the monsoon and prevented proper market systems and consultations for

planning so the direction and volume of activities proposed for Year 1 (and onwards) might still

change after intensive field work and consultation will complete the project‟s insights.

3.2.3. Enabling Environment, Assessments and Planning

The key to the results‟ sustainability and scale-up is the coordination and cooperation among market

system stakeholders at all levels. The programme will use an adjusted form of the participatory market

chain approach (PMCA) that was developed by DFID-projects to facilitate coordination of value-chain

actors for sectors with smallholder producers. PMCA has been successfully piloted in Nepal by

International Development Enterprise (IDE) and Practical Action (PA.). Corridor platforms established

on PMCA approach principles will identify market chain bottlenecks (irrigation, skills, rural collection

centres, inputs, mutual trust, government policies, implementation of policies) and be managed by

thematic groups (for the moment area-wise, later maybe product-wise) of representatives from

producers, input suppliers, traders, government agencies and processors to coordinate value-chain

action. The figure below gives an overview of various stakeholders that should be involved in planning

for different levels. The said platforms will also play a key role in the participatory market system

assessments that will be the base for planning.


Page 23

How exactly corridor coordination and platforms will work out in each case will have to be elaborated

during implementation. The project incorporates the SED Partners‟ different approaches to market

systems development (Helvetas being more focused on producers and VDCs; Practical Action being

more market systems-oriented), continuously reviewing results and recording lessons. Both

approaches are valid and will provide the necessary lessons for development of the processes from

Year 2 onwards.

Also, ambitions will be higher in the mid-hills districts than in the Karnali where the development of

commerce, entrepreneurship and private sector linkages is at a rudimentary stage. The first year will

focus on assessment, adjustment of modalities to local situations and capacity building, while

interventions in processing, marketing, services development and linkages to entrepreneurs outside

the area will mostly take off only from Year 2 onwards. If needed, the project might support linkages

and coordination platforms for specific commodities at regional level, or invest in the ones that are

already created by e.g. High Value Agriculture Project (HVAP) for the Mid-West. Corridor Plans will

VDC

DADO/DLSO/DFO

Regional Trader/

ExportersLocal Traders

Producer Groups

(incl. RBGs)

RAP3

Dt Chamber of

Commerce & Ind.

DDC/DTO

Large Producers

Cooperatives

Local Processors

Other SED Projects

and NGOs

Micro-Finance Institutions, Banks

Transporters

Agrovets, Traders

Associations

(producers,

cooperatives)

CommunityCorridor-level marketDistrictRegion

Masons, repairmenEquipment Installers/Dealers

Factories

Collection Centre Committee

Home-level

Processors

Project Field Offices

VDC Council & VDC

Secretary

RAP3 Field Office

Saving and Credit

Groups

Regional Market

Committee

Maintenance

Workers, User

Committees

Local Resource Persons (nurseries,

technicians, community vets)

Agri/Livestock

Service CentresRDA, RDLS, RDF

Market Committee

Legend: Priority Target Groups Government, External SupportPrivate Sector, Other Market Actors

Opinion Leaders,

Representatives

Opinion Leaders,

Representatives

Opinion Leaders,

Representatives

Opinion Leaders,

Representatives

Consumers Consumers Consumers Consumers Consumers

Labour, Employees Labour, Employees Labour, Employees Labour, Employees

Others

Research Centres


Page 24

more narrowly coordinated with both the concerned corridors‟ Village Development Councils (VDCs)

and the district offices for agricultural development, livestock services and forestry (District Agricultural

Development Office (DADO), District Livestock Office (DLO) and (District Forestry Office DFO).

Whether and how market system coordination will be sustainable after the project will depend on the

strength of both the local private sector and the government.

3.2.4. Market Systems Assessment

For Year 1 a full market systems assessment, let alone a participatory one, was impossible as the

inception period fell during the monsoon. Therefore most activities are based on existing projects‟,

VDC and DDC assessments and priorities and secondary information. The results will be verified in

the first corridor market system actor and VDC meetings, and be expanded by those same meetings.

Quantities of activities provided for in the budget might change as result of consultation. More detailed

participatory market systems assessments as basis for Year 2-4 plans will be initiated once the Year 1

programme implementation is on its way. These corridor plans will be the basis for the overall district

and project level plans.

RAP3 will assess and address issues and opportunities throughout the whole market system. It will

support interventions that support production, processing, marketing, market system services such as

inputs, repairs, finance, and employment in market system services. This support will be provided

District

Economic

Programme

Basket

New RAP-generated

Opportunities

Existing Opportunities

Improved road

access for all

Income from road

labour for poor

Market systems

analysis for opportunity

products/ subsectors

Enabling environment

Physical &

Infrastructure

environment

Livelihoods &

Economic

environment

Social environment

Infrastructure support

Trails, trail bridges, ropeways, tuins


Skills for employment in services


Corridor

Market

system

coordination

platforms

Extra support for poor

Support to

producers

Support to

Processors,

traders and

transporters

Support to

Services

Support to market systems services

Support production and collection

VDC and DDC

Plans

RAP SED

Corridor

Plans

Plans of

others

(HVAP,

KISAN,

AFSP,

HIMALI,

LINK, etc.)

DDC/VDC

Meetings on

economic

development

Assessments &

Plans by Others

Support processing and marketing


Page 25

mostly to groups, communities and to cooperatives and entrepreneurs at road/Socio Economic

Development (SED) corridor level (and a number of VDCs), but also in major bazaars, district

headquarters and where essential in major towns of the Terai such as contracts between Terai

entrepreneurs and farmers in the mountains.

By ensuring that priorities and plan are set jointly by all market system actors, including farmers,

extension services, traders, processors, lowland factories, research institutes, local government,

specialist NGOs, cooperatives, banks. RAP3 will bring all markets system actors together in corridor

level platforms that jointly select priorities and interventions that can range from providing inputs to a

few poor households to engaging with national level entrepreneurs and advocacy for adjustment of

inappropriate government acts and regulations.

By improving the density and quality of market system services, the project can remove services

bottlenecks and enable local actors to establish the linkages that are essential for participating

effectively and sustainably in commercial production, processing and marketing. These services

include repairmen, masons, contractors, transporters, traders, agrovets, apple tree grafters, input

suppliers, nurseries, manufacturers, cooperatives and micro-finance institutions. Where feasible the

service providers will be engaged to implement interventions with the farmers, including construction

and installation, cultivation training, demonstrations and promotion fairs so building relations along the

way.

3.2.5. Support to Production and Collection

The project will support production and collection by community groups, notably RBGs, existing

farmer groups and cooperatives as well as Community Forest User Groups (CFUG) for sustainable

harvesting of non-timber forestry products (NTFP). Wherever possible, training and coaching will be

done by local resource persons, lead farmers, agrovets, entrepreneurs and other service providers,

supported and trained by the project. Support levels will vary with levels of potential, poverty and risks

(newly introduced technologies and crop varieties), and can vary from complete vegetable growers

kits (including micro-irrigation sets) to only one training or a linkage event. Demonstrations will include

permaculture demo gardens in selected locations.

3.2.6. Support to Processing and Marketing

Project area producers lack the technologies, organisation and skills for grading, processing, storage

and processing, necessary to trade and compete in local and regional markets. Processing at

entrepreneurial level is all but absent in the hills due to the high cost of processing, lack of facilities

and locally available skills. Key interventions include the creation of links between producers and

traders and processors, the capacity building and post-harvest skill development of local producers

and processors by regional entrepreneurs.

Producer groups will be supported for value addition (drying, grading, storage, processing) and joint

marketing. Support will be also given to cooperatives and entrepreneurs for establishing or improving

processing plants and product marketing. Often economic infrastructure will be involved like slaughter

house, ginger solar dryer, medicinal herbs distillery, lokta paper plant, collection centres, markets. In

all cases (support to) business plans, management arrangements, training and equity guarantees will

precede support in kind. Business plans will be more elaborate and with higher levels of equity for the

entrepreneurs.


Page 26

3.2.7. Support to Services Development

Production, processing and marketing are hampered by inadequate access to technical advice, inputs

(seed, seedlings, tools, cement, fertilizers, sprinklers), equipment, water, finance and repair services.

The only services available are often limited to the district headquarters. Key interventions include

service network density and service market assessments and capacity building for services, skill

development for potential employees (land labourers, fruit tree grafters, masons, mechanics, drivers)

and linkage events that will bring service providers and customers together at village or bazaar level.

Most of the service providers will be farmers trained and experienced as local resource persons, lead

farmers, local traders, representatives of bazaar-based traders and agrovets and people with

vocational training.

3.2.8. Integrated pro-poor approach focused on few road corridors

Whereas government and most economic

development programmes in the area such

as HIMALI./ADB, HVAP/IFAD, and

KISAN/USAID have chosen value chain

development approaches, RAP3‟s strength

lies in combining income generation with:

1. Increased market access through roads,

trails and bridges (and internet), 2. Greater

economic capacity for the poor using

temporary incomes from working in RBGs.

3. Participation in income generation (IG)

activities related to construction of

economic infrastructure, 4.Increased

access to energy solutions for IG and cost

saving. There are also substantial

geographical areas that are not covered by

any similar programme. (See map which

also indicates the proposed RAP3 SED

VDCs)

RBGs will start as road construction groups, but will build their organisational and financial strength

through capacity building interventions, saving and credit, road labour income earning, awareness

raising on economic opportunities and establishing of linkages with services and support

organisations. RAP2 showed that not all RBGs will have the interest, capacity and resources to

engage as group in income generation, but over the years about 50% are expected to actively and

successfully participate in IG, too, investing the income earned in road construction.

Target Corridors and Commodities

The component will target the six new road corridors to be constructed in Bajura, Humla, Mugu and

Kalikot and eight existing road corridors of which seven are RAP2 corridors in Dailekh, Doti and

Achham. Based on preliminary market assessments, the project has decided to support the

production or collection, the processing and the marketing of the following products: fresh vegetables,

goats, vegetable and legume seed, non-timber forest products (e.g. attis, timur, ritha, seabuckthorn,


Page 27

lokta, satuwa), spices (turmeric, ginger) and fruit. Vocational training, enterprise development and

economic infrastructure interventions will be geared to support these activities but the extent to which

this can take place is limited by the existing budget.

3.2.9. Implementation

The programme will be implemented by RAP3 SED partners Helvetas, Practical Action and Winrock,

through district-based staff recruited directly and through local Non-Government Organisations (NGO)

partners, through local government (trail bridges) and private sector entrepreneurs (especially

renewable energy technologies). Helvetas will implement IG in Dailekh, Kalikot, Jumla and Mugu.

Practical Action will implement IG in Doti, Achham, Bajura and Humla. Winrock will work in all eight

core districts on energy interventions. Alliance will provide supporting vocational training to promote

longer term opportunities.

Delivery Partner Geographical Area Technical Area

Helvetas Dailekh, Kalikot, Jumla and Mugu Income generation

Support to RBGs

Economic infrastructure

Helvetas & DDC All 8 districts Trail bridges

Practical Action Doti, Achham, Bajura, Humla Income generation,

Support to RBGs


Practical Action All 8 districts Gravity ropeways and Tuins

Winrock All 8 districts Renewable energy

ICT for livelihoods improvement

Alliance All 8 districts Vocational training

3.2.10. RAP3 vs RAP2 Approach

The main differences with RAP2 include:

A focus on limited numbers of road corridors, both new construction and maintenance, rather

than thinly scattered throughout the district.

A value chain development approach in which IG and Economic Infrastructure (EI) actions do

not address producers‟ issues in isolation, but in combination with interventions that address

bottlenecks along the whole value chain and throughout the road corridor.

EI interventions are not isolated but will address IG beneficiaries‟ issues. This does increase

the impact as well as sustainability of the infrastructure. Because infrastructure has actually

been made part of IG and is subject to IG needs, it‟s budget share and direct employment

impact may decrease compared to numbers provided in RAP‟s Business Case

A focus on whole market systems and priority bottlenecks results in more processing,

marketing and services development interventions, and few promising new technologies like

renewable energy technologies, ropeways, micro-irrigation, solar lift pumps, mechanisation.

Implementation through specialist partners and staff rather than through under-resourced non-

specialist DDCs/DTOs and a number of social mobilisers.

Limitation to subsectors with economic potential rather than a large number of subsectors.

Coordination through government and cooperation with other economic development

programmes.


Page 28

3.2.11. Target Groups.

The component directly targets about 11,000 (23%) households in 14 road corridors, while another

26,000 corridor households will be targeted indirectly through project-supported cooperatives, market

actors, services and entrepreneurs. Road Building Groups (RBGs) and former RAP2 RBGs made up

of poor households will be the priority target group. However, the required levels of trade volume,

leadership, risk taking abilities and access levels for this type of development are often beyond the

poorest households, and only active involvement of the non-poor will provide adequate trade volumes,

market stability and negotiation power. Also, the experience from RAP2 shows that not all RBGs will

be able or willing to participate in economic development.

Members of Road Maintenance Groups (RMGs, 3-5 persons maintaining about 4-8km of road) along

maintenance corridors will only be targeted if they are living in SED corridors, and their inclusion in IG

groups will be promoted and supported. Whether SED-corridor RMGs need a separate support

approach will be assessed during Year 1, once the composition, strengths and weaknesses of RMGs

are better known. It is not physically possible with the limited resources to support all RMGs

throughout the district, so the number of RMG members among the direct beneficiaries will be limited.

There will be about 25 RMGs (total 100 members) along the RAP2 roads which form the SED

corridors in Doti, Achham and Dailekh).

3.2.12. Gender Equity and Social Inclusion.

The project will give priority to women and Disadvantaged Groups (DAGs)8, i.e. those who are both

poor and socially excluded. Women, Dalits and IP can be easily identified. At the corridor or VDC

meetings the three remotest most neglected wards (each VDC has 9 wards) will be identified as

remote areas. DAGs will be identified by the community itself through food security ranking (months of

food the household can produce locally or procure from locally earned income).

Like RAP2, women will constitute about 50% of IG participants. DAGs will be at least proportionately

represented among participants. The table below shows in which sector, DAGs will be accorded

priority.

Women and DAGs will participate on equal basis and under the same conditions as others, but will

require extra support to overcome the obstacles they face in participating or benefiting from improved

access. The obstacles to participation will be identified jointly with DAGs, before concrete support

plans are proposed. For these support plans a separate DAG fund (£5,000-10,000 per partner) will be

available to which DAGs can apply or which the implementers can propose to use for DAG support.

This extra support might constitute the extra purchase of services and coaching by project-trained

Local Resource Persons (LRP), extra support for renting of land or water, approach and technology

adjustments or a more step-wise engagement. Poor farmers that have never cultivated vegetables but

who have potential for commercial production could first start to participate in a kitchen gardening

programme before engaging in semi-commercial production. Others that do not have adequate

access to land, water or money will be assisted to make rent agreements for use of land or water

8 RAP3 will adopt an adjusted definition of DAG i.e. households that belong to socially excluded groups (Dalits,

Indigenous People and people in neglected remote corners of each VDC) and that also belong to the poor (less than 6 month’s food security). DAGs are therefore the poor Dalits plus the poor Indigenous People plus the poor non-Dalit / non IP from the three remotest wards of each VDC. DAGs constitute an estimated 28% of the target area population.


Page 29

sources with neighbours, to obtain collateral-free loans (guarantees by group members), or to install

rainwater harvesting installations.

3.2.13. Beneficiaries, DAGs and Income Benefits per Sub-Component

Component

4-Yr Direct

Beneficiari

es

Unique

direct

beneficiary

hh

Indirect

Beneficia

ry hh

Income or

Saving

effect

DAG

benefic

iary (%)

DAG

beneficia

ry hh

Remarks

hh Hh Hh £ /hh/yr Hh Hh

1. Trails, Trail

Bridges, Ropeways

and Tuins

31,000 24,000

10 28% 8,680 unique hh: only non-corridor hh

2.1 Infrastructure

(Irrigation, Marketing,

Processing

800

28% 224 only IG target group is served

2.2 Renewable

Energy

7,000 3,500

30 40% 2,800 Unique hh: 50% target group overlap with IG

3.1 Support to

Producers and

CFUGs

10,000 15,000

50 40% 4,000

Assumption: within yr 4 1 neighbour per 2

target hh is also engaged in commercial

production and marketing. These are included

as they will participate in Yr 3-4 marketing and

services activities

3.2 Processing,

Marketing & Services 14,000

21,000 10 15% 3,100

Assumption: Of 48,000 corridor hh, 75% or

36,000hh benefit from improved marketing and

services. Of these 15,000hh are direct(see 3.1)

and therefore 21,000hh are indirect. Less

DAGs will be among the indirect beneficiaries

3.3 Extra Support to

DAG

2,700

100% 2,700 Extra Support to DAGs will allow them to be

among the 16,000 direct beneficiary hh

3.4 RBG Capacity

Building 5,400

60% 3,240 RBG labour income falls under LRN

component. The extra support will allow them

to be among the 16,000 IG beneficiary hh

EI & IG Programme

Total

70,900 42,500 21,000 36

24,744

3.2.14. Beneficiary Estimate by District

The proportion of beneficiaries among districts will depend on population density, including density of

poor households (hh), and economic potential of existing road access and market access. Both these

criteria, linked to RAP3‟s aim to lift people out of poverty, heavily favour the lower districts. Doti has

more poor than Jumla, Mugu and Humla combined. The table below provides total population by

district and corridor.

District HH Population Poverty

Rate

People

Below

Poverty

Line

Old

RAP2

RBGs

New RAP3 Road

Construction

Corridor (RBG)

SED Road Corridor SED Corridor

Poor

Dalit

2011

Census

2011

Census

2011

Census

2011

Census VDC VDC people hh VDC people Hh people Hh

%

Dailekh 48,919 261,770 36% 93,714 6 0 0 0 16 67,682 11,952 24,230 4,279 12%

Jumla 19,303 108,921 49% 53,371 0 0 0 0 3 12,987 2,098 6,364 1,028 2%

Kalikot 23,013 136,948 58% 79,430 0 3 15,909 2,604 5 24,654 4,049 14,299 2,348 NA

Mugu 9,619 55,286 47% 25,984 0 3 8,146 1,498 6 15,518 2,910 7,293 1,324 14%


Page 30

District HH Population Poverty

Rate

People

Below

Poverty

Line

Old

RAP2

RBGs

New RAP3 Road

Construction

Corridor (RBG)

SED Road Corridor SED Corridor

Poor

Dalit

Humla 9,479 50,858 56% 28,480 0 6 12,410 2,046 6 12,410 2,046 6,950 1,146 12%

Bajura 24,908 134,912 64% 86,344 0 3 18,363 3,350 3 18,363 3,350 11,752 2,144 19%

Achham 48,351 257,477 47% 121,014 4 0 0 0 11 37,584 6,721 17,664 3,159 26%

Doti 41,440 211,746 49% 103,756 5 0 0 0 13 72,340 15,046 35,447 7,373 24%

8 Districts 225,032 1,217,918

592,093 15 15 54,828 9,498 63 261,538 48,172 124,000 22,911 22%

Note: Some table data imported from CBS 2011 census report (pdf format). Numbers do not always tally.

The corridor coordination meetings will prioritise interventions, communities and entrepreneurs, and

technical and economic assessment by project staff will select on basis of potential, interest, need

(poverty, disadvantage), duplication or synergy with other programmes. Corridor inhabitants will

benefit in many different ways. Economic analysis of three past NLSSs (Nepal Livelihoods Standard

Surveys) shows that households with new road access (48,000hh in SED corridors) increase their

incomes from agriculture and livestock by about £50 per year. SED interventions might double those

benefits for about 15,000hh and benefit another 20,000hh in the corridor by £30-40p.a. through

improved access to markets and services. The table below provides a summary overview and

estimate of benefits from both Income Generation and Economic Infrastructure.

Who How Many HH

Type of Benefit Annual saving or income increase (£)

Corridor hh Total 48,000 Road access (no IG, EI) 50

IG Target hh (4,000 DAG) 10,000 Production, linkages, markets 50

IG Target hh Neighbours 5,000 Copy the target hh 50

Corridor hh 20,000 Better markets, services 10

Corridor hh 7,000 Energy cost savings 30

Corridor hh 12,000 Trail bridge, ropeways, trails, tuins 10

Non-corridor hh 18,000 Trail bridge 10

Service providers 2,000 New customers, income, employment X

3.2.15. Embedding resilience in Income Generation support

Many RAP interventions already support adaptation and resilience – irrigation, crop diversity, access to

markets, roads, increased incomes, savings and organisation into economic groups probably all increase

adaptive and resilience capacity.


Page 31

Support to community and individual resilience - Several core RAP3 interventions have direct

contributions to community resilience, these include:

Improved access – enabling emergency evacuation and arrival of emergency assistance; can

diversify and strengthen the economy which in turn makes individuals more resilient

Social and economic development – diversifying income sources, increasing savings and enabling

investment in DRR assets all increase resilience

Increasing social capity – strengthening community institutionsl and social inclusion increases the

capacity to plan for and respond to disasters

Increased human capital – RBG / RMG training, including first aid and the experience of operating

in work gangs also supports more general emergency response

By ensuring RAP3 core tasks are done to the appropriate standards RAP3 will support improved resilience

of beneficiary communities. In addition, there is scope to contribute further to community and individual

resilience through

Include DRR and LAPA provisions in market systems analysis and market systems development

Provide location specific DRR information to the public

Investigate and pilot early warning systems relating to agribusiness

The feasibility of supporting these wider interventions will be reviewed during year 1 implementation and

incorporated in the year 2 implementation plan if appropriate. Any support will be designed to reflect the

local vulnerability profile, local capacities and priorities.

RAP3 is also interested in supporting the development of a community level Continual Improvement

Matrix based on the 9 characteristics of a resilient community as defined by Flagship 4. RAP3

communities could be included as a case study / pilot to develop such a matrix.

Incorporating Climate Change in intervention design -

Design for probably higher temperatures – there is likely to be migration upwards of agro-

ecological zones including of pests and diseases, which needs to be considered in choice of

cropping patter, particularly of perennial species like fruit trees.

Design for possible increased intensity and frequency of high intensity precipitation – Crop

cultivation on sloping land will be more at risk from erosion and means grazing lands may also be

at greater risk if poorly managed.

Design where necessary with awareness of specific glacial lake outburst flood risk.

Rainfall variability combined with increased temperatures means greater drought risk – may affect

appropriate cropping patterns and agricultural technology designs, local eco-systems may

become more fragile than communities are used to including reduced vegetation providing less

protection to erosion and landslip and dry vegetation being more at risk of forest fire.


Page 32

Supporting community and individual planning and adaptation

Supporting existing DRR and adaptation planning processes – RAP3 will encourage and support

its directly benefiting communities to implement the national CBDRM and LAPA guidelines as part

of their annual planning and budgeting cycle. All RAP3 interventions will also be compatible with

the CBDRM and LAPA and where possible RAP3 will contribute to CBDRM and LAPA priorities.

Supporting autonomous community adaptation – whether or not a CBDRM or LAPA is in place or

being developed in any specific RAP3 community, most adaptation is likely to take place through

actions by the community and through individual households in response to changes as they

arise, rather than some pre-determined plan. Poor households struggling to deal with the

problems of today can be forgiven for not putting time and resources aside to prepare for hazards

or changes that may or may not happen at some unspecified time in the future. RAP3 will adopt

implementation and support approaches that can enhance local adaptive capacity including:

o SED field teams should be aware of current multi-hazard risks and environmental issues

and fragilities, and how these may be exacerbated by on-going climate change

o Start with current concerns – drought, springs drying, erosion, forest loss, floods etc as

these may be more real issues to people than „climate change‟.

o Encourage local problem solving approaches that empower individuals and communities

to analyse and solve problems, to increase future adaptive and response capacity

o Contribute to community strengthening, respecting and working through existing

community institutions to leave the community stronger and better able to adapt and

respond in future


Page 33

3.3. ECONOMIC INFRASTRUCTURE

The economic infrastructure aims to improve incomes through savings on energy, travel and

infrastructure maintenance costs and through removal of infrastructural bottlenecks to participation in

income generation activities. It is not yet possible to estimate how many more people will be able to

participate in IG interventions due to infrastructure support, but the component will allow the

programme to include resource-poor groups and enable services such as processing that are not

possible without steady energy supply. Further, participants will save money and time worth £10-50

p.a. on transport and fuel. Although new incomes from wage labour are generated by this component,

the involved benefits will be limited (about 300,000 labour days over 4 years).

The component is implemented by Helvetas (IG-related works), DOLIDAR and Helvetas (Trail

Bridges), Practical Action (IG-related works, Ropeways, Tuins) and Winrock (Renewable Energy).

3.3.1. EI driven by IG Components

Previous multiple programmes that have focused on labour and earthwork schemes in the project

area have had poor results in terms of sustainable infrastructure and economic development. Many

programmes do not include structural works. Many more consider economic effects as by-products.

Within the Karnali zone one can find incomplete roads, trails and canals, where the difficult sections

(hard rock, aqueducts, land slide control) have been left out. As a result, apart from income during

construction, economic benefits are minimal and local people do not invest in the maintenance of what

little infrastructure is useable.

These problems are exacerbated by a lack of technical support and supervision, while geographical

remoteness prevents people importing materials and tools, apart from large quantities paid for and

transported by donor projects. Many canals and trails have been rebuilt by successive programmes

with little investment or maintenance on the part of their users. Poor people that benefited from

temporary labour opportunities go back to migratory labour as soon as the programmes finish.

As a result of the above RAP3 intends to embed EI firmly in the IG component to avoid the pitfalls of

labour-intensive earthwork infrastructure when it is not linked to longer term change and to optimize

the economic impact of RAP3‟s economic infrastructure. Irrigation, collection centres, trails and

ropeways will only be considered if they help address bottlenecks in market systems, as identified and

prioritised by corridor market system actor platforms. Not only will EI interventions be identified

through the corridor platforms, but the project will also work with other economic development

programmes that do not provide infrastructure support such as (LINK,Helvetas), KISAN(USAID),

AFSP(GAFSP), HVAP(IFAD).

3.3.2. Trail Bridges

These reduce travel and transport costs and open access to new markets and opportunities. The

subcomponent will be implemented by DDC/DOLIDAR with support of the SDC-funded Helvetas-

managed Trail Bridge Support Unit (TBSU). RAP3 will fund material and construction costs for at least

96 trail bridges.9

9 The trail bridge programme has been prepared on the understanding that approximately UK£395,000 will be

transferred from RAP2 to the TBSU for the trail bridge programme in RAP3 Core Districts.


Page 34

The Trail Bridge component follows the Trail Bridge SWAp, which has also been supported before by

DFID. The locations for Year 1 follow therefore the plans and priorities of the whole district. The

example of thirteen carry-over trail bridges in Humla and Mugu shown over page indicates that the

trail bridges will be scattered over the whole

district, with four out of thirteen directly benefiting

RAP3 SED Corridor VDCs where the new roads

are constructed. During Year 1 it will be reviewed

whether adjustments can be made to use this

programme to address market systems

bottlenecks identified for each road corridor (see

IG component description).

Each trail bridge will benefit on average 500

people (nearly 100 households), and the number

of beneficiaries will be about 10,000 households

or more. About 70% of these are unique

beneficiaries living outside the RAP3 SED

Corridors. For each bridge the local people

identify a priority destination to which they want to

cut the distance. This can be a health post, a

market, a school, a forest or a grazing pasture. Estimates are that on average the beneficiaries will

save at least 2 hours of walking time travel time to that priority destination for each trip.

3.3.3. Trails, ropeways and improved tuins.

Trails and Tuins (cable river crossings) have the same aim as trail bridges. Gravity Ropeways are a

relatively new phenomenon, successful in West Nepal, but only feasible for villages that produce

higher volumes of cash crops but do not have road access. They will be implemented on a pilot basis.

All three will be implemented directly by Practical Action. RAP3 will at first support one or two of each

(benefiting at least 600 households), and might increase numbers after year 1 if the budget allows.

3.3.4. Renewable Energy.

Solar Home Systems (SHS), improved cooking stoves (ICS), and micro-hydro power have substantial

energy cost saving effects, beside direct benefits for education (night time learning), health (less

smoke), manufacturing and services. The project will support beneficiaries to invest the savings in IG

interventions. Processing and market systems services will be enabled by provision of the required

energy (solar lighting systems, hydropower, improved water mills, solar dryers, solar lift pumps,

vaccine fridges). The project also will pilot support to public services like schools, health posts and

extension services with energy and ICT solutions. Winrock International will in coordination with the

government‟s renewable energy agencies (Appropriate Energy Promotion Centre, DDC-Energy Unit)

assist private sector service providers (installation and maintenance companies) to implement these

interventions in at least one hundred groups and communities (Year 1 target) benefiting more than

3000 households (Year 1 target), who will also be supported to avail of important government

subsidies. RAP3 will only contribute about 50% of the total installation costs.

3.3.5. Irrigation.

RAP3 will support the construction or repair of about 35 schemes (year 1 target), to be implemented

by Practical Action and Helvetas. Nearly all beneficiaries will be IG-groups that are prioritised by


Page 35

corridor plans, but who have identified lack of water as a bottleneck to participation in vegetable, spice

and goat production.

The main source of agricultural income increases in the mid-hills in the last ten years has been

commercial vegetable cultivation aided by micro-irrigation. Sometimes surplus from water supply

schemes is used (Multiple-Use Systems, MUS). Therefore chief opportunity for dry areas and poor

communities is the provision of reservoirs (ponds, often rain fed), simple pipe systems and micro-

irrigation (sprinkler and drip). Support to surface irrigation schemes, which are mostly focused on

cereal cultivation (rice-wheat/mustard) with less participation by poor people, can be considered if

used for cash crop cultivation. Support will be limited to reducing maintenance costs and increasing

efficiency through repairs and small improvements.

3.3.6. Market, Storage and Processing Infrastructure.

This will enable producers and traders to conserve products, to better time the sales of products and

to improve the sales environment. Assistance to start or improve collection centres, market sheds,

and processing plants (e.g. solar ginger dryers, NTFP distilleries) aims to increase local incomes

through adding value and reducing costs through transporting in bulk. The availability of local

processing facilities often allows more households to start production. By working with RAP3 partners

Helvetas and Practical Action, supported by Winrock‟s energy solutions, RAP3 will support directly

about 1000 households and entrepreneurs, thereby indirectly providing processing and market

services for another 6000 households. Opportunities for interventions will gradually emerge from

working at corridor levels, so they will be limited in Year 1.

3.3.7. Target Groups

The EI-target areas and groups (non-trail bridge) overlap with the IG target areas and groups for more

than 90% as the majority of economic infrastructure will be identified by and benefit IG target groups

to solve their IG-bottlenecks. Only some renewable energy interventions will benefit groups that do not

participate in other IG-activities. A minimum of 3000 households will benefit from renewable energy

and most of these will be RBG and DAG households. In Year 1 at least 400 households will benefit

from irrigation interventions (and a further 1000 through micro-irrigation equipment). Collection

centres, market sheds and processing plants will only be identified during Year 1, and from Year 2

onwards are expected to benefit all producers in the SED corridors, although the majority will not be

directly involved in implementation and only indirectly in planning.

3.3.8. Disadvantaged Groups (DAGs)

DAGs will benefit from RAP3 economic infrastructure through a) interventions that address specific

DAG bottlenecks (lack of land, water, absorption capacity), c) minimum proportions of interventions

and support for DAGs, d) special support in the form of extra training or coaching, and extra subsidies

to address risks, e) a clear stance against discrimination towards women and socially excluded

groups. The approach and issues are discussed under Income Generation.

3.3.9. Services and Linkages for Maintenance.

The programme will ensure sound maintenance arrangements before construction starts. This not

only includes training of user committees and maintenance workers, but also establishing linkages

between users and service providers. Renewable energy service providers are normally the ones who

install the facilities and provide a warrantee for one or two years. Solar systems rely on the services of


Page 36

trained local cooperatives. Micro-irrigation equipment will only be supported once spare parts

suppliers and repairs services are locally established and available. Collection centres will be built by

trained management committees that often emerge from local producer groups, cooperatives or the

corridor coordination platforms.

3.3.10. Employment Results of SED-Components

Component 4-Yr

Beneficia

ries

Temp

employm

ent, 4yr

Sustained

Employme

nt Impact

(Yr 3&4 IG)

Total

employment

Impact, 4-yr

Remarks

Hh (incl.

2x

counts)

Empl

day

Empl day Empl day

1. Trails, Trail Bridges, Ropeways

and Tuins

31,000 237,000 31,000 268,000 32% of construction cost is labour;

sustained employment effects limited

2.1 Infrastructure for Irrigation,

Marketing, Processing

800 34,000 30% of construction cost is labour

2.2 Renewable Energy for cost-

saving and services

6,700 20,000 24,000 44,000 10-25% of construction cost is labour;

sustained employment effects result from

investing savings

3.1 Support to Producers and

CFUGs

9,800 3,000 878,000 881,000 Most employment impact comes from

multiplier effects. Employment effect is

taken as 30% of what IDE's report

Agriculture and Labour found for SIMI in

lower hill districts. DAGs and RBGs are

included in the IG beneficiaries (3.1),

extra support helps them participate.

3.2 Processing, Marketing &

Services

21,000

3.3 Extra Support to DAG 2,700

3.4 RBG Capacity Building (IG

effect only)

5,400

EI & IG Programme Total 77,400 294,000 933,000 1,227,000

3.3.11. Embedding resilience in Economic Infrastructure

All buildings and structures will be constructed to the appropriate level of multi-hazard resilience, with

earthquake resilience being particularly relevant. This means following national building codes and the

National Society of Earthquake Technology Guidelines where these exist for the relevant structure, and

sensible good practice where they do not. Landslip resilience will include consideration on siting and on

management of uphill slopes. Other hazards such as glacially outbursts, lightning, flood and wind are

likely to be relevant in specific locations and for specific infrastructure types. All design procedures and

documents will include documentation on how multi-hazard risks were considered and addressed in the

design, showing any mitigation or adaption actions that were either taken or rejected. Climate change

adaptation will consider similar criteria to those affecting LRN plus the potential impacts on stream /

spring flow for irrigation, multi-use water and micro-hydro designs.

The EI component will also ensure that there is at least one earthquake resilient building at District level

that can act as a coordination centre and refuge.


Page 37

3.4. CAPACITY AND INSTITUTIONAL DEVELOPMENT

This component is focussed on building capacity in the LRN sector among key stakeholders. These

include district level public sector institutions (DDC, DTO), central public sector institutions (MOFALD,

DOLIDAR, RBN) and private sector institutions involved in LRN project implementation, specifically

consultants, contractors and user groups and RMG/RBG10

. The strategy adopted builds on that

developed over the past two years in the RTI Maintenance Pilot, RAP2 and the IMC Technical

Proposal for RAP3.

3.4.1. LRN Strategic SWAp Objective

As mentioned in the overview, GON‟s LRN SWAp objective will be achieved by GON and its

development partners adopting a single, Government-led, RTI policy with common approaches to RTI

development. This is to be matched by improving governance and capacity building at local and

central levels of government to allow progressively greater reliance to be placed on government

procedures for implementing future RTI investments. Outsourcing to the private sector is a key part of

building capacity and technical harmonisation in the sector, with the role of GON officials shifting away

from technical implementation to planning and overall management. The framework for this is the 5

year DTMP and the annual ARAMP which, since their adoption as national policy, will be followed by

all new LRN projects in all 75 districts.

3.4.2. Working with Government

Some of the most important lessons from RAP2, in particular the RTI Pilot, relate to effective working

relationships with GON. The approach follows a clear Engagement Strategy which results in

Partnership Agreements. Engagement in the new RAP3 districts has been an early objective of RAP

3 and eight workshops were conducted in June, paid through the RTI Pilot.

We have developed, tried and tested the Engagement Strategy over the past 10 years through our

experience of introducing maintenance cultures for rural roads in Vietnam and Nepal. This strategy

can be extended to cover all components of RAP3 to develop effective relationships with participating

districts and central ministries right from the start.

The engagement strategy follows a simple process, summarised in the diagram below, which leads to

the development of partnership agreements. This process has been applied in Nepal to support road

maintenance and earthquake resilient reconstruction of schools through RAP2. It can be applied

equally to all RAP3 components. Staff play a key role here, particularly in remote districts where they

must act as flexible diplomats/arbitrators.

10 RAP3 specific maintenance repairs works funded through DDF will use either Contractors or User Groups. RAP3

direct works will use RBG or SBGs. For routine maintenance we intend to set up permanent User Groups to be called RMG. Capacity building of NGO, RBG/RMG will be handled by SEDOs as part of the LRN component and those components dealing with economic infrastructure, income generation and trail bridges.


Page 38

3.4.3. Partnership agreements

The Partnership Agreements provide a formal written agreement between the organisation being

supported (e.g. DDC, DoLIDAR, RBN, user committees) and the programme. These agreements

clearly define:

the principles of cooperation,

terms and conditions for programme implementation,

the support to be provided,

roles and responsibilities and commitments made.

The documents prepared during the engagement process form annexes to the agreement.

3.4.4. Embedding TA teams in GON Offices

The Technical Assistance (TA) team acts as a service agency offering training, support and advisory

services to the participating districts and relevant central GON partners, through tailor made

assistance packages designed to respond to defined needs.

The TA team is the main interface with district and central authorities, and it has been demonstrated

by the RTI Pilot embedding TA staff in relevant GON offices, i.e. District Technical Offices and

DoLIDAR, allows them to engage on a day to day and informal basis. The GON office benefits from

TA resources to improve the fulfilment of programme deliverables, as well as support for their wider

responsibilities. This results in more effective cooperation, more efficient implementation, confidence

building, transfer of knowledge and a more positive work ethic.

In particular, the TA team are able to play a valuable role in on- the- job- training (OJT) for wide range

of stakeholders that includes User groups, local contractors, local, political representatives,

government staff and DTO staff paid through the District Support Plans. For instance every User

Group or RMG is given a one day orientation workshop before undertaking any work while contractors

are required to attend Pre bid meetings together with district level officials. Additional training is

provided through more formal channels as part of the central GON Support Plan and is discussed in

Component 5: LRN Policy and Harmonisation.

3.4.5. Annual Support Plans

These define the capacity and institutional development plans and targets for the coming year. In the

new RAP3 districts it will be important to engage and build confidence and interest in the programme

from the outset. Our engagement process starts by asking “What can we do for you?” and ends in

formal Tri Partite Partnership Agreements between the TA, district and central government, and first

year annual support plan.

The annual support plan defines a calendar of events that includes key activities, milestones and

targets for the year and the associated checklist of evidence required for milestone payments to be

Awareness Raising

Situation Review

Improvement Strategy

Support Framework

Annual Support

Plan

Partnership Agreement


Page 39

made. In Programme for Results (P4R) language, these are approximately equivalent to Interim

Results Indicators (IRI), Disbursement Linked Indicators (DLI) and Programme Development

Objectives (PDO).

Our District Team Leaders (DTL) will work alongside the DTO / DDC to implement the capacity and

institutional development plans in the district. These plans will include capacity building and training

for length workers, RMGs, user committees, contractors and DTO / DDC staff, and provide necessary

resources to enable the DTO / DDC to carry out the relevant activities and meet milestone targets.

Whilst the DTLs main focus will be on managing and monitoring the delivery of the annual support

plan, they are embedded in the DTO office, effectively doubling the number of qualified engineers

working for the district, and provide informal technical and management support to the DTO for all

their road projects. This promotes the evidence based decision making processes that are essential

for sustainable LRN asset management.

GON projects normally allocate 5% for contingencies from which the project management budget is

drawn. The result is that these projects TA budgets are chronically underfunded. Discussions with the

GON LRN SWAp programme indicate that a portion of the funds going to the 14 RAP3 districts might

be used to support the ASP, in which case DFID funds would be used to complement GON funds for

both works and technical assistance.

3.4.6. Feedback from Beneficiaries

As part of the review of the RTI SWAp and RTI Pilot for preparation of the Project Completion Report,

feedback from RTI Pilot districts was sought through questionnaires to the LDOs and DTO‟s to assess

their perception of the RTI SWAp approach in Pilot districts. A wider spectrum of respondents will be

made after the end of the current working season in October as part of the Annual Review. All Pilot

districts will be part of RAP3 so the annual review process will take place as part of the annual

calendar of events.

Description Score out of 100

Planning (DTMP, Annual DDC Plan, Monthly Plan) 91.7

AAMP Preparation (Road Condition Survey, Data Analysis) 95.8

Evidence Based Decisions (Project prioritisation, fund allocation) 83.7

Procurement (Costs estimates, bid document & evaluation, contract

documentation for both contractors and User Committees) 90.0

Monitoring, evaluation and reporting 86.2

Work Measurement and preparation of bills of quantity 90.8

Work Efficiency (to time, cost and quality) 85.0

Works Implementation and supervision 85.8

Coordination with stakeholders 91.7

Figure 3.2: Feedback from Beneficiaries


Page 40

The average score from Pilot beneficiaries stands at 89% demonstrating clearly the effectiveness of

both the district teams and support from the centre to the districts in terms of GON buy-in to the asset

management approach to be adopted by RAP3.

3.4.7. Measuring Capacity and Institutional Development

In addition to straightforward monitoring of annual support plan implementation and achievement of

milestone targets, the annual support plans have a less tangible Programme Development Objective,

such as “Improved district level management of the district road core network”. We have developed

Continual Improvement Matrices (CIM), based on the ISO 9004 concept, which uses these matrices to

measure the sustainability of an organisation using a quality management approach, and which

provide a tool for assessing performance and progress to achieving long term strategic objectives.

They are ideally suited to monitoring improvements and progress to long term capacity and

institutional development objectives, such as the SWAp compliance (as is used on the RTI Pilot). The

CIM assessment also provides a mechanism for identifying strengths and weaknesses to determine

where support is most needed. The diagram below presents an example of a CIM assessment form.

The further to the right the shaded bars are, the closer they are to achieving the long term target. The

idea is that an organisation should be aiming to show continual improvement through a gradual shift to

the right at each assessment. The format includes columns to identify constraints to moving up

(improvement) and the actions needed to overcome those constraints.

We have used these matrices to demonstrate improvement and hence the impact of the RTI Pilot on

district level management of the LRN sector. These matrices enable complex and subjective

measures of institutional change to be quantified through a participatory assessment with key

stakeholders, and provide an effective tool for comparing change among a diverse group of districts.

Targets are set in terms of improvements made rather than absolute scores to reflect the different

starting positions of each district.

The district assessments summarised below were carried out by representatives of the DDC, DTO,

political representatives and community leaders at a participatory workshop. Our DAMEs facilitate the

process and verify the results based on their working knowledge of the LRN sector in the district.


Page 41

There is no point in overstating the results as this simply makes it more difficult to demonstrate

improvement in the following year.

We will develop a new set of central and district Continual Improvement Matrices based on the wider

objectives of RAP3. They could also be used for introducing performance based incentives for LRN

asset management and the transition towards full P4R through GON systems in some districts, things

to think about for the longer term support to the sector. The concept could also be expanded to

measure capacity and institutional development of the other key players in the LRN sector and those

involved in RAP3 implementation as a whole, including contractors, consultants, NGOs, etc.

Results of District CIM Assessments in RTI Pilot Districts

3.4.8. Training Programme

A significant aspect of any capacity and institutional development plan is formal training and

experience sharing. The training programme will cover all bodies involved in the LRN sector and

generally be related to the technical manuals and guidelines for works planning, design and

implementation that form part of the Asset Management Manual.

We aim to engage with the Nepal Engineers Association (NEA) or the Nepal Forum for Rural

Transport and Development to develop and deliver a wide range of technical training programmes to

current and future engineering practitioners. We would also aim to work with University departments

to revise their curricula to include LRN asset management courses.

Training requirements can be written into contract documents to ensure staff working on RAP3 or

other programmes have attended key training programmes. Consulting and works contracts can

include evaluation criteria that promote or require an organisation to sponsor students through

university or implement a graduate training scheme. IMC supported the Uganda National Roads

Authority (UNRA) to include such provisions in their consulting service contracts, with some success.

In the RTI Pilot we have developed a Task Series Approach that compares organisational functions

and responsibilities with the capacity of their staff and uses a traffic light system to determine where


Page 42

capacity is adequate (green), partially adequate (yellow) and where capacity is inadequate (red).

Checklists are used for participatory information collection on number of staff (provision and

availability), experience, qualifications, responsibilities, skills and resources (required and available),

opportunities and areas of support needed.

It identifies a range of capacity constraints and allows those affected to propose their own solutions

and recommendations for change and improvement. Training programmes for middle level

management are more likely to focus on issues related to project management while junior level

training programme are likely to concentrate on technical issues, specialist interest areas, information

technology, self-development and possibly higher level formal education.

We will deliver our training programme through external training suppliers. To mitigate against poor

quality and indifferent impact risks, we will use Alliance Nepal to help us manage this programme.

Alliance Nepal has extensive experience in monitoring technical and vocational training programmes

in Nepal and they have supported our formal training and facilitation on RAP since the design phase

in 1999.

In the last two years RAP2, through the RTI Pilot designed and conducted courses in the following

subject areas

Contract Management

Construction management

Pavement Design

Roadside Bio-engineering

Planning and Organisational Management

Financial Accounting and Reporting

Monitoring and Evaluation

Environmental Impact Assessment/Initial Environmental Examination (EIA/IEE)

3.4.9. Embedding resilience through capacity building

The capacity and institutional development component, working directly through formal training and

indirectly through the support provided to communities and individuals through the other components,

may include:

Supporting RAP3 Districts in the DRM and LAPA planning processes

Training local engineers, technical officers and masons in resilient infrastructure – using LRN and

EI structures as demonstration projects

Preparing simple construction handbooks for local technical officers (sub-engineers and resource

persons) and masons covering good practice and key resilience features

Supporting local organisations active in DRM and LAPA, such as the Nepal Red Cross Society

district chapters and local NGOs, to increase awareness raising and training activities within RAP3

communities and support for preparedness and adaptation initiatives defined in the district and

community DRM and LAPA

All capacity and institutional development initiatives relating to resilience or climate change adaptation

will be developed in close consultation with national and district level organisations active in these areas.

RAP3 will build on what is already happening and make sure that any training and planning support is

specific and relevant to the local vulnerability profile and that potential responses are relevant to local


Page 43

capacities and priorities. RAP3 will follow a bottom-up approach, with support initiatives developed and

agreed through community and district level consultations processes. This process will take time, so the

development of implementation plans for DRR / CCA support will be developed over time during the first

year of implementation.

All training materials, handbooks and guidelines will be developed in consultation with the relevant

central bodies, including MOFALD, DUDBC and NRRC for DRR related training.

3.4.10. Key Challenges

Key challenges to the capacity building and institutional development that RAP3 will need to address

through the annual support plans are likely to include:

Political pressure vs evidence based decision making

DDCs able to ignore their approved plans and central GON systems and policies

Capacity of district officials (knowledge, human and physical resources, transport)

GON officials absent from remote districts without delegating authority

Poor relationship between GON and private sector


Page 44

3.5. LRN POLICY AND HARMONISATION

The objective of this component is to develop suitable GON Asset Management Systems (AMS) and

capacity to manage and maintain a sustainable road network. At present a draft AMS has been

prepared only for the maintenance part of asset management. As the central and district capacity for

road maintenance increases, the AMS will extend to the rehabilitation and upgrading of LRN assets

and, where necessary, for new construction, in accordance with GON guidelines. To date, the RTI

Pilot has focussed on the harmonisation of technical procedures, but has developed and is currently

testing financial and implementation procedures for review and future harmonisation.

As part of this technical harmonisation process, new DOLIDAR formats, templates and guidelines for

District Transport Master Plans (DTMP) and Annual Road Maintenance Plans (ARMPs) have been

developed, tested in the 7 pilot districts and have been rolled out to a further 21 districts, including the

RAP2.1 districts, and wider roll out in the coming months through SDC‟s District Road Support

Programme (DRSP) and the World Bank‟s Rural Access Improvement and Decentralisation Project

(RAIDP).

3.5.1. LRN SWAp Programme

We work closely with the MoFALD / DoLIDAR SWAP Programme, sitting in DoLIDAR, who provide

additional central GON funding for maintenance works in the pilot districts. GON policy is to expand

this programme, starting with districts where donors have committed to support the LRN sector and

road maintenance. The SWAp programme will therefore expand to include the RAP3 districts. In our

experience, being seen as part of the GON SWAp has significantly increased the ownership and

support for the RTI pilot initiatives at both central and district levels, resulting in positive change where

others have failed. We intend to continue with this approach.

3.5.2. Management Capacity

An effective and sustainable Local Road Network (LRN) is vital in the fight against poverty and

enabling economic growth in rural areas. The GON Strategic Assessment of the LRN sector,

conducted in February 2012, concluded that the increased spending over the next ten years

necessary to develop the LRN will outstrip the capacity of DDCs and DoLIDAR to manage the sector.

By providing management and implementation support, RAP3 will help the sector manage this by:

Developing harmonised AMS procedures that help improve planning, implementation and

financial management processes, including evidence based decision making and anti-

corruption measures

Boosting the number of engineers in the District Technical Offices by placing our own TA

teams in their offices and joint planning, management and supervision of LRN

interventions

Supporting DoLIDAR and DDCs to outsource LRN planning, design, supervision,

monitoring and evaluation to the private sector in the short to medium term, allowing

DoLIDAR to reposition itself as a Management Agency for the sector (similar to UK

Highways Agency for example)

Supporting DoLIDAR to change its span of control from 1:75 to, say 1:10, through

consultants (linked to new donor LRN projects or GON programmes) each responsible for

area based LRN management contracts – similar to that of RAP3. This would enable

DoLIDAR to improve the provision of technical support to, and management of LRN data

from, all 75 districts without increasing its staff base.


Page 45

This allows DOLIDAR to continue to develop SWAp compliant systems and procedures for the next

generation of LRN projects and roll out the SWAp approach to all 75 districts in the country by GONs

2014 target date.

3.5.3. Nepal Road Sector Assessment Study

The LRN Sector Assessment Study11

presented a list of recommendations to GON and donors to

seek agreement on a common set of short to medium term policy issues aimed at building momentum

for harmonisation and change. The outcome was a GON approved LRN Action Plan that identified

the following areas that needed support for improvement – these are summarised in section below.

The study identifies who should do what in the sector in 2012-2015 and is the basis for RTI Pilot

support to central GON institutions, overriding the Institutional Strengthening Action Plan (ISAP)

document prepared previously12

.

In RAP 3 we will continue to support GON in line with the LRN Action Plan, which to date has included

review rural roads standards, norms and specifications and simplification of DTMP and Annual Road

Maintenance Plan (ARMP) formats to make them cheaper and easier to use by decision makers and

people living in the districts.

3.5.4. Public Financial management

The TOR makes specific reference to Public Financial Management and Fiduciary Risk Reduction

based on the MOFALD Fiduciary Risk Reduction Action Plan (FRRAP) for 2012 -15. The plan, drawn

up in March 2012, identifies six key areas requiring fiduciary risk reduction reforms:

Planning, programming and budgeting;

Funds flow, including budget release;

Implementation, including procurement management;

Internal accountability;

External auditing, reporting and monitoring and evaluation; and

Revenue management.

The FRRAP assigns responsibility for implementation together with timelines, milestones and

monitoring, with DoLIDAR nominated the responsible party for two outputs relating to Implementation,

including procurement management. These are Output 3.3 Reform of Procurement Management of

Local Bodies and Output 3.6 Improve Rural Road and other Project Design and Construction.

11 Nepal Road Sector Assessment Study (NRSAS), 2012, prepared for DOR and MOFALD / DOLIDAR with support from

WB, ADB, DFID, and SDC. 12

which has not been adopted by DoLIDAR


Page 46

3.6. DISASTER RISK REDUCTION

This component embeds resilience in all programme initiatives, building on from RAP2 experience.

The overall objective is to minimise losses from frequently occurring risk events in RAP3 supported

communities.

Experience in rural Nepal suggests that DRR initiatives achieve better results if treated as an integral

part of wider livelihood development initiatives. Therefore, most of the initiatives will be integrated

with the other components, especially the Economic Infrastructure and Income Generation

components. See the sections on „embedding resilience‟ under each component.

The RAP3 DRR implementation strategy had been developed in consultation with our delivery

partners and representatives from NRRC‟s Flagship 4, including DIPECHO. Any DRR initiatives will

be developed in consultation with local stakeholders and reflect local circumstances, building on what

has already been done by other partners such as the Nepali Red Cross and in LAPAs.

The DRR component will focus only on those initiatives that affect the implementation work or results

of RAP3. This will include:

The development of simple construction, operation and maintenance handbooks for Economic

Infrastructure works that focus on good construction practice, incorporating resilience

techniques where appropriate

Slope management measures to minimise impacts of landslides on LRN and vice versa

Training our RAP3 staff and partners in resilient infrastructure to ensure they can manage the

works programme to resilient standards and in disaster risk reduction to ensure our teams are

prepared for potential disasters. These staff may provide resilience advice and support to

RAP3 supported DDCs and communities as needed.

Providing Light Search and Rescue (LSAR) and First Aid training to our RBG / RMG members

plus general awareness raising among RAP3 supported households of simple preparedness

measures.

Carrying out structural vulnerability assessments on the DDC offices allocated to our RAP3

teams and providing support for appropriate retrofitting, improvement or new construction

works to provide a safe environment for our staff as required by DFID‟s Duty of Care

statement.


Page 47

3.7. PERFORMANCE MANAGEMENT AND VERIFICATION

The Performance Management and Verification Component includes the following sub-components:

Programme Management

Quality Management

Financial Management

Risk Management

Monitoring and Evaluation

3.7.1. Programme Management Manual

During the inception phase, we have already begun work on developing the outline Programme

Management Manual (often referred to as the RAP3 Manual or just the Manual) and detailed

procedures for the technical components. The Manual builds on from that developed under RAP2,

taking into account lessons learned and new developments on RAP3, and will include detailed

management and technical procedures, which follow the ISO Plan-Do-Check-Act model. It will clearly

define implementation processes and controls, checking and verification requirements, reporting

formats and roles and responsibilities for all RAP3 components, sub-components and activities.

The PMM is primarily written for our implementation teams, but will equally define the roles and

responsibilities of our delivery partners, service providers, GON partners, DFID and other relevant

bodies. It will cover selection and control of our sub-contractors / suppliers / NGOs, and governance

controls for any activities or works to be implemented through GON systems. The PMM will include

guidelines for mainstreaming climate change and disaster resilience into design and programme

plans.

3.7.2. Project Control Plan

This is used to describe the controls to be applied when managing the project, to ensure that:

Client requirements are met

Relevant policy and legislation is identified and adhered to,

Outputs and deliverables meet defined technical and quality standards,

Target dates for deliverables and significant events are met,

The services are completed within the agreed budget.

The PCP is maintained as a separate, live document to the PMM updated regularly to reflect changes

in client requirements, programme conditions and other internal or external factors or events that may

affect implementation, agreed work plans and results targets.

3.7.3. Knowledge Management and Communications Strategy

This is a critical aspect of ensuring effective and efficient management, responding to changes in

circumstances and risks, and in understanding and responding to the needs of key stakeholders,

including GON, DFID and programme beneficiaries. It is important that our GON counterparts,

especially in DoLIDAR and the Districts, are involved in all decision making processes and endorse all

our strategies and plans, even when activities are implemented directly by the programme.

The communications strategy includes routine feedback and reporting mechanisms and formal

periodic reviews of achievements and lessons learned. The August annual reviews provide a formal

mechanism for reviewing achievements to date, preparing plans for the coming year, and for

reviewing our implementation strategies and processes as part of a continual improvement process.


Page 48

They involve a participatory review of all aspects of the programme, though with a focus on annual

targets and results.

3.7.4. ISO 9001 Quality Management Systems

This incorporates key concepts from ISO 14001 Environmental Management Systems, OHSAS 18001

Occupational Health and Safety Management Systems, BS10500 Anti-bribery Management Systems

and ISO 31000 Risk Management Systems. It will therefore include measures to ensure compliance

with the applicable aspects of UK law and DFID‟s Duty of Care and Due Diligence requirements.

3.7.5. Internal Audits

We will adopt a two-tiered approach to our internal audit process to optimise the number of formal

audits carried out with minimal additional full time auditors. Each RAP3 component team or district

should be audited at least once a year.

Internal audits at the district level. These internal audits will focus on verifying compliance of

physical works and support activities against the RAP3 Manual and identifying opportunities

for continual improvement at the local level and in the manual itself. We would invite DDC

representatives to participate in or observe all first tier audits.

Second party audit with a centrally based team conducting audits on central management

processes, districts and the quantity and quality of outputs delivered. These will focus on

assessing the appropriateness and effectiveness of the RAP3 manual in addition to

compliance and improvement.

The audit programme will include:

Systems audit – to verify implementation of the PMM

Technical audit – to verify quality of works and services provided and safeguards measures

Financial audit – to verify payments and assess value for money and anti-corruption measures

Results audit – to verify that declared results, especially progress milestones, have been

achieved

3.7.6. Beneficiary Verification

These will focus on a small number of key issues such as verification of physical and other tangible

outputs and payments. They can also include information on perceptions of transparency and access

to information, community participation and engagement, programme effectiveness and satisfaction.

3.7.7. Integrated Decision Support System

The financial management and reporting system will be fully integrated with our M&E system through

a web-based IDSS. Linking these two discrete functions will provide decision makers with a more

holistic view of the programme.

The IDSS will capture all budgeting and accounting data from the central and district offices. It will

automatically aggregate data and generate the various financial progress reports needed. It will

facilitate Commitment Accounting, P4R Accounting, and Accrual Accounting. It will ensure that all

transactions are tagged to a Disbursement Linked Indicator to compare easily actual costs against

plans and results payments. Our web-based IDSS supports full transparency of data and

accountability and will be used to ensure all relevant data is made publicly available in accordance

with DFID‟s guidelines and those of IATA and COST.


Page 49

3.7.8. Risk Management

During the inception phase we have prepared a detailed Risk Matrix which is included in this report.

In addition, a specific Briefing Note on Elections Risk Assessment was submitted to DFID at their

request, (Please see Annex). The Risk Matrix identifies key risks, their probability and potential

impact and a risk rating which combines these two criteria. It identifies appropriate risk treatment

options and mitigation measures. It also defines the degree to which the risks are manageable – i.e.

those which RAP3 has some control over and accepts risk liability – and the level or risk that RAP3

will absorb and the level of risk where the liability remains with DFID. The risk matrix also shows how

the accelerated spend option increases certain risks and DFID‟s liability for them.

As part of our risk monitoring process, we intend to establish a database, perhaps as an integral part

of the IDSS in time, which records all risk events that occur in the RAP3 areas and those that may

occur outside of these areas but which may impact on RAP3 implementation.

3.7.9. M&E System

This is an integral part of the IDSS and will capture all non-financial data required for monitoring and

evaluation purposes. This will include data on results, physical and temporal targets, and actual

achievements. It will support analysis and reporting against the agreed implementation plans and the

RAP 3 LogFrame. The DFID programme wide LogFrame needs to be updated to reflect the latest

plans achievable with the revised RAP 3 spend profile and maintenance priorities. The RAP 3

LogFrame must nest perfectly into the wider and revised DFID LogFrame (which should include the

MEL contract and KEP contract) so there is no ambiguity on what the IMC managed RAP 3 is

expected to deliver.

This M&E part of the IDSS will focus predominately on output results based with bi-annual trends

monitoring to promote institutional learning and increased results impact. More broadly it will:

a) Provide the framework by which programme progress is measured over time.

b) Promote internal and external accountability and justification of resource usage for RAP 3 results

c) Provide an evidence base for programmatic decision-making in relation to resourcing, planning,

implementation.

d) As an integrated M&E / FM system allow simple but robust assessment of the VFM efficiencies

across the programme in real time.

e) Promote RAP 3 learning and dissemination across the organisation and with key stakeholders.

The IDSS will follow the core principals as developed during the Marrakesh Second Roundtable for

Managing for Results. The capacity to direct, manage and track expenditure and progress against

predefined results and outputs, will allow the RAP 3 team to pursue the programme objectives and

systematically account for the use of all programmed funds.

The diagram below presents the overarching strategic framework for the IDSS


Page 50

Overarching strategy for IDSS

The M&E aspects of the IDSS are being developed in close consultation with the MEL team. The

draft M&E system, as shared with MEL, focuses on output level results rather than outcome and

impact, but establish a robust beneficiary monitoring system that includes RBG / RMG / IG support

household registration and baseline survey to support impact and outcome assessment. A small

sample of these same households will be used for trend monitoring to gain a better understanding of

the linkages between actions on the ground and the output and outcome results, enabling RAP3 to

adjust its implementation strategies and methods to optimise delivery of results over time. We are

developing the questionnaire jointly with the MEL team. As the MEL baseline is not scheduled until

February, we will need to carry out this registration processes directly, though we will give the raw

data to MEL team for further analysis. It is likely that the MEL team will take over the trend monitoring

process at a later date, though this is not confirmed yet.

3.7.10. Community Participatory Monitoring and Learning system,

A system will be developed in which RAP 3 participants at all levels of implementation – community

members, road and SED group participants, field-staff, Government, NGO Partners and HQ staff –

will be enabled to reflect on progress and make suggestions for improvement. This will be captured by

specially designed scorecards and management will be expected to provide specific and timely

feedback. This will feed into a continual implementation improvement process and a principle of

• VFM reporting

•Plans and budgets linked to PRs

•Payment for delivering results

•Incentives for performance

•Results based reporting

•Monitoring and learning feedback loops

•External review and third party audits

•Exceptions reporting

•Focus on outputs with agreed indicators and time-bound targets

• Use of theory of change to harmonise across components / outputs and test approach

•Participatory programme management

•Risk Sharing

•Traceability - inputs, outputs and outcomes

•Transparent information sharing with all stakeholders

•Participatory monitoring systems

•Internal and external accountability

ACCOUNT'

ABILITY

SHARED

GOALS &

STRATEGIES

PERFORMANCE

BASED

EVIDENCE

BASED

DECISION

MAKING


Page 51

transparency in which participant views are listened to and they are kept informed about how the

programme is responding to their suggestions.

We are working in consultation with the MEL team to develop the community participatory monitoring

and learning system, to prevent overlap and to ensure that the information collected is useful not only

for reviewing our direct implementation strategies and plans, but that it can also be useful in

understanding the wider development context of RAP3.

The IDSS uses web-based technology that allows transparent access to monitoring and financial data.

This will need to be backed up by the ability to respond to queries arising from this openness. There

will also be a clear whistle blower process. The IDSS will allow the introduction of mobile technology

for data collection at a later stage, especially for community level verification and monitoring. It also

has capability for future scale up of M&E data to support the sector wide approach for the LRN sector.

This web based approach will be complimented by more traditional oral reports and the use of

community noticeboards to ensure nobody is excluded.

3.7.11. Monitoring systemic change, environmental management and risk

Environmental management plans or environmental risk factors identified during intervention planning

will be monitored and appropriate changes to mitigation measures taken if necessary.

In consultation with the MEL team some of the systemic changes resulting from road access and

market development will be monitored on a monthly basis, including availability of inputs, market

prices and traffic volumes.

The risks in the risk matrix and assumptions in the LogFrame will be monitored and reviewed on a

regular basis, with appropriate action being taken as required.

3.7.12. RAP Implementation/MEL M&E

The following starting points stem from initial discussions between RAP and MEL on roles and

responsibilities for M&E. With MEL now mobilising, more detailed plans and commitments will be

drawn up in October and November. The following diagram explains the relationships, flows and

linkages between these activities.

RAP DECC/ITAD

Monthly

Monitoring against outputs

Quarterly third party monitoring against outputs, taking

small samples of work, and developing a simple system for capture

Reporting against finances; outputs such as employment days, physical works progress, refining implementation as appropriate

Analysis of programme monitoring data, monitor trends, and feedback

Development of MIS and web-based open access database

Collation of relevant other-source secondary data

Inception phase

RAP consulted on each of the Inception activities, feed in to design, and provide grounding / reality checking

Support revisions of logframe and lead on revision of Theory of Change Produce M&E framework and strategy, and VfM diagnostic framework

Provision of any relevant data to inform baseline Design and completion of qualitative survey to feed baseline Design and completion of Baseline survey

Define monitoring indicators & measurement methods Define evaluation indicators & measurement methods

Design of Impact Assessments, and methodology


Page 52

Post inception phase

Annually

Annual report against progress Collection of data and evidence on outcomes through cases studies, training / RBG / SED participant feedback etc Inform thematic review and Response and Innovation options and choices

Annually

Timely completion and dissemination of 3 thematic reviews / year Offer periodic „reflection & decision making‟ exercises based on evidence findings Management of the Response and Innovation window resources, decision making and implementation

DFID Annual Review Completion of Mid-term (May 2016) and final Impact Evaluations (end of project PCR)


Page 53

4. WORK PLAN

The Implementation Plan for the first year of implementation is presented below to show the timing of

the main elements of each component in the programme. A detailed workplan for all programme

components is available in Micro Soft Project if required.


Page 54


Page 55

5. RESULTS

The headline results presented below are for RAP3 Implementation and will feed up into the DFID

LogFrame for RAP3, which will include results for KEP and MEL components. Now that the MEL

consultants have started, discussions between RAP and MEL project management teams in Kathmandu.

It has been agreed that MEL will make adjustments to the DFID LogFrame before December 2013 so that

all components are fully integrated. In the meantime the Implementation contract will pursue the “Headline

Results” as agreed with DFID Nepal.

MEL will work on the theory of change/evaluation strategy/ revision to the LogFrame. Assumptions for the

results during the design will also be revisited. We hope this will help to focus attention and might identify

other areas besides RAP3 IG, where indirect results also can be expected. Detailed versions of this should

be available by November. MEL will also help to refine jobs and poverty reduction results, including more

clarity for the short term jobs figure.

Headline Results for RAP3 over four years.

Business Case Outcomes Comments

20,000 people lifted out of poverty Achievable

7.5 million days of employment generated (In LogFrame as HH) Adjusted to 5.4 million

200 economic infrastructure investments Achievable

600km of roads maintained per year for 4 years Achievable

800,000 people benefiting from improved access (In LogFrame) Achievable

40,000 farmer’s incomes up by GBP130 p.a. (In LogFrame) Adjusted to GBP 70 p.a.

500 GON staff and 200 RMGs trained Achievable

Output based, contracted maintenance finance adopted Achievable


Page 56

6. FINANCIAL MANAGEMENT

6.1. PAYMENTS FOR RESULTS (P4R)

6.1.1. DFID’s Approach

DFID‟s Approach to Payment by Results defines it as a

contracting form which includes:

Payments based on pre-agreed results. Paying for

development outcomes, not inputs

Recipient discretion on how to achieve results.

Independent verification of results linked to

disbursement.

Benefits of P4R include:

Higher focus on achieving programme results

Value for Money considerations taken into account to

make the most optimal programme choices.

Only those activities which have a strong business

case for achieving the desired Results and achieving

tangible benefits are undertaken.

Improved decision-making due to higher-quality

financial management

6.1.2. RAP3 Mechanism

The flow diagram overleaf summarises the RAP3 P4R mechanism and fund flows for both the Managed

Fund and for Technical Assistance. It is an annual process that will be repeated for each year of

implementation (October to September). The following bullet points provide a quick summary of the

mechanism.

1. Define Programme Results (PR) - this defines the results that RAP3 is expected to deliver,

focusing on output indicators, but with consideration of outcome indicators. This step requires a

careful balance of several interdependent, and often conflicting, factors such as balancing budget

constraints against physical targets, balancing benefits to large numbers of poor people against

benefits to the remote poor, which in turn affect Value for Money indicators.

2. Finalise the Programme LogFrame based on defined PRs – linking component level inputs and

outputs to the overall implementation LogFrame and PRs.

3. Prepare overall work programme and annual budget for each component – this acts as the

central mechanism for monitoring and financial management and control. Once this work

programme and annual budget are finalised, the TA costs (which are fixed for the year) will be

calculated as a percentage of the Annual MF budget.

These first three steps are an iterative process to ensure the optimum balance between Programme

Results, Work Programmes and Budgets. This iterative process has resulted in a decision by DFID on

Budget and Results options.


Page 57

Annual Flow Chart of P4R Mechanism for Managed Funds and Technical Assistance.


Page 58

4. Define Disbursement Linked Indicators (DLIs) for all components – these form the

basis for all payments in the P4R approach. Under a true P4R mechanism, the recipient

should pre-finance works and be reimbursed only against results achieved. However,

none of the delivery or implementing partners (DDCs, Contractors, Consultants, and

NGOs) have sufficient funds or access to credit to enable them to undertake significant

work without receiving an advance payment. Such an approach would significantly

hinder the amount of work and results that could be achieved through RAP3. Therefore,

RAP3 has proposed a rolling advance mechanism for works implementation in which

an advance of annual budget is transferred, with top-ups linked to actual progress13

. The

table in section 6.1.3, item 1 describes the risk mitigation strategy for such advances.

Where possible, DLIs will include successful completion of pre-defined progress results

and outputs. The DLIs and their target dates will define the annual DFID payment

schedule for RAP3. The payment schedule will include details of the „evidence’ that will

be provided to confirm that each DLI has actually been achieved.

These first 4 steps plus the associated TA cost calculations form the Implementation Plan for

each year.

5. Sign agreements with delivery and implementing partners – where feasible, these

agreements will also be based upon the key principles of P4R, linking payments to

specific DLIs. These agreements and the budgets defined in them create a „Commitment

to Pay‟. Commitment Accounting starts at this point, enabling RAP3 to know the true

balance available for other initiatives and for monitoring partner progress against these

agreements

6. Execution of planned activities, expenditure incurred and tagged against DLIs – All

RAP3 activities are either directly or indirectly related to the achievement of a DLI.

Financial transactions will be recorded at district and central levels and tagged against a

specific DLI, to enable direct traceability of each payment to a Programme Result. This

tagging is the key enabler for P4R Accounting ensuring complete transparency and

accountability in the fund flow system.

7. Reimbursement claims filed with RAP3 office – As the implementing partners submit

claims for activities completed or results achieved, these create a „Liability to Pay‟.

Accrual Accounting is used to record these expenses as they are submitted, rather than

waiting for the actual payment transaction to be completed, more closely linking them to

actual achievement of results rather than just cash transactions which are often delayed

for due diligence checking. This accrual accounting gives better view of the financial

position of the programme at any instant, enabling more accurate financial monitoring

and forecasting.

8. RAP3 makes payments upon delivery of results – after having completed appropriate

due diligence checks, including verification of results and payment calculations, RAP3

will make the payment transfers in accordance with the relevant Agreement requirements

and offset these against the accrual accounting. The time from submission of partner

13 The time taken to draw down on these tranches will vary between districts and will be used to inform second

year advances. Unused DFID funds can be rolled over to the next financial year and used for emergency maintenance up to December as has happened in the RTI Pilot districts and with the Helvetas Trail Bridge SWAp.


Page 59

claims for payment and RAP3 payment of them will be within 30 days. RAP3 will also

make all relevant staff and expenses payments from the TA element of the programme.

9. RAP3 invoices DFID based on pre-agreed DLIs – RAP3 will invoice DFID at the end of

each calendar month, stating which DLI‟s have been achieved during the month. The

invoice amount will be a sum of the total DLI payments plus the 1.99% administration and

management fee plus the pre-agreed percentage cost for the TA costs.

10. DFID pays RAP3 – within a pre-agreed timeframe (30 days) from submission of a valid

invoice.

11. Annual Review – the annual review will be held before the final payment is made at the

end of each Implementation year (September). Ideally the review will take place in

August alongside the main RAP3 annual reviews with our GON partners. It will include a

review of progress and results achieved against the programme LogFrame, Work

Programme and Annual Budget. It will also review the variations between the

Commitment Accounting, P4R Accounting and Accrual Accounting. Where significant

variations against plans and between accounts are found, RAP3 and DFID will decide

jointly whether an adjustment needs to be made in the end of year invoice or in the next

year‟s annual plans and budgets.

RAP3‟s Performance Management and Verification (PMV) component and our Integrated

Decision Support System (IDSS) should mean that any such variations are highlighted as soon

as they occur and appropriate adjustments agreed with DFID sooner rather than later. There

should be „no surprises‟ at the time of the annual review. Interim reviews can be held at any time

during the implementation year should the IDSS identify actual or potential delays in achieving

DLIs or results targets.

6.1.3. Risk Mitigation Measures

Ref Risk Mitigation

Measure Tools used

1.

RAP3 funds are not

used for their

earmarked purpose

Minimise funds

available for

misuse at any point

in time.

Close financial monitoring and adjust % Rolling advance

according to the MCPM risk rating of districts14. 10% for high risk

districts.

RAP3 sub- contracts with implementing partners and suppliers

include a range of risk management mechanisms. These include:

an advance payment bank guarantee for larger value

contracts

milestone payments with no advance for smaller lump

sum contracts

performance guarantee for works contracts

insurance requirements (including indemnity and

professional liability) for service and works contracts to

defined coverage and financial limits

Audit accounts and

fund flows

Through internal auditing procedures for all RAP3 funds plus

through GON Office of the Auditor General audits of RAP3 funds

channelled through DDF (RAP funds are included in both GONs

Red Book and White Book)

2.

Budget priorities not

based on actual

needs of the intended

LRN budgets

based on GON

approved planning

LRN priorities are defined in the District Transport Master Plans

(DTMPs) and Annual Road Asset Management Plans (ARAMPs),

which in turn prioritise works based on socio-economic and traffic

14 MCPM can be found at lbfa.gov.np


Page 60

beneficiaries processes data. All other components are linked to the LRN programme.

These will be approved by District Councils in their annual

meetings (December)

Work programme

and Budget based

on agreed

Programme

Results and

LogFrame

The overall and annual RAP3 budget priorities are established as

part of an iterative process that balances Programme Results

with physical output targets and associated budgets. This

process includes defining who the intended beneficiaries and

their needs are.

3.

Lack of multi-year

perspective in

budgeting causes

delays in

procurement and

fund disbursement

Use DTMP for

advance planning

and procurement

The condition survey conducted for DTMP preparation plus

subsequent annual post monsoon survey data can be used to

prepare ARAMPs in time for inclusion in GON Annual Budgets.

Carry-over of RAP3 funds allows for early procurement of specific

maintenance contracts.

4.

Lack of transparency

of plans, budgets and

fund use at local

levels

Public disclosure of

all RAP3 plans,

budgets, fund use

Through RAP3 website and open data approach, plus information

boards at all RAP3 offices and work sites. All sub-projects will

follow GON public audit procedures as a minimum standard and

be subject to RAP3 internal audit.

5.

Inaccurate budget,

fund flow and

progress forecasting

Implement

commitment, P4R

and Accrual

Accounting

Systems

The RAP3 financial management system, which is integrated with

the M&E system through an Integrated Decision Support System

(IDSS), allows for Commitment accounting in addition to P4R and

Accrual accounting to support improved forecasting. The IDSS

will also support a „dashboard‟ facility to keep track of actual

against planned fund flows and progress. Risks will be built in to

the work programme and DLI / payment schedule.

6.

Inaccurate reporting

of progress and

results

Independent

verification

The DLI / payment schedule includes details of the evidence to

be submitted to confirm that each DLI has been achieved. In

addition, triangulation of M&E data from various sources will be

used for verification - planned and spot check internal audits,

public audits, beneficiary verification and feedback mechanism,

MEL consultant verification.

7. Rent seeking and

corruption

Follow Anti-

corruption

procedures

Including internal audit, tracking of elapsed time between

eligibility for payment and actual payment received, tagging

expenditure transactions to specific DLIs to measure true costs

and cost data analysis and comparisons across teams,

components and districts.

8.

Weak capacity of

GON delays progress

and disbursement

Provide technical

assistance

Our TA team, including DTLs, will be fully responsible for working

closely with GON and other implementing partners, providing

technical and management assistance as necessary through the

annual support plans, to ensure progress and results are

delivered to pre-agreed plans, where possible. See the risk

matrix for further details.

9. Theft of RBG/RMG

wages

5 person teams for

cash withdrawals

RAP3 to follow RMO recommendations and RAP2 incident

review.

6.2. FINANCING MAINTENANCE

While RAP2 operated outside the GoN Financial Management System (FMS) for road

construction, the SWAp objectives of the RTI Pilot component has meant that it should ideally

operate within the GON system. As a first step in this direction, a short term fund flow

mechanism has been tested for road maintenance works in the seven pilot districts, using GON‟s

Financial Management System at the district level. RAP3 will adopt a similar mechanism for

funding maintenance related works through the GON system thus greatly improving coordination

with, and support from, GON agencies at both the central and local levels.


Page 61

As part of this initiative, an assessment of fiduciary risks in the LRN sector was conducted in

2012 with the primary objective of:

Identifying overall fiduciary risks associated with LRN support by DFID

Assessing the risks involved in using government systems in LRN sector at national and

district level and in relevant line ministries & departments.

Assessing the risks of using short term fund flow mechanism for road maintenance works

Government Details Risk Ratings

Public Financial Management System High

Risk of Corruption High

Assessment of Reform Credibility Partially credible

Short term FMS proposed for RTI Pilot maintenance works Moderate

MOFALD PEFA and FRRAP reforms- March 2012-2015 Partially credible

The fiduciary risk assessment (FRA) was conducted as per DflD's practice paper - 'How To Note

- Managing Fiduciary Risk when Providing Financial Aid' (HTN, 2011). The assessment was

undertaken as a combination of desk review of available information, documents, progress

reports, and audit reports. Field visits were conducted to assess the operations of government

system. The approach included discussions with officials of Financial Comptroller General office

(FCGO), MOFALD and other government departments

6.2.1. Short Term Risk Mitigation Measures

A flow chart by RTI Project management showing the flow of funds for maintenance under the

RTI SWAp pilot is outlined below. These, effectively, represent a short term strategy because

they do not contemplate medium or long term reform.


Page 62

It has three essential characteristics:

RTI have appointed staff (DAMEs and SAMEs) in each district to oversee and support

activities. Experience of other donor funded projects in the sector shows that this

approach substantially mitigates risks that might otherwise be anticipated;

Payments are made based on certified work completed. That is to say, once funds have

been transferred to the districts, cheques can only be drawn from the designated bank

account when both the Chief of the District Technical Office and the District Asset

Manager Engineer (appointed by the project) have signed off on work done to date.

Based on the DTO and DAME‟s recommendation the LDO can sign the cheque.

6.2.2. Define Disbursement Linked Indicators (DLIs) for all components

These form the basis for all payments in the P4R approach. Under a true P4R mechanism, the

recipient should pre-finance works and be reimbursed only against results achieved. However,

none of the delivery or implementing

Although not, at this stage, fully integrated into the GoN payments system the intention is to

move towards doing that. In the meantime, involving DDC officers in making payments and

using, wherever possible, GoN systems for such things as procurement will enable the

engagement between the project and DDCs to be more meaningful. (See previous page)

It is considered that the mechanism has been effective and has sufficient controls in place such

as a locally based member of RTI, output based funding and the requirement to obtain RTI

approval for certain activities. DDCs might consider that their actions are being overly

constrained and monitored. However, given the widespread concerns expressed in FRA it is

inevitable that RAP3, in the first instance, should adopt a cautious approach. As the relationship

between RAP3 and the 14 participating DDCs develops and confidence and trust flourishes then

Planning1. Works programme based on annualcondition survey and AAMP for maintenance of DRCN construction

2. Procurement of contractors/RMG based on GON Procurement Act 2063 and Regulations 2064

3. P4R arrangement for replenishment

DFID Agreement to use for maintenance works payments

Disbursement1. DDF sets up DFID Ledger to track disbursement of maintenance funds

2. RTI Pilot transfers funds to DDF account

3. Payments for works made against actual results

Pilot Audit

Requires NOL by Pilot TA

Signed off by Pilot TA


Page 63

it will be possible to relax some of the controls e.g. approval limits can be raised, more of the

Annual Support Plan spending could be handled by the DDC on behalf of the project.

Considering the above points the risk is still assessed to be Moderate.


Page 64

RT

I S

EC

TO

R M

AIN

TE

NA

NC

E P

ILO

T

FU

ND

FL

OW

ME

CH

AN

ISM

FO

R T

HE

RO

AD

MA

INT

EN

AN

CE

WO

RK

Dis

tric

t (A

ME

s)R

TI

Ce

ntr

e

1 2 3 4 5 6 7 8 9 10

Ste

pF

low

dia

gra

m

Re

qu

ire

d A

ctio

n

DD

C w

ill r

etu

rn the u

nspent am

ount

to R

TI. D

DC

will

pro

vid

e a

ccess to

the a

ccounting d

ocum

ents

to R

TI

and D

FID

as a

nd w

hen r

equired for

audit, and p

rogra

mm

e r

ela

ted

report

s

Arr

ange technic

al

and fin

ancia

l audit

thro

ugh third p

art

y

and c

arr

y o

ut

inte

rnal audit as

an w

hen n

eeded

Pre

pa

re p

ay

me

nt

sch

ed

ule

an

d f

ore

cast

mo

nth

ly b

ud

ge

t b

y

DD

C/D

TO

RT

I r

ele

ase

fu

nd

to

Do

no

r fu

nd

ing

Aco

un

t, G

a 4

.4 t

hro

ug

h D

istr

ict

De

ve

lop

me

nt

Fu

nd

Fu

nd

tra

nsf

er

to B

an

k A

cco

un

t M

ain

tain

un

de

r ca

pit

al

he

ad

(G

a

2),

Op

era

tin

g A

cco

un

t

DD

C m

ain

tain

se

pa

rate

le

dg

er

for

roa

d m

ain

ten

an

ce e

xp

en

dit

ure

un

de

r R

TI

fun

d w

ith

de

tail

of

ex

pe

nd

itu

re,

am

ou

nt

pa

id f

or

pu

rpo

se,

ba

nk

ch

eq

ue

an

d V

ou

che

r d

eta

ils

Su

bm

it m

on

thly

sta

tem

en

t o

f e

xp

en

dit

ure

wit

h d

eta

ils

of

da

te o

f

ex

pe

nd

itu

re.

Do

LID

AR

/RT

I

Co

ord

ina

tor

RT

I S

EC

TO

R M

AIN

TE

NA

NC

E P

ILO

T

Sig

nin

g

Carr

y o

ut pro

cess, re

com

mend &

appro

ve

DD

C/D

TO

Sig

nin

g

Sig

nin

g

Initia

te a

nd c

arr

y o

ut h

irin

g a

nd

pro

cure

ment pro

cess a

nd s

eek N

o

Obje

ction L

etter

(NO

L)

from

RT

I

centr

e and s

ign the c

ontr

acts

. S

end

a s

et of contr

act to

RT

I

Centr

e/C

oord

inato

r

* support

to p

repare

bid

docum

ents

* in

volv

e in b

id e

valu

ation a

nd

recom

mendation

* support

to a

dm

inis

ter

the c

ontr

act

* H

e w

ill b

e o

ne o

f th

e invitee m

em

ber

of

bid

evalu

ation c

om

mitte

e

Ide

nti

fy m

ain

ten

an

ce w

ork

s, p

rio

riti

se a

nd

pre

pa

re l

ist

of

ma

inte

na

nce

act

ivit

ies

to b

e c

arr

ied

ou

t u

nd

er

dif

fere

nt

roa

d

corr

ido

rs f

rom

RT

I p

roje

ct f

un

d

Se

lect

im

ple

me

nta

tio

n m

od

ali

ty a

nd

ba

sed

on

Lo

cal

Fin

an

cia

l

Ad

min

istr

ati

on

Re

gu

lati

on

, 2

06

4,

pro

cure

go

od

s, h

ire

co

ntr

act

or

or

form

use

rs' c

om

mit

tee

or

an

y o

the

r a

pp

rop

ria

te s

erv

ice

s a

nd

wo

rks

Ag

ree

me

nt

DD

C r

eq

ue

st R

TI

to r

ele

ase

of

succ

ee

din

g t

ran

che

wit

h a

fte

r

ad

just

me

nt

wit

h t

he

ea

rlie

r re

lap

se o

f b

ud

ge

t

Co

nti

nu

e t

he

pro

cess

re

lea

sin

g b

ud

ge

t to

DD

C u

p t

o s

eco

nd

la

st

tra

nch

e a

nd

ass

ess

th

e b

ala

nce

an

d e

xp

ect

ed

ex

pe

nd

itu

re f

or

the

la

st t

ran

che

of

fin

an

cia

l y

ea

r t

o a

vo

id f

ree

zin

g o

f b

ala

nce

fun

d

Carr

y o

ut field

measure

ment,

pre

pare

paym

ent cert

ific

ate

( b

ill),

check, appro

ve a

nd p

ay

Monitor

field

activitie

s a

nd r

ecom

mend

cert

ific

ate

(bill

) fo

r paym

ent upto

cert

ain

defined lim

it a

nd a

bove that g

et

concura

nce fro

m R

TI centr

e. Lim

it is

defined in the M

annual. K

eep r

ecord

and

copy o

f p

aym

ent cert

ific

ate

.

Keep p

aym

ent re

cord

and

monitor,

guid

e to

AM

Es/D

DC

/DT

O

Mo

nit

or,

gu

ide

to

AM

Es/

DD

C/D

TO

Ve

rify

, co

nfi

rm a

nd

ap

pro

ve

by

RT

I a

nd

no

tify

to

DF

ID v

ia R

AP

.

* M

onitor,

support

, guid

e to

AM

Es /D

DC

/DT

O

* carr

y o

ut te

chnic

al audit o

f

hirin

g p

rocess

Ass

ist

to D

DC

/DT

O t

o c

arr

y o

ut

con

dit

ion

surv

ey

, p

rio

riti

se r

oa

d a

nd

ma

inte

na

nce

act

ivit

ies

an

d t

o p

rep

are

lis

t

DD

C w

ill s

end m

onth

ly r

equest to

RT

I

Support

to p

repare

month

ly fore

cast and

recom

mend

RT

I to

ensure

budget need a

nd

rele

ase fund to D

DC

DD

C w

ill s

end m

onth

ly r

equest to

RT

I R

ecom

mend for

succeedin

g tra

nche

RT

I to

ensure

budget need a

nd

rele

ase fund

Pro

vid

e r

ele

vant account sta

tem

ent,

copy o

f already p

aid

paym

ent

cert

ific

ate

etc

. to

RT

I

Revie

w a

nd v

erify

sta

tem

ent of

expenditure

and a

dju

st w

ith the e

arlie

r

rele

ase o

f budget, p

repare

and

recom

mend for

succeedin

g tra

nche.


Page 65

7. BUDGET AND PAYMENT SCHEDULE

A detailed budget estimate has been prepared based on the Implementation Option chosen by

DFID. This has a spend target of UK£10.6 million by March 2014 to be achieved through

advance procurement of materials for road construction (gabion wires) and transfers up to the full

first year value into District Development Funds for LRN maintenance and the Helvetas managed

Trail Bridge SWAp fund for trail bridges.

This report presents summary budget data. The detailed budget estimate is available in MS

Excel on request.

7.1. OVERALL AND ANNUAL BUDGETS

The total programme budget as defined in the Contract is UK£31.55 million, of which UK£4.51

(14.3%) is allocated for Technical Assistance and UK£27.04 (85.7%) to the Managed Fund for

works and support initiatives.

The table and chart below summarise the cost estimates by year and by component.

Inception

PhaseYear 1 Year 2 Year 3 Year 4

Overall

Programme

Component

%

Technical Assistance 120,813 1,368,545 1,288,321 1,228,293 506,111 4,512,083 14.3%

Component 1: LRN Asset Management 0 10,173,014 3,992,614 2,754,891 2,233,131 19,153,649 60.7%

Components 2 & 3: Economic

Infrastructure and Income Generation83,819 2,290,379 2,043,040 1,359,775 796,377 6,573,391 20.8%

Components 4 & 5: Capacity and

Institutional Development & Policy and

Harmonisation

1,287 285,572 213,159 95,361 26,007 621,386 2.0%

Component 6: Performance Management

and Verification65,527 332,682 124,462 122,025 44,154 688,849 2.2%

Component Totals 271,447 14,450,191 7,661,596 5,560,344 3,605,780 31,549,358 100%

Annual % 0.9% 45.8% 24.3% 17.6% 11.4% 100%


Page 66

The inception phase costs are actual costs and are less than the contracted and invoiced

amounts15

. Years 1 to 4 are estimated costs based on contractually agreed rates and best

estimates of unit costs for construction works and support services. These unit costs are

presented elsewhere in this report.

7.2. RESULTS BASED PAYMENTS

The payment mechanism for RAP3 implementation is results based with payments to be made

against Disbursement Linked Indicators (DLIs). The proposed DLIs for year 1 implementation

are summarised in the table below.

15 The difference between actual costs and the invoiced amount has been deducted from the Year 1 October

amount in the detailed payment schedule.

Disbursement Linked Indicators (DLIs)Yr 1 Allocation

* Yr 1 Amount £

PDO 1: Employment generation under RAP3 7.4% 1,072,277

Direct Employment days on LRN 95% 1,018,663

Direct Employment days on IG/EI 5% 53,614

PDO 2: Implementation of LRN Asset Management Component 66.4% 9,595,237

% Fund transfers to DDF for maintenance 39% 4,060,000

% payments for procurement of goods (materials, tools, equipment) 14% 1,500,000

% LRN Asset Management DLIs 47% 4,035,237

PDO 3: Implementation of Economic Infrastructure and Income

Generation Components14.7% 2,121,108

Fund transfers to Trail Bridge SWAp (Helvetas) 24% 501,024

% Trail Bridge programme DLIs 3% 55,669

% Income Generation / Economic Infrastructure DLIs 74% 1,564,415

PDO 4: Implementation of Capacity Building and Policy & Harmonisation components2.0% 293,024

% achievement of Central level Support Plan 8% 19,979

% achievement of Private Sector Support Plan 5% 6,660

% achievement of District level Implementation Plans 35% 133,193

% capacity building / policy & harnonisation DLIs 30% 133,193

Total Managed Fund Amount in Year 1 13,081,647 OTHER 9.5% 1,368,545

Technical Assistance Fee 90% 1,231,690

% fee charged against achievement of above DLIs 100% 1,231,690

Annual Results 10% 136,854

% achievement of Key LF Indicators - To be defined from LogFrame

with MEL Consultants & DFID. 100% 136,854

Total Contract Value for Year 1 14,450,191 * PDO a l location is % of tota l Year 1 contract va lue, DLI a l location is % of relevant PDO value

Output 1: Employment for poor and disadvantaged groups in RTIA

Output 2: Improved sustainable access due to climate resilient RTI infrastructure works

Output 3: Improved access to economic opportunities through training, infrastructure development

Output 4: Strengthened institutional capacity to sustainably manage rural transport infrastructure


Page 67

The methodology applied in establishing and allocating amounts to DLIs is provided in a

separate briefing paper, also contained in Annex 2 of this implementation plan.

The detailed calculations and assignment of amounts to DLIs and sub-DLIs is available in MS

Excel.

7.3. YEAR 1 PAYMENT SCHEDULE

The table and charts overleaf present the forecast monthly and cumulative entitlements to

payment against the DLIs. This is essentially the payment schedule for year 1 of

implementation. The amounts shown under each month are the amounts earned in that month.

Invoices for these amounts will be submitted in the first few days of the following month and will

therefore be paid by DFID in the following month. For example, the amounts earned in October

will be invoiced and paid in November.

Please see Annex 2 for detailed explanation of Year 1 DLI targets and how they work and are

calculated and Annex 3 for the associated Invoicing and Payment Procedures.

The table below summarises the key payment targets and the forecast amounts for those target

dates. These payment targets include the amount invoiced during the Inception Phase.

Target Date Target Amount Forecast Amount Difference

December 2013 UK£3.7 million UK£3.33 million UK£0.37 million under

March 2014 UK£10.6 million UK£10.43 million UK£0.17 million under


Page 68

Output OctoberNovember

+1st wk Dec

Remainder

DecemberJanuary

Output 1: Employment for poor and

disadvantaged groups in RTIA (20%)1,041 1,041 6,207 52,101

Output 2: Improved sustainable access

due to climate resil ient RTI

infrastructure works (30%)

608,290 1,244,200 1,343,563 1,220,898

Output 3: Improved access to economic

opportunities through training,

infrastructure development and private

sector engagement

472,108 409,465 234,070 237,669

Output 4: Strengthened institutional

capacity to sustainably manage rural

transport infrastructure

37,104 48,853 37,199 20,883

OTHER 75,662 160,397 152,627 144,202

Monthly TOTAL 1,194,205 1,863,956 1,773,666 1,675,752

Cumulative TOTAL 1,194,205 3,058,161 4,831,827 6,507,579

Output February March April May


disadvantaged groups in RTIA (20%)148,717 221,282 236,958 236,958




1,530,690 1,134,854 909,088 614,338




sector engagement

153,416 108,003 108,003 108,003




9,133 30,634 10,655 10,655

OTHER 173,428 140,739 119,077 91,325

Monthly TOTAL 2,015,383 1,635,513 1,383,780 1,061,278

Cumulative TOTAL 8,522,962 10,158,475 11,542,255 12,603,533

Output June July August September Year 1 Total


disadvantaged groups in RTIA (20%)143,090 8,898 8,098 7,888 1,072,277




625,227 265,227 98,863 - 9,595,237




sector engagement

110,369 110,369 69,636 - 2,121,108




26,639 39,958 21,311 - 293,024

OTHER 85,240 39,964 18,634 137,597 1,338,891

Monthly TOTAL 990,564 464,415 216,541 145,485 14,420,538

Cumulative TOTAL 13,594,097 14,058,512 14,275,053 14,420,538 -


Page 69

8. RISKS AND ASSUMPTIONS

Our Risk Management Strategy will follow the guidance provided in ISO 31000 Risk

Management Systems. The Risk Management process is summarised below and includes a

detailed risk assessment, risk evaluation, monitoring and review, and communications and

consultation.

Risk Management Process

We have identified some risks in our technical methodology, and will develop a more

comprehensive risk matrix that includes technical, political, social, environmental, legal,

institutional and financial risks, and appropriate risk mitigation measures. Risk treatment options

are:

Accept or share risk – Continue without treatment or mitigation

Treat risk – remove source, change likelihood / consequence

Avoid risk – cancel activity

We will engage the DFID / GIZ Risk Management office to conduct their own (political) risk

assessment of the RAP3 districts.

This risk matrix will be based initially on our previous experiences through RAP and our delivery

partners, but will evolve over time as we learn more about the new RAP3 districts and the

location specific risks. The RTI Pilot has developed a risk matrix for the P4R pilot, which

monitors potential delays in achievement of milestones DLIs and Interim Results Indicators (IRIs)

and uses a traffic light colour system to identify those on target, those that might or have already

slipped (less than 15%) and those that might or have already been delayed significantly and

which might have a knock on effect on other targets.

The risk matrix will be updated regularly based on actual progress and risk related feedback from

the RMO and our implementation teams. Updates will be discussed at the Monthly Board

Meetings and a copy of the updated risk matrix included in the routine progress reports to DFID

and GON. We will also notify DFID of any significant changes or events affecting the risk status

of the programme and the anticipated impact on achievement of results as the need arises.


Page 70

We have carried out a review of the causes of delays and cost overruns in the last year or so,

and many of the risks relate to:

absence of key officials who have not delegated authority for decision making or

authorisations in their absence

difficulties in procuring or delivering goods and materials due to problems with

customs officers, bandhs and transportation problems (inadequate river crossings,

inadequate vehicles, bad weather and landslides)

inadequate high level management of contractors and supervision consultants and

poor conditions for their employees.

reluctance of RBGs and user committees to return to work immediately after the

festival season

We can address the latter two issues through improved management support and revising the

work programmes, but there is little that IMC can do about the first two issues other than

assuming a delay will be incurred and building this into the implementation programme.

8.1. TRANSFER OF MANAGEABLE RISK

On time based service contracts, the Client bears liability for risks. On performance or results

based contracts, the client transfers responsibility and risk to the service provider. Based on

IMC‟s experience of risk transfer on previous contracts, such as Term Maintenance Contracts

with the UK‟s Highways Agency, we have developed a Risk Evaluation tool that uses a traffic

light system to classify the manageability of potential risks.

Summary of major risks

In the diagram above, manageable risks are shown in green and can be transferred to the

service provider (IMC). Non-manageable risks are shown in red and are to be retained by the

Client. Partially manageable risks are shown in yellow. The service provider has some influence


Page 71

over these risks, but not completely, therefore only part of the risk can be transferred. In practice

this could mean that consultant and client would agree on the % split of the consequences of

these risks based on the level of influence the consultant is able to exert to manage that risk.

8.1.1. Non Transferrable risks

These include the following:

1. Impact of Earthquakes

2. Impact of Severe weather events

3. Extended Political Unrest and Violence

8.2. TRANSFERABLE RISK MATRIX

Transferable Risk Matrix for Original RAP3 IMC Contract

#

Item

Risk (without

financial

acceleration) To

whom

Pro

babili

ty

Imp

act

Ris

k R

atin

g

Mitigation measures

Remarks

1 Next election

Election

moratorium on

new project

start-ups

between 1 Aug

and next

election (19

Nov '13, or Mar

'14)

DFID V High AAMP

= High

PARTLY

MANAGEABLE by IMC,

with maintenance works

on DCN from already

approved DTMPs

assumed OK. Procure

consultants in waiting

period and test for direct

funding of pre-approved

improvements.

Potential loss of first

work season on

improvements but

with opportunity to

catch up in following

2.5 yrs.

2 Post project

funding?

DFID funds up

to 80% of

ARAMPs for

whole RAP3

period, with

GoN to take

over full

funding via its

RTI SWAp.

DFID

GoN High UC = High

PARTLY

MANAGEABLE by IMC

by working with DDCs to

demonstrate robust

results from following

DTMPs and funding

robust AAMPs.

3 Procurement

delays

Long

procurement

times by DDCs

for contractors,

consultants

and materials

IMC

DFID High

HIgh

MANAGEABLE by IMC

DAMEs and RAP3

Coordinators chasing

DTO to keep on

programme, with the

alternative of direct

funding if progress

cannot be improved.

Interest in running

contracts and

procurements by

DDC is high, and so

DDCs should

respond in order to

avoid the DF

alternative.


Page 72

4 Poverty

Reduction

Compatibility of

RTI SWAp with

poverty

reduction

objective of

RAP3 could be

scrutinised.

DFID High Med Med

PARTLY

MANAGEABLE by IMC,

as the inevitable

consequence of SWAp,

by making the case for

(a) preservation of

present road asset

necessary to sustain

poverty reduction

measures, and (b) the

general economic devt

attributable to roads.

DTMPs and AAMPs

prioritise by

population with no

reference to

poverty, leading to

case where more

elites will enjoy

more road

improvements

because the volume

is there to justify

works.

5 DTMP

DTMP's as

foundation of

LRN works,

shown to take

no account of

poverty in

prioritisation of

works, (done

rather by

population).

DFID

IMC High Med Med

PARTLY

MANAGEABLE - by IMC

by working on LRN

Policy which could be

refined to use poverty

ratings in the

prioritisation of the

DTMP. Needs champion

in Govt to carry this

concept to policy

amendment.

IMC has established

good relationships

in DoLIDAR, with

the coordination

office in the new

DoLIDAR

headquarters.

6 Leakage

Leakage at

DDC caused

by rent seekers

holding back

signatures for

payment of

invoices

IMC

DFID High Med Med

MANAGEABLE - by

IMC DAMEs and

Support Consultants

exercising tight checking

on all payment

procedures using RAP3

funds, and by RAP

Coordinators visiting the

field doing random spot

checks on quality and

quantity,

7 Unused

DDFs

DFID money

stuck in DDF,

which if

scrutinised,

could be seen

as DFID

money out but

not yet used to

reduce poverty

in any shape or

form.

DFID Med Med Med

PARTLY

MANAGEABLE by IMC

by RAP3 DAMEs and

Support Consultant

monitoring a limited

imprest system within

DDF, to be topped up by

RAP every time balance

drops below 25% of

monthly planned

requirement.

8 District

relations

Short time to

develop

relationships,

with RAP staff

moving full-

time into new

Districts only

after Inception.

IMC Med Med Med

MANAGEABLE by doing

follow-up workshops to

gain genuine

acceptance of hurriedly

done DTMPs agreed

with lower officials

during Inception. DTL's

mobilised at beginning

of September.

Political leaders

sent lower

representatives to

get the DTMP "out

of the way", but

when it comes to

the real spending,

interests will be

raised.


Page 73

9 Bandh

Political

disruption,

bandhs

IMC

DFID Med Med Med

MANAGEABLE by IMC

under "normal" Nepal

conditions by allowing

extra down time in all

programmes, and

making a catch-up effort

when things have

temporarily slipped

back.

IMC has dealt with

bandhs in previous

RAPs, which have

never suffered

completion delays

for this reason.

10 Extortion

Demands by

political parties

and gangsters

for

contributions

from work

groups,

contractors,

NGOs,

Supervision

Consultants

and RAP3

offices.

IMC

DFID High Low Med

MANAGEABLE - by

following BOGs and

enlisting help of the

RMO in some

demonstation field cases

to raise appreciation of

RAP3 stance on this.

Ultimate counter is to

stop development funds

locally.

11 Political

interference

Political

interference in

prioritisations

and use of

labour.

IMC Med Med Med

PARTLY

MANAGEABLE by IMC

thro' interaction on

DTMP prioritisation in

AAMPs to avoid direcly

associated bandhs, and

also to allow workers

from all parties to gain

RAP work.

Labour allocation

problems in the

Terai and eastern

Districts may still

arise.

Follow RMO

guidelines and

poverty survey,

NGOs used for

social mobilisation

in 10 districts, esp

for UCs.

12 Long snows Climate effects IMC

DFID Med Med Med

MANAGEABLE 2-month

snow stoppages in high

Districts by IMC by using

adaptable mobile SBGs

with sufficient numbers

for completion in Yr 4.

UNMANAGEABLE

within 3.5 seasons if

there are extensive

snow stoppages

because foreshortenng

the already short

working season.


Page 74

13 Under

bidding

Under bidding

by contractors

to the extent

that they

cannot deliver

the works to

the required

standard.

IMC Med Med Med

MANAGEABLE by IMC

thro' (a) RAP DAMEs

reviewing Engineer's

estimates, (b) enforcing

specs by RAP3

Coordinators and

DAMES doing spot

checks on selected site

of interim certificates on

DDC contracts from the

start of RAP3 and (c)

request better guidelines

for deciding non-

responsiveness.

This is a

development on

contracts with

DDCs, where

contractors feel that

they can do less

work at lower quality

and still collect full

payment.

14 Collaboration

Collaboration

amongst

contractors in

RAP3 bidding

IMC Med Med Med

MANAGEABLE - by IMC

and DDCs by offering an

e-bidding option, and a

tight surveillance by

RAP DAMEs and

Support Consultants

during tender drops,

stopping the tender

process if needed and

going for a rebid.

E-bidding used in

RAP1, and later

taken up by DoR

and now DoLIDAR

and some DDCs.

Not used much, but

the fact that it is

available frustrates

the blocking of bid

drops at offices.

15 Manipulation

Manipulation of

setting out to

alter the site

measurements.

IMC Low Med Low

MANAGEABLE - by

recording the setting out

pegs with instruments

and local referencing.

Setting out of RAP

earthen roads uses

unsophisticated

tools, and the result

is simply pegs in the

ground. These can

then be

manipulated.

16 Theft

Theft of funds

or materials

provided by

RAP

IMC Low Low Low

MANAGEABLE - by

insisting on payment

procedures thro' banks,

and for materials by

arranging for secure

stores and yards with

stock books and

constant attendance.

Incidence of this has

been very rare on

earlier RAPs, where

the person trusted

to collect the cash

for the bank has

absconded, or been

robbed on the return

trip before

distributing to the

group.

KEY DCN = District Core Road

Network

ARAMP

=

Annual Road Asset

Management Prog

DTMP =

District Transport Master

Plan UC = User Committee

RTISWA Rd Transp I/structure sector-wide approach.


Page 75

ANNEX 1: PROCUREMENT PROCESS

Detail of Goods and Works Procurement Procedures:

Contract

Size (NRs) Procurement Method

Contract Type

Bid Procedure

Remarks Responsibility & Authority Standard Bid Document (SBD) for

Goods & Works

>1 million

Nat

ion

al C

om

pet

itiv

e B

idd

ing

(NC

B)16

Inte

rnat

ion

al C

om

pet

itiv

e B

idd

ing

(IC

B)

>6

million

Good

Unit rate contract

Multi-year agreement

Design supply and installation agreement

Turnkey agreement

GoN (PPMO) – SBD for national competitive bidding (document as extended by RTI SWAp)

Post notice and publish in National newspapers with 30 17days min bid period

Post notice and publish in National & International newspaper & website with 4518 days

Prequalification/post qualification needed

Conduct pre bid meeting before 10 & 15 days in case of NCB & ICB

19 respectively

Quotation must be valid for a period of o If < 100 M, min 90 days

o If >100 M, min 120 days

DAME prepare annual procurement plan and

before initiation get prior approval from RTI

Centre

DAME prepares draft bid notice, document

and recommend

DDC/DTO check, verify and approve by

competent authority as per LBFAR

DDC/DTO conduct opening / evaluation with

assistance of DAME, who will act as one of

the invited member of bid evaluation

committee.

DDC/DTO obtain NoL from RTI Centre before

contract signing

1 to 6

million

30 to

500

million

GoN (PPMO)- SBD,

Medium contract for

NCB/ICB (document as

extended by RTI SWAp

Post notice and publish in National newspapers with 30 20days min bid period

Post notice and publish in National & International newspaper & website with 4521 days

16 As per PPR 31 17 As per PPA 14 (4) 18 As per PPA 14 (4) 19 As per LBFAR 102 (1) 20 As per PPA 14 (4) 21 As per PPA 14 (4)


Page 76

6 to 30

million

Works

Unit rate contract

Agreement & lump sum figure amount

Cost reimbursement agreement

Times & materials rate agreement

Management agreement

Repair & maintenance or management agreement based on performance

Piece work agreement

GoN (PPMO)- SBD, Small

contract I A for national

competitive bidding

(document as extended by

RTI SWAp)

Prequalification/post qualification needed

Prequalification criteria apply to the contract, which value is more than 6

22

million

Conduct pre bid meeting before 10 & 15 days in case of NCB & ICB

23 respectively

Quotation must be valid for a period of o If < 100 M, min 90 days

o If >100 M, min 120 days

Cost estimate of work contract value up to 624 million should be declared in advertisement

DAME prepare contract document for

signing.

DDC/DTO’s competent authority as given in

LBFAR signs contract.

1 to 6

million

GoN (PPMO)- SBD, Small

contract II A for national

competitive bidding


RTI SWAp)

0.15 to 1 million

Sealed

Quotation 25

Goods

Unit rate contract

Or as specified in LBFAR,2064( 2007), Schedule-82

Good-GoN (PPMO) –SBD

for sealed quotation


RTI SWAp) Post notice and publish in National OR Local

newspapers with 15 days min bid period26

Conduct pre bid meeting before 7 days of bid

submission date.

Quotation must be valid for a period of 45

days27

DAME prepares draft bid notice, document

and recommend

DDC/DTO check, verify and approve

DDC/DTO conduct opening / evaluation with

assistance of DAME

DDC/DTO obtain NoL from RTI centre before

contract signing

DAME prepare contract document for signing.

Approve and signed by DDC/DTO as per

LBFAR.

Works

Unit rate contract


Cost reimbursement agreement


Management agreement



Work-GoN (PPMO) –SBD

for sealed quotation


RTI SWAp)

Or modify the SBD to suit

other contract type

22 As per LBFRAR 82 (1) 23 As per LBFAR 102 (1) 24 As per LBFAR 99 25 As per PPA 40 & LBFAR 77 26 As per PPA 40 (3)& LBFAR 77 (3) 27 As per LBFAR 77(7)


Page 77

< 150,000

Dir

ect

Pu

rch

ase

or

Neg

oti

atio

n28

Good

Unit rate contract

Or as specified in LBFAR, 2064(2007), Schedule -82

Good-GoN (PPMO) –SBG

for Direct Purchase


RTI SWAp)

Invite written rate or proposal from suppliers

and contractors. Undertake formal evaluation

and prepare report.

In case, where a sole supplier has the

exclusive right to supply such proprietary

goods may be procured from such a supplier

or through his/her authorized dealer or

agent.29

Should not be given works twice to one

Construction Company within one fiscal year.

DDC/DTO initiate the process with assistant of DAME

Prepare & recommendation -DAME

Checked & Approved by – DTO/DDC as per LBFAR

DDC/DTO obtain NoL from RTI centre before contract signing

Works

Unit rate contract





Or as specified in LBFAR, 2064, Schedule -83

1. Note: Threshold limits are based on figures including VAT Note 2. Nol –No objection Letter

28 As perPPA,2063 41& LBFAR 76 (1) 29 As per PPA 41 (B, C) & LBFAR 76(1)3


Page 78

Rural Access Programme (RAP 3), Service (Supervision Consultant) selection process (Quality and

cost based selection) - Flow diagram

2.

3.

4.

5.

6.

7.

Preparation of ToR

Preparation of Short listing and Technical proposal

Evaluation criteria

Preparation of Request for Proposal

(RFP)

Advertisement for EoI, distribution of EoI

documents

Short-listing of Consultant

Notification to selected consultants and invite technical and financial

proposals

Receipt of proposals (Technical +Financial)

Opening of Technical proposal Financial proposal remain sealed & shall be

deposited in secure place.

Evaluation of technical

Notification to consultants secured the minimum qualifying

marks and indicates date of financial proposal opening.

Financial proposal opening and evaluation

Calculation of combined score (Technical &

Financial) and ranked the proposals

Negotiation on technical and financial conditions (as per

necessity)

Sign Contract

>= (1) Firms qualify, PA 26 (2)

Yes

Pre bid meeting

7

days

21

days

10

days

21

days

20

days

7

days

7

days

7

days

Total = 100 to 146

46

days

Note: Time period required shown for 8 to 11 SCs, hiring in single process from CTA.


Page 79

ANNEX 2: DLI’S FOR YEAR 1 IMPLEMENTATION

INTRODUCTION

This note has been prepared to address some of the concerns and queries raised by DFID

during their review of the draft Implementation Plan and proposed Year 1 DLIs. These concerns

were raised at the meeting of 2nd

October 2013 and in the written comments sent by email on 4th

October. This note refers to two excel spread sheets, the Detailed Cost Estimate and the DLI

sheet. These have been submitted to DFID along with the Implementation Plan.

COST ESTIMATES

Detailed Cost Estimates

A detailed cost estimate has been prepared using the standard DFID commercial proposal pro-

formas, building on from the pro-formas contained in Section 5 of the main IMC / DFID contract. It

provides a detailed cost estimate for the inception phase and for each year of the implementation

phase, and for the following component groups:

Technical Assistance (TA)

Local Road Network Asset Management (LRN)

Economic Infrastructure (EI) and Income Generation (IG)

Capacity & Institutional Development (CB) and Policy & harmonisation (PH)

Performance Verification and Management (PMV)

Costs for climate change adaptation and disaster resilience are included under each component as

appropriate. E.g Resilience training is included in the CB component, slope stability in LRN

component.

Compliance with Contract Conditions

The following conditions have been followed in preparing the detailed cost estimates:

a) The total contract duration is 4 years, the total contract value remains at UK£31.55 million of

which the total TA value remains at UK£4,512,07530 equivalent to 14.3% as defined in Section 5

of the contract.

b) The amount for the inception phase is UK£367,647.3, including the one month extension to end

October.

c) Fee rates under the Technical Assistance cost estimate are as per pro-forma 1 of Section 5. Fee

rates under the Managed Fund are as per the schedule of rates contained in Annex C3 of the

contract, or lower in some cases.

d) The 1.99% Fund handling and administration charge has been applied only to the actual

implementation budgets under the managed fund. It has not been applied to associated

30 Actual cost estimate amount comes to UK£4,512,083, £8 over budget. This will be adjusted later to ensure

TA spend remains within the contract value.


Page 80

management costs (fees and expenses). The total charge is therefore less than shown in Section

5 of the contract.

Schedule 4 Special Conditions, Clause 13 price changes (see clause below) makes provision for an

increase in fees and reimbursable expenses rates up to maximum limits every 2 years. Such

increases have not been included in the detailed cost estimates as standard contract management

practice is to fix the contract price on original rates. However, DFID will need to include provision in

their future budgets to cover these escalations.

ESTABLISHING DLIS

Linking DLIs to LogFrame Outputs

Each Output in the LogFrame that is related to the RAP3 Implementation contract (Outputs 1-4

only), is aligned with the programme components. See table below. Disbursement Linked Indicators

(DLIs) have been developed for each of these Outputs / Components.

Logframe Output Associated RAP3 Component

Output 1: Employment for poor and disadvantaged groups in RTIA

None directly, but achieved through works in LRN / EI / IG – components 1, 2, 3.

Output 2: Improved sustainable access due to climate resilient RTI works

LRN Asset Management – component 1

Output 3: Improved access to economic opportunities through training, infrastructure development and private sector engagement

EI and IG – components 2 and 3

Output 4: Strengthened institutional capacity to sustainably manage rural transport infrastructure

CB and PH - components 4 and 5

All outputs indirectly DRR and PMV – components 6 & 7 Technical Assistance

Output Level DLIs

The nature of RAP3 is that most output results can only be achieved in the medium to long term –

annually at best. An exception to this is employment days which can be measured continuously. It

was therefore necessary to develop DLIs that provide a steady income to cover operating costs for

implementation, especially given the accelerated implementation programme and high monthly

spend rates in the first six months.

13. Price Changes

All Fee rates shall remain fixed for the first 2 years and will be adjusted in line with CPI for International staff up to a maximum ceiling of 3% for any increase awarded. The national consultant’ fee rates will be adjusted in accordance with be the Consumer Price Indices (including salaries) published in the Quarterly Economic Bulletins by the Government owned Nepal Rastra Bank up to a maximum ceiling of 10% for any increase awarded. Further reviews will be carried out every 2 years throughout the duration of the contract.


Page 81

The main DLIs therefore include two main types of payment mechanism – payment against a

milestone or payment against progress. .

Milestone DLIs are linked to fund transfers to GON accounts for SWAp associated works (LRN

maintenance and trail bridges), to the signing of contractual agreements and to the preparation

of detailed implementation plans.

Progress DLIs are based on percentage achievement of a detailed implementation plan

The above DLIs tend to be linked to inputs rather than outputs, so two further Results Based DLIs

have been included:

Employment Days – payment based on a unit rate per employment day provided through RAP3

works

Annual Results – payment based on % achievement of a selected number of Logframe Output

(and possibly Outcome) indicators against annual targets. The indicators and annual targets are

yet to be defined, and will be agreed jointly between the RAP3, MEL and DFID Nepal teams by

December 2013.

Sub-DLIs

The detailed implementation plans for each district and each component will include a number of

DLIs similar to the output level DLIs above. These are referred to as sub-DLIs. An indicative list of

sub-DLIs has been prepared and included in the DLI spread sheet to enable monthly forecasting, but

will need to be reviewed and refined after December31 when the detailed implementation plans are

prepared.

Technical Assistance DLIs

There are no clear milestone DLIs that can be applied to the TA component. A better reflection of

the performance of the TA team is the delivery of the Output DLIs. Therefore, the DLI for TA is a

percentage payment against achievement of the above DLIs. See section 4 below for more details.

ALLOCATING AMOUNTS TO DLIS

Allocating Amounts to Outputs

Amounts assigned to each Output are equal to the total cost of the associated components from the

detailed cost estimate plus a pro-rated share of the PMV costs – see the table below for an

explanation of how each Output amount has been calculated.

31 Detailed implementation plans cannot be prepared until the LRN condition surveys and ARAMPs have been

prepared, scheduled for November and December, and cannot be finalised until the District Councils meet and approve the ARAMP and the implementation plans for all components in their district, likely to take place in December and January.


Page 82

Output Actual Component Cost in Year 1

Adjustment for Emp. Days

Adjustment for PMV Allocated Amount

Output 1 – Employment days

NA 10% of Output 2 (excluding advance procurement amount) and Output 3 costs added

£ 0 £ 1,072,277 £ 1,072,277

Output 2 – LRN

10% Output 2 deducted (excluding advance procurement amount)

Pro-rated PMV costs added (80%)

£ 10,173,014 - £ 843,239 £ 265,462.63 £ 9,595,237.33

Output 3 - EI/IG

10% Output 3 deducted Pro-rated PMV costs added (18%)

£ 2,290,379 - £ 229,038 £ 59,766.96 £ 2,121,108.38

Output 4 - CB

Pro-rated PMV costs added (2%)

£ 285,572 £ 7,451.94 £ 293,023.94

£ 12,748,965.11 £ 0 £ 332,681.54 £ 13,081,646.65

ALLOCATING AMOUNTS TO DLIS WITHIN OUTPUTS

Each output amount is divided between the DLIs under it on a percentage basis.

This percentage is generally proportional to the actual cost distribution of the cost items associated

with each DLI.

Output 1 – Employment Days DLIs

The total amount allocated to this output is 10% of the associated works costs as described above.

Unit rates for employment days have been estimated based on LRN length and EI/IG budgets (days

per £ invested) for the different types of work or support to be provided. The unit rates for LRN

elements are presented in the table at the end of this paper. EI /IG unit rates have been presented

in the Implementation Plan.

The percentage share between LRN and EI/IG days is directly proportional to the total estimated

days to be provided within the budget allocations.

Payment will be made at the unit cost for each day employment directly provided through RAP3

funded initiatives.

Only direct employment days are included in this DLI. Secondary or indirect days have not been

included though these may be included in the Annual Results DLI later in the programme if an

acceptable method for estimating and measuring them can be developed.

Output 2 – LRN DLIs

The LRN DLIs include direct cost DLIs for transfers and procurement of goods, and a progress DLI.

The amounts have been allocated as follows:

Fund transfers to DDF for maintenance – amount is equal to the cost estimate for maintenance

works. Payments will be made against actual transfers made.


Page 83

Payments for procurement of goods – amount is equal to the cost estimate for items to be

procured. Payments will be made against percentage achievement of the detailed procurement

plan.

LRN Asset Management sub-DLIs – amount is the remaining balance of the total LRN budget

minus the above two amounts. The total LRN budget includes non-works32 costs. Payment will

be against percentage achievement of the detailed implementation plans for LRN.

Output 3 – EI / IG DLIs

The EI/IG includes a direct cost DLI for transfers and two progress DLIs. The amounts have been

allocated as follows.

The EI/IG component is divided into two sub-components: Trail bridges and Non-trail bridges. The

amounts allocated to these two sub-components is proportional to their implementation budgets.

i. The total year 1 implementation (works) budget for trail bridge programme is £ 530,346, this

is 26.25% of the total year 1 implementation budget (£ 2,020,721)

ii. The total year 1 EI / IG component budget (shown as SED in the detailed cost estimate) is £

2,290,379. This budget includes direct implementation costs plus management costs (non-

works costs).

iii. 26.25% of the EI/IG component budget is £ 601,110. This is the amount allocated to the

Trail Bridge programme.

iv. The remaining balance of £ 1,689,260 is allocated to the remaining EI / IG programme.

The trail bridge amount is further divided between two DLIs. 90% is allocated to the fund

transfers, with 10% allocated to percentage achievement against the trail bridge implementation

plan.

These amounts are then converted into percentages of the total component value and are

equivalent to 23.6%, 2.6%, 73.8% for trail bridge transfers, trail bridge progress, remaining EI/IG

component progress.

Output 4 – CB & PH DLIs

All the CB / PH DLIs are progress DLIs against detailed implementation plans. As with the EI/IG

component, the allocation of the output budget among the four DLIs is based on a pro-rated division

of the total CB /PH component costs based on the actual implementation budgets assigned to them.

For example, the amount allocated to the central level support plan implementation is calculated as

follows:

i. The total year 1 implementation (works) budget for central level ASP (annual support plan) is

£ 15,000, which is 6.81% of the total year 1 implementation budget (£ 220,000)

ii. The total year CB/PH component budget is £ 285,572.

32 Non-works costs for LRN component include design and supervision consultants, fund handling and

administration charge, fees and expenses for district level Engineering Officers in new road construction districts.


Page 84

iii. 6.81% of the CB/PH component budget is £ 19,979. This is the amount allocated to the

Central Level ASP DLI.

iv. The same process is followed to calculate the amounts for private sector ASP, district ASPs,

and the general capacity building and policy harmonisation programme.

ALLOCATING AMOUNTS TO SUB-DLIS

The sub-DLIs are the most flexible level of the results based payment mechanism. In general they

have been established as a combination of milestone DLIs and progress DLIs and defined in terms of

a percentage of the associated DLI amount.

Sub-DLIs have been designed to support effective cash flow management within the programme, to

ensure all payment liabilities and operating costs can be met and prevent any delay to

implementation that might result through lack of funds.

Sub-DLIs have also been designed to reflect the performance of the RAP3 team, and therefore are

linked to activities and milestones that under our direct control. Milestones or activities that are

beyond our direct control have been assigned minimal payment amounts, where used. These

typically include sub-DLIs requiring formal approvals by GON, DFID or other external parties.

Sub-DLIs and the amounts allocated to them are likely to be reviewed and revised on a regular basis

to adapt to actual progress, to risk events and risk factors. They will be managed in a flexible

manner to ensure that the overall programme remains on course to achieve the annual and overall

results targets. All changes will be agreed with the DFID Nepal team.

ALLOCATING AMOUNTS TO TA AND ANNUAL RESULTS

In addition to the Output related budgets and DLIs are the Technical Assistance and Annual Results

budgets and DLIs.

The cost estimate for Technical Assistance in year 1 of implementation is £ 1,368,544.5. Of this

amount, 10% is allocated to the annual results DLI.

The Annual Results DLI will be linked to achievement of key LogFrame indicators at output and

possibly outcome level, and will be defined through consultation and agreement between the MEL,

RAP3 and DFID Nepal teams. A minimum performance target will be defined for the year and

payment will be proportional to the actual results achieved during the implementation year.

The total Managed Fund amount for year 1 is £ 13,081,647. The remaining 90% Technical

Assistance amount is equivalent to 9.42% of this Managed Fund total for year 1. The TA costs will be

paid as a direct proportional fee on every pound earned through the achievement of the Managed

Fund (Output) DLIs. In future years, the ration of TA costs to MF costs will vary and the fee adjusted

accordingly. For example, the monthly forecast total for all Output DLIs in November is £ 1,703,559.

At 9.42%, the TA fee for that month will be £ 160,397.

By linking the TA payments to the achievement of Output DLIs links and the annual results, the TA

payments also become results based.


Page 85

EMPLOYMENT DAYS UNIT RATES DATA

LRN Employment Days - Unit Rates Unit Quant Lab % Days per unitCost per unit

(NRs)

Equivalent

'cost' per

day (NRs)

Actual works

budget (NRs)

Employment

Days estimate

New construction - HUM km 25,000 15,500,000 620 418,500,000 675,000

New construction - MUG km 25,000 15,700,000 628 329,700,000 525,000

New construction - KAL km 25,000 12,000,000 480 228,000,000 475,000

New construction - BAJ km 20,000 9,500,000 475 218,500,000 460,000

New construction - JUM,DAI,ACH,DOT,DAD km 18,000 8,000,000 444 - -

New construction - JHA,MOR,PAR,SAN,SIN km 16,000 7,000,000 438 - -

Emergency Maintenance km 163 20% 20 30,000 1,500 4,900,000 3,267

Routine / recurrent maintenance km 6,000 85% 99 35,000 353 210,000,000 595,000

Specific maintenance km 2,072 50% 417 250,000 600 518,000,000 863,333

Periodic maintenance (gravel) km 560 30% 250 250,000 1,000 140,000,000 140,000

-

Improvements - JUM,DAI,ACH,DOT,DAD,

PAR, SAN, SIN km 27 40% 8,667 6,500,000 750 175,000,000 233,333

Improvements - JHA,MOR km 12 70% 16,333 7,000,000 429 84,000,000 196,000

2,326,600,000 4,165,933


Page 86

ANNEX 3: INVOICING AND PAYMENT PROCEDURES

INTRODUCTION

RAP3 is a large and complex programme adopting a results based payment mechanism. This is

a new approach for the RAP3 team, IMC and DFID, so it is important to ensure that these parties

agree on the detailed invoicing and payment process and the associated control and verification

systems. The monthly expenditure forecast for RAP3 is very large, reaching almost UK£2 million

at peak times, which has implications on IMCs cash flow management and overdraft facility. It is

important that the invoicing procedures are sufficiently robust to ensure that all invoices are paid

quickly and that IMC‟s overdraft facility is not over-extended, putting the commercial viability of

IMC at risk, whilst also ensuring that RAP3 continues to meet DFID‟s results targets, value for

money and due diligence requirements.

INVOICE AND PAYMENT PROCESS

The diagram below summarises the payment flow chart. Further explanations are given in the

paragraphs below.

Steps 1-2: Liability to Pay

Results based payments are linked to a set of Disbursement Linked Indicators (DLIs) as defined

in the Implementation Plan for Year 1, and which will be reviewed and updated each

implementation year. DLIs include specific progress milestones and rolling advances for works

implementation against agreed plans. For each DLI, an appropriate form of „evidence‟ of

achievement is also defined.

The achievement of DLIs, some of which include transfers to government accounts or payments

to RAP3 partners and suppliers, creates a „liability to pay‟ to both RAP3 and DFID.

Steps 3-4: Draft Invoices

RAP3 will prepare and submit draft invoices, based on the actual DLIs achieved and associated

requests for payment / transfer, to the DFID Nepal team for review. The DFID Nepal team will

review these, seek clarifications where necessary and endorse the DLIs and associated


Page 87

payments being claimed. This should ensure that the invoices are acceptable to DFID and can

be processed quickly, with no cause for delay.

The invoice format and supporting documents are described in more detail in section 3 below.

The RAP3 team will keep copies of the DLI „evidence‟ on file and make these available for

inspection at any time, but they do not need to be attached to the invoice itself.

Steps 5-6: Invoice and Payment

Once DFID Nepal have endorsed the draft invoice, RAP3 will send the final invoice to IMC head

office, who will then formally submit the invoice to DFID in East Kilbride in accordance with the

terms and conditions of the main IMC / DFID contract.

The contract terms and conditions state that invoices will be paid within 30 days, but it has been

the normal practice of DFID to try and pay within 15 days. It is important that this accelerated

payment process continues under RAP3, and should be easily achievable now the „draft invoice‟

steps have been included.

Steps 7-8: RAP3 payments and costs

Once the DLIs and payment requests are accepted by DFID, through their endorsement of the

draft invoice, the payment requests become valid and RAP3 is obliged to honour the liability to

pay. IMC transfer funds to the RAP3 operating account, make these payments, and cover all

other operating costs to ensure operations continue smoothly and progress remains on target.

Although operating costs are numbered as step 8, the last step in the payment process, the

boxes are placed at the start of the process reflecting the fact that they are also the entry point

for the whole cycle. During October, the first month of the RAP3 implementation year, the

provision of operating costs by IMC kick starts the cycle, and can therefore be considered as

step 0.

INVOICE AND PAYMENT TIMING

Monthly Cycle

RAP3 will follow a monthly cycle for invoicing and payment as shown below.

Key timings and dates

To ensure that IMC are able to provide sufficient funds to cover the operating costs and ensure

the programme remains on target against agreed implementation plans, it is important that the

following dates and timeframes are observed, though taking into account weekends, public

holidays and special considerations as necessary.

21 22 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

1 Progress reports identify DLI achievements

2 Requests for payment / transfers received

3 Draft invoice prepared and submitted to DFID Nepal

4 DFID Nepal review and endorse draft invoice

5 Invoice finalised, sent via IMC to DFID EK

6 DFID pay invoice

7 IMC pay partners within 30 day limit

8 Operating costs incurred for implementation

Month 2Month 1Step No. Action


Page 88

For identifying DLI achievements, RAP3 monthly progress reports will cover the period 22 to 21

of each Gregorian calendar month33.

All requests for payment against DLIs or for fund transfers shall be submitted by RAP3

delivery and implementation partners by 26th each month.

RAP3 will submit draft invoices by 29th at the latest.

DFID Nepal will review and give feedback on the invoices within 2 working days, by 4th

at the latest34.

RAP3 will finalise invoices and submit them within 2 working days to DFID EK, by 8th

each month.

DFID EK will aim to make payment on invoices previously endorsed by DFID Nepal

within 15 calendar days.

RAP3 will make payment against endorsed DLIs / fund transfers within 30 calendar days.

OTHER ISSUES

Exchange Rates

All DLI amounts are calculated and will be paid in Pounds Sterling. For DLIs that are associated

with fund transfers made in Nepali Rupees, the actual transfer amounts will be invoiced to DFID.

Clause 29.2 of the General conditions states that foreign currency expenses will be reimbursed

at the exchange rate stated in the London Financial Times on the preceding Friday. Under RAP2

we have invoiced DFID using the actual exchange rates applied by our Standard Chartered Bank

when transferring funds from the IMC UK account to our Nepal account. This is a more accurate

reflection of actual costs to IMC. We will continue this practice of invoicing DFID against the

actual bank exchange rate

DLI Changes

The latest approved list of DLIs, the amounts allocated to them and the evidence required to

demonstrate their achievement are attached to this procedure.

As implementation progresses, it may become apparent that some DLIs or the amounts allocated

to DLIs may need to change. All changes to DLIs or the amounts allocated to them will be made

through consultation between the RAP3 and DFID Nepal team and the DFID Nepal team will

approve the revised DLI list.

Typical reasons for changes may include:

Exchange rate fluctuations affect actual transfer amounts and the actual amount for DLIs

directly linked to such fund transfers. Gains or losses on these DLIs will be adjusted and

balanced through changes to amounts allocated to other selected DLIs

Risk events affect delivery of agreed implementation plans in certain districts, or certain

types of works or support initiatives. Adjustments to implementation plans and

33 To allow sufficient time for field level reports to be checked and consolidated through to central level. Once

the IDSS is introduced and fully functioning, it may be possible to shift this timing to later in the month. 34

International accounting best practices and IMC internal procedures require that monthly financial reporting is completed and invoices submitted by the 4

th of the following month.


Page 89

associated DLIs will enable the overall programme to stay on course to achieve key

results targets. For example, delays in specific maintenance works might be offset by

increasing routine or period maintenance works.

Fund handling and administration charge

The 1.99% fund handling and administration charge covers costs associated with the

administration of the Managed Fund. The charge is applied only to the main implementation /

works budget items; it is not applied to the associated management costs. See the detailed

Implementation Phase Cost Estimate for details.

The charge covers costs such as:

external audit on RAP3 accounts (carried out by KPMG annually and as required to

resolve issues)

legal and financial advisors called in as required to ensure RAP3 complies with relevant

changes in GON finance, procurement and employment regulations

bank charges on fund transfers and overdraft facility

The DLI amounts are inclusive of the fund handling and administration charge and this is

therefore not shown separately on the invoice.

INVOICE FORMAT

Covering Sheet

The invoice format will include a simple covering sheet that provides all the information required

under Clause 28 of the general conditions of the contract and the following information:

Item

IMPLEMENTATION YEAR 1

Contract Value (for year 1)

Previously Invoiced Amount

THIS INVOICE Balance

Managed Fund

Technical Assistance

Total

DLIs Claimed

Behind this sheet will be a list of all DLIs achieved during the invoice period and the associated

amounts claimed during the invoice period as shown below.

DLI Ref

DLI Description

Evidence of achievemen

t

ACHIEVEMENT AMOUNTS

Previous Achievement claimed

Cumulative Achievement at month end

Amount previously invoiced

Amount claimed this invoice

Cumulative amount invoiced

TOTAL


Page 90

Supporting Narrative

The invoice will include a short narrative to support the DLI claims and will include:

any changes made to the DLIs or the amounts allocated to them, as agreed with the

DFID Nepal team

whether there are any outstanding queries on DLIs and the response agreed with the

DFID Nepal team

any adjustments that have been made in this invoice to address queries raised

previously.

RISKS AND RESPONSE MEASURES

There are a number of issues that may affect DFID‟s endorsement or payment of RAP3 invoices

or of IMCs ability to fund operations. These are identified below with proposed general mitigation

measures to prevent their occurrence and response measures to be taken if the risk event does

arise.

Potential Risk General mitigation measure

Proposed response measure

1. RAP3 progress reports incorrectly state DLI achievement

RAP3 internal audit procedures will include verification of progress and DLIs

a. If incorrect data is identified before draft invoice submission, the invoice will be revised and a correct version submitted

b. If incorrect data is identified between draft invoice endorsement and main submission, the invoice will be revised and a correct version submitted to DFID EK, with a note sent to DFID Nepal informing them of the change

c. If incorrect data is identified after invoice submission, DFID will pay the invoice and RAP3 will make any necessary adjustments in the next invoice they submit

2. RAP3 partners report incorrect achievement of DLI

RAP3 internal audit procedures will include verification of progress and DLIs

a. RAP3 agreements with delivery and implementation partners will clearly state that payment claims against DLIs or fund transfers become valid only once DFID Nepal endorse them through their endorsement of the draft invoice.

b. The same response options as in 1 above will be applied.

3. DFID Nepal query achievement of a particular DLI in the Draft Invoice

RAP3 ensure evidence of DLIs achievement is provided before including in invoice. DFID report any feedback that may raise concerns over DLI reporting

a. If the query can be clarified and the issue resolved through discussion between the RAP3 and DFID Nepal teams (without delaying invoice submission by more than 2 days), draft invoice is revised if necessary and endorsed by DFID Nepal before submission to DFID EK.

b. If the query cannot be clarified quickly and the query is based on unconfirmed facts, DFID Nepal endorse the invoice including the particular DLI claim, the query is investigated further and adjustments made in the next


Page 91

invoice if necessary. c. If the query cannot be clarified quickly and the

query is based on facts confirmed by members of the RAP3 or DFID Nepal teams, RAP3 remove the particular DLI claim from this month’s invoice, the query is investigated further and adjustments made in the next invoice if necessary.

4. RAP3 data is not entered or is incorrectly entered in DFID FM system.

RAP3 is already entered in system with current contract details DFID Nepal team ensure RAP3 data is updated quickly following contract amendments

a. DFID Nepal team inform RAP3 team as soon as a potential problem becomes apparent. RAP3 team will adjust implementation plans and reduce ‘liability to pay’ amounts accordingly, to be readjusted once the system is updated.

5. IMC has insufficient funds to pay liabilities in full

Manage implementation plans to balance ‘liability to pay’ amounts with fund availability.

a. DFID Nepal agree to process a mid-month invoice during months with high (over UK£1 million) ‘liability to pay’ amounts if specifically requested by RAP3 team.

b. DFID pay high value invoices within 15 days, enabling IMC to use these funds to pay liabilities within 30 day limit.

Implementation Plan - rapnepal.comrapnepal.com/sites/default/files/report-publication/Inception...

Documents

Transcript of Implementation Plan - rapnepal.comrapnepal.com/sites/default/files/report-publication/Inception...