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Document ofThe World Bank

Report No: 76135-MA

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF US$ 4.55 MILLION

TO THE

KINGDOM OF MOROCCO

FOR A

LOCAL GOVERNMENT SUPPORT PROGRAM (PACT)

APRIL 18, 2013

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective April 15, 2013)

Currency Unit = Moroccan DirhamUS$ 1.00 = MAD 8.53

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

AFD French Development AgencyCIDA Canadian International Development AgencyDAJED Director for Legal Affairs, Studies and Documentation (Directeur des Affaires

Juridiques, des Etudes et de la DocumentationDAA Directorate of Administrative Matters (Direction des Affaires Administratives)DAAP Procurement Division (Division des Achats et des Approvisionnements)DGCL General Directorate for Local GovernmentsDPL Development Policy LoanGID Integrated Expenditures Management System (Gestion Intégrée de la Dépense)GIZ German Development Agency (Gesellschaft für Internationale Zusammenarbeit)KfW German Development BankLGs Local GovernmentsLOCT Fundamental law on Local GovernmentsMAD Moroccan DirhamONE National Electricity OperatorONEE National Water and Electricity OperatorONEP National Water Supply OperatorPDO Project Development ObjectivePACT Local Development Support ProgramPMT Project Management TeamPSP Private sector participationSDL Local Joint Ownership CompanySOE State-Owned EnterpriseSP Asset company (Societé de Partimoine)VAT Value Added TaxUSAID United States Development Agency

Regional Vice President: Inger AndersenCountry Director: Simon Gray

Sector Director: Junaid Kamal AhmadSector Manager: Franck Bousquet

Task Team Leader: Francois Boulanger

MOROCCOLOCAL GOVERNMENT SUPPORT PROGRAM (PACT)

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT.................................................................................................8

A. Country Context.............................................................................................................8

B. Sectoral and Institutional Context.................................................................................9

C. Higher Level Objectives to which the Project Contributes.........................................12

II. PROJECT DEVELOPMENT OBJECTIVES..............................................................13

A. PDO.............................................................................................................................13

Project Beneficiaries..........................................................................................................14

PDO Level Results Indicators...........................................................................................14

III. PROJECT DESCRIPTION............................................................................................15

A. Project Components.....................................................................................................15

B. Project Financing.........................................................................................................18

Lending Instrument............................................................................................................18

Project Cost and Financing................................................................................................18

C. Lessons Learned and Reflected in the Project Design ................................................21

IV. IMPLEMENTATION.....................................................................................................22

A. Institutional and Implementation Arrangements.........................................................22

B. Results Monitoring and Evaluation.............................................................................23

C. Sustainability...............................................................................................................23

V. KEY RISKS AND MITIGATION MEASURES..........................................................24

A. Risk Ratings Summary Table......................................................................................24

B. Overall Risk Rating Explanation.................................................................................24

VI. APPRAISAL SUMMARY..............................................................................................25

A. Economic and Financial Analyses...............................................................................25

B. Technical......................................................................................................................25

C. Financial Management.................................................................................................26

D. Procurement.................................................................................................................27

E. Social (including Safeguards)......................................................................................28

F. Environment (including Safeguards)...........................................................................28

G. Other Safeguards Policies Triggered...........................................................................29

Annex 1: Results Framework and Monitoring.........................................................................30

Annex 2: Detailed Project Description.......................................................................................34

Annex 3: Implementation Arrangements..................................................................................39

Annex 4: Operational Risk Assessment Framework (ORAF).................................................53

Annex 5: Implementation Support Plan....................................................................................58

PAD DATA SHEETMorocco

LOCAL GOVERNMENT SUPPORT PROGRAM (PACT)PROJECT APPRAISAL DOCUMENT

.

Middle East and North Africa Region

MNSURBasic Information

Date: May 7, 2023 Sectors: Subnational Government administration, urban transport, municipal solid waste, potable water distribution and sanitation

Project ID: P144438 Themes: Decentralization, municipal infrastructure and service delivery, local government capacity and institution building

Lending Instrument: Trust Fund EA Category: C

Team Leader(s): François Boulanger

Joint IFC: No.

Recipient: Kingdom of Morocco

Responsible Agency: Ministry of Interior

Contact: Mr. Abdelouahed Ourzik Title: Gouverneur, Directeur des Affaires juridiques, des Études, de la Documentation et de la Coopération

Telephone No.: +212 537 28 64 27 / 25 Email: [email protected].

Project Implementation Period: Start Date: October 1, 2013 End Date: September 30, 2018

Expected Effectiveness Date: October 1, 2013

Expected Closing Date: August 30, 2018.

Project Financing Data(US$M)[ ] Loan [ ] Grant [ X ] Other (MENA Transition Fund)

[ ] Credit [ ] Guarantee

For Loans/Credits/Others (in US$ million)Total Project Cost : 8.45 Total Bank Financing : 4.55

Total Co-financing : 3.90 Financing Gap : 0

.

Financing Source Amount(US$M)BORROWER/RECIPIENT 3.90

IBRD

IDA: New

IDA: Recommitted

Others (MENA Transition Fund) 4.55

Financing Gap

Total 8.45.

Expected Disbursements (in USD Million)Fiscal Year YR1 YR2 YR3 YR4 YR5 YR6

Annual 0.1 0.7 1 1.1 1.25 0.3

Cumulative 0.1 1.8 2.9 4.15 4.55.

Project Development Objective(s)

The Development Objective of the proposed Grant is to set up a lasting program to provide Local Governments with access to decentralized support services and assistance to institutionalize inter-municipal cooperation.

.

ComponentsComponent Name Cost (USD Millions)

Component 1: Deconcentrated LG support centers 1.95

Component 2: Inter-municipal cooperation and institutional reform of local service delivery

5.95

Component 3: Program Management 0.45

Unallocated (contingencies) 0.1.

CompliancePolicyDoes the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ].

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ ] No [ ].

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment OP/BP 4.01 No

Natural Habitats OP/BP 4.04 No

Forests OP/BP 4.36 No

Pest Management OP 4.09 No

Physical Cultural Resources OP/BP 4.11 No

Indigenous Peoples OP/BP 4.10 No

Involuntary Resettlement OP/BP 4.12 No

Safety of Dams OP/BP 4.37 No

Projects on International Waterways OP/BP 7.50 No

Projects in Disputed Areas OP/BP 7.60 No.

Legal CovenantsName Recurrent Due Date Frequency

Description of Covenant

.

Team Composition

Bank Staff

Name Title Specialization Unit

François Boulanger Sr Urban Economist Task Team Leader MNSUR

Elisabeth Goller Sr Transport Specialist Urban transport services LCSTR

Xavier Chauvot de Beauchêne Sr Water and Sanitation Specialist

Water and sanitation services MNSWA

Renaud Paubelle Infrastructure Specialist PSP issues and solid waste services

MNSSD

Fatou Fall Social Development Specialist Social safeguards MNSSO

Andrew Losos Environmental Specialist Environmental safeguards MNSEN

Sophie Hans-Moevi Program Assistant Project support MNSUR

Soumia Driouch Program Assistant Project support MNCMA

Abdoulaye Keita Senior Procurement Specialist Procurement MNAPC

Non Bank Staff

Name Title Specialization

Fadhel Ghariani Sr Institutional Consultant Institutional reform of service delivery, solid waste services

.

Locations

Country First Administrative Division

Location Planned Actual Comments

Morocco Not yet defined

.

I. STRATEGIC CONTEXT

A. Country Context

1. Since the first Municipal Charter (Charte Communale) in 1976, Morocco has very gradually been expanding the legal and administrative autonomy of local governments (LGs). The last ten years, in particular starting with a major overhaul of the Charte Communale in 2002, have seen no fewer than a dozen laws and many more decrees, each a small step away from centralization. Most notably, the changes eliminated an array of ex-ante controls by the Ministry of Interior and the Ministry of Finance. The process for distributing LGs’ 30% share of national Value Added Tax (VAT) receipts has been made more transparent. Municipalities have also been required to systematically develop participatory medium term investment plans (Plans Communal de Développement).

2. However, key areas of centralization remain either formally or informally in place, including a number of ex ante controls by the central Government. In particular, most key decisions of a LG (budgeting, borrowing, taxing, creating subsidiaries, naming a Secretary General, procurement decisions) remain subject to the approval of the Ministry of Interior. Even when such approval is only supposed to entail a legality check, it is often perceived to constitute a judgment call on municipal managerial decisions. In addition, although by law the municipality is responsible for a wide array of public services,1 national operators still provide a large portion of these services with in practice little or no contractual oversight from LGs, who in theory have delegated the service execution to these operators. In twelve larger urban areas, there is a public local multi-service utility (régie), which is often perceived as reporting more to Rabat than to local stakeholders.

3. This is reinforced by the fact that deconcentration has been even slower than decentralization, with the result that the necessary dialogue between local governments and the State cannot take place at local level through the regional or provincial representative of the State (the Governor or Wali). As a result LGs feel that they lack a counterpart. Deconcentrated staff of line ministries also usually has no decision autonomy on investments in their area, or even sometimes lack knowledge of up-to-date information regarding plans made for the area.

4. The 2011 Constitution has introduced important changes with the aim of furthering decentralization. It follows in a large part recommendations contained in the 2011 report of the Consultative Committee on Advanced Regionalization (régionalisation avancée). In particular, it enshrines two strong principles: the administrative autonomy of LGs (libre administration des collectivités locales), and subsidiarity.2 In addition, transfers of responsibilities from the central to the local level must be accompanied by a transfer of resources. These principles are to be translated into a revised fundamental law on LGs (loi organique des collectivités territoriales - LOCT), which will constitute a new step forward towards a more legally decentralized

1Local public services include potable water supply, electricity distribution, wastewater collection and treatment, drainage, municipal solid waste management, street lighting, urban transport, traffic signaling and parking management, ambulance services, slaughterhouse management, and funeral services. Municipalities are also in charge of local economic development and of an array of hygiene, health and environmental functions as well as socio-cultural services.2Under the principle of subsidiarity, in areas which do not fall within its exclusive competence of the central government, the central government shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the LGs, either at regional, provincial and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at central government level.

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government system.

5. The LOCT will be followed by several related laws and decrees, among which in particular a revamp of the LG finance law (loi de finances locales). The process to transform new constitutional principles, in particular on regionalization, into a detailed and consistent set of laws, regulations, and financial flows is still at an early stage. It is supported by the Bank through several on-going Development Policy Loans (DPLs). For instance, re-assessing the appropriate territorial level to deliver the municipal solid waste service was done during the preparation of the second series of two DPLs (DPL3 and DPL4) on the solid waste sector, which confirmed that such level should remain the municipality (the requirement to include this in the draft LOCT is a trigger for DPL4). Technical assistance in support of the preparation of the Governance (Hakama DPL will help assess how the intergovernmental transfer system (distribution of VAT receipts) can be adjusted to match changed service delivery responsibilities, and the proposed DPL matrix includes prior actions on establishing an appropriate framework for health and education services to be delivered at the regional level.

6. Yet, while the legal framework for this new step towards decentralization is being defined, for different reasons, LGs have not yet developed sufficient implementation capacity to fully take on the responsibilities assigned to them by the pre-2011 laws.

B. Sectoral and Institutional Context

7. The 2011 constitutional reform confirmed the municipalities as the lower tier of the local governments (regions, prefectures, provinces, and municipalities). The municipal competencies cover provision of key municipal services, including water supply and sanitation, electricity distribution, municipal solid waste collection and disposal, street lighting, urban transport, slaughterhouses, markets, socio/cultural/sports centers and funeral services. They are also in charge of drainage infrastructure. The legislator required the municipalities to systematically develop the planning function either through participatory medium term investment plans (Plans Communal de Développement) or service plans, like in the municipal solid waste management. Yet quality of planning remains a key challenge for municipalities.

8. Overall municipal revenues have steadily increased from 2007 to 2012 by 62 %, thanks to the 2008 local fiscal reform. This was particularly due to the transfer of a significant portion of VAT revenues. With some individual exceptions municipalities enjoy reasonable levels of revenues to cover the charges of their mandates. Improving the efficiency of municipal revenue management and diversification of local revenues remain key challenges. Although most municipalities end the year with surpluses and low indebtedness, financial sustainability remains at risk as medium and smaller municipalities lack the capacity to plan, prepare and execute quality and cost-effective projects. Inter-municipal arrangements are thus contemplated to mutualize scarce local resources and capacity, and share economies of scale.

9. Morocco has been investing heavily to improve local service delivery, but there are risks regarding the long term sustainability of these investments in great part due to institutional and capacity constraints. Over the last decade, several national sector plans have directed large amounts to infrastructure for local services in the form of financial incentives to

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investment, in particular in sanitation (Programme National d’Assainissement), solid waste management (Programme National des Déchets Ménagers), urban transport, and urban upgrading (Mise À Niveau urbaine). Yet the policy dialogue conducted between the Bank and the Government under parallel sector DPLs has identified risks regarding the long-term sustainability of these investments. The risks stem not only from financial constraints to maintain and expand existing investments, but in a large part from institutional issues – whether of capacity, ownership, or both.

10. Municipal financial data seems to indicate that LGs have insufficient capacity to plan and prepare investment projects. Although the situation is not homogeneous, urban municipalities have consistently been running cash surpluses in recent years. Their overall low indebtedness level leaves ample room for more investment borrowing despite large unmet needs for investments to cope with rapid urbanization and the necessary modernization of services. While there is a clear need to modernize municipal financial management, for instance, to improve tax collection, the low indebtedness/cash surplus conjunction points to delivery capacity issues, more than to financing issues, as a key cause of insufficient investment in local services.

11. There are problems with the private provision of infrastructure services, which studies have shown to come in large part from insufficient project and contract management capacity in municipalities. The existence of a lively market of private provision of infrastructure services and the strength of national-level operators have been Morocco’s main assets in improving local service delivery over the last two decades. Private provision is however currently suffering setbacks, in the form of some operators pulling out of the market, of an accumulation of payment arrears, of service lapses and general recurrent questioning in the media about the “gestion déléguée” model.

12. As a response, the central government, supported by donors and the Bank through its DPLs, has been carrying out many capacity building activities for LGs. This has not had sufficient impact. The Ministry of Interior has a training department, which develops and runs training for LGs. These courses are not sufficiently technical, do not cover all LGs’ responsibilities and are not necessarily recurrent. The Ministry of Interior has also some sectoral support units for LGs at central level, for instance, the Division for Urban Mobility and Transport. These units are not exclusively dedicated to support LGs, are overwhelmed with administrative tasks, and are not perceived as sufficiently close to LGs. As for line ministries, most of them are not organized to provide support to LGs.

13. Many foreign aid agencies have also financed projects to support LGs’ in the decentralization process. These projects have mainly focused on local development planning, citizens’ participation at local level, transparency, and the organization and management of municipalities.3 They focus mainly on training and awareness rising and do not provide hands-on 3Examples of donor-supported projects include (i) the Local Governance Project, co-financed by the Canadian International Development Agency (CIDA), which supported among others the preparation of municipal development plans, strategic communication at local level and management of local partnerships and human resources (HR); (ii) the Platform for Dialogue between Citizens and LGs, co-financed by USAID, which aimed at strengthening citizens’ participation at local level; (iii) the Strategic Plan to Promote Decentralization in Morocco, co-financed by the Spanish Agency for International Cooperation and Development (AECID), which focused on strategic participative planning as well as HR, local service and asset management for LGs; (iv) ART GOLD, co-financed by the United Nation Development Program (UNDP), which focused on local development plans; (v) the Moroccan Decentralization Process Support Program, financed by the French Agency for Development (AFD), which centered on the relation between local and central services, technical assistance to strengthen local authorities through partnerships with French cities, and the establishment of support centers for policy makers; and (vi) the activities of the Konrad Adenauer Foundation, which focused on legal guides and other publication for local management, municipal self-management, and capacity strengthening, among others of

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support to implement projects. They have not specifically looked at the service delivery capacities and structures of municipalities. Generally, they involved a limited number of municipalities. Many of these projects have also recently been completed. There is currently no comprehensive program that assists Moroccan municipalities to carry out their service delivery functions.

14. Urban growth requires dealing with service delivery needs at the level of the geographical conurbation. The rapid growth of Moroccan cities has led to a situation where few of the essential infrastructure services required in an urban context can be managed at the communal level. Network synergies or economies of scale require large investments to be made at a metropolitan level. While leaving the responsibility for delivering some services, such as solid waste collection, at the municipal level makes most sense due to the proximity with citizens, it would be unrealistic to assume that planning, procurement, project management and contract management skills can be built up to an adequate level of professionalism in all small and medium municipalities at an acceptable cost. Inter-municipal cooperation becomes essential.

15. The institutional arrangements for inter-municipal cooperation have not yet been generalized in all large metropolitan areas. Various options for inter-municipal cooperation are provided by law. The ongoing inter-municipal cooperation experiences are, sector-specific, and limited in scope. There is also a risk that the multiplication of inter-municipal bodies with different geographical boundaries and “ad-hoc” financing schemes through new local taxation lead to considerable complexity of the decentralized government system. This would not allow for the economies of scale and synergies that Morocco needs.

16. There is a relative consensus on the need to experiment with new service delivery models to serve inter-municipal cooperation. In addition to the Bank-supported 2008 study on utility reform in Morocco, the Second Urban Transport DPL and the Third and Fourth Solid Waste Sector DPLs support creating or experimenting with new institutional structures to remedy identified coordination and capacity weaknesses in the delivery of these services. Examples include using local joint ownership companies (sociétés de développement local – SDL), anew legal structure that the law makes available to LGs for economic development, to form inter-municipal or regional asset companies to professionalize capital planning, project management, and private sector service delivery contract management.

17. These new service delivery models could become the entry point to reform state-owned utility operators. The public side of service delivery is in flux, in particular as the state-owned national water supply operator, ONEP (Office National de l’Eau Potable), and electricity operator, ONE (Office National de l’Électricité), have been merged into ONEE (Office National de l’Eauet de l’Électricité). ONEE is testing new PPP-based models, such as pilots for water services in small towns. The above-mentioned 2008 study recommended a re-organization into regional multi-service asset companies, separating investment planning and financing from operations. Its recommendations have not yet been implemented. There is a need to help these various initiatives converge, placing LGs at their core. New service delivery models would bring the management of water, electricity and sanitation services closer to municipalities and provide them with an opportunity to tap the capacities the state-owned companies.

local policy makers.

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18. The reform and modernization of service delivery, especially at inter-municipal level, will require the provision of expertise (Assistance à Maîtrise d’Ouvrage) and incentives. Sector-specific reforms and investment plans in Morocco over the last few years show that none of the issues described above will be tackled without a systematic, reinforced delivery of expertise and incentives to struggling LGs. These issues have been the subject of several prior actions or triggers in Bank DPLs approved or under preparation. The proposed Local Government Support Program (PACT) aims at setting up a comprehensive program that would generalize this delivery while clearly leaving LGs in the driver seat.

C. Higher Level Objectives to which the Project Contributes

19. The higher level objective of this operation is to facilitate the provision of high quality public services to Morocco’s citizens and hence ultimately improve their lives. This will be done by helping the Government of Morocco to set up support program for LGs, which will help them to fully take on their current local service delivery functions and make them ready for the new decentralization challenges introduced by the 2011 Constitution.

20. The decentralization of services in Morocco finds its impulse in several Royal Speeches setting the Kingdom’s reform agenda. In addition, the increase in technical support to LGs from deconcentrated government departments is one of the key recommendations of the Consultative Committee on Regionalization. Additionally, in the Development Policy Letter in support of the 3rd Solid Waste Sector DPL, the Government of Morocco confirmed the alignment of the activities proposed in this operation with its general development agenda. In the Letter, the Moroccan Government stresses that its reform agenda includes “the development and implementation, from 2013 onwards, of a national support program for LGs including support to setting up inter-municipal institutions and public asset companies for local public services” and increasing technical support services to LGs.

21. Territoriality is a cross-cutting beam under the 2010-2013 Country Partnership Strategy (CPS), whereby the Bank committed to “support the Government’s objective to […] increase the role of local government, its performance, accountability, and empowerment.” The proposed grant would fall squarely within this objective. Further, the proposed grant would also be completely consistent with the second CPS pillar: service delivery to citizens.

22. The proposed support is completely aligned with the Bank’s new framework for engagement in MENA. It will contribute to (i) strengthening the governance of local service delivery by helping local governments set up inter-municipal institutions able to share the benefits of economies of scales and manage professionally infrastructure investment and delegated local services; (ii) improving economic and social equity by providing equal access to local services in urban areas, and particularly to low income and informal neighborhoods; and (iii) accelerating the development of smart city as engine of sustainable growth through more efficient management of local service systems.

23. The proposed operation will also allow citizens to rip the benefits of organized metropolitan dynamics (access to additional and improved services) and mitigate metropolitan externalities (congestion, environment stress, etc.) thus contributing in urban areas to boosting

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shared prosperity – one of the World Bank Group Goal.

24. As far as the Transition Fund’s thematic areas are concerned, the proposed operation would fall within the following ones:

Primarily, Enhancing Economic Governance, through creating new and innovative government agencies related to new transitional reforms, building capacity for local government and decentralization, and reforming public service delivery in the local social and infrastructure sectors.

Secondly, Investing in Sustainable Growth, by creating enabling conditions for increased investment in improving the urban environment, and in particular urban transport, solid waste management and wastewater collection and treatment, while strengthening the delivery of these services by the private sector.

And secondly as well, Competitiveness and Integration, as the proposed Support Centers and enhanced inter-municipal institutions will facilitate the planning and implementation of urban infrastructure projects that are critical for the competitiveness of cities in Morocco.

25. The proposed operation is also complementary to the "New Governance Framework Implementation Support Project” approved by the MENA Transition Fund on February 20, 2013. With respect to decentralization, the latter is focused on supporting the fiscal and budgetary planning aspects, including supporting: (i) the reform of the fiscal transfer and equalization system, (ii) capacity building for LG financial management and procurement, and (iii) strengthening the system of planning and performance contracting. The proposed operation looks at enhancing the service delivery capacity within the given fiscal framework. However, the proposed LG Support Centers will provide a useful platform to deploy the tools developed under the “New Governance Framework Implementation Support Project”. Similarly, support to implementing the new public procurement law in LGs will be essential to increasing their capacity to provide some of their services.

26. Finally, the proposed operation is fully in line with policy recommendations under Bank-supported DPLs approved in recent years or under preparation, including the Solid Waste Sector series of DPLs, the Urban Transport Sector series of DPLs, the Plan Maroc Vert DPL, and past support under the Water Sector DPL. It will directly help the Government to implement some of the prior actions or reach some of the triggers contained in the proposed second Urban Transport and fourth Solid Waste Sector DPLs.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

27. The Development Objective of the proposed Grant is to set up a lasting program to provide LGs access to decentralized support services and assistance to institutionalize inter-municipal cooperation.

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28. The proposed Grant would achieve this Development Objective through funding the design and set up of a Morocco Local Government Support Program (Programme d’Appui aux Collectivités Territoriales – PACT), as well as through funding some of the initial support and incentives it will provide.

Project Beneficiaries

29. In its pilot phase financed through this grant, the Local Government Support Program is expected to directly benefit about 20 to 25 municipal administrations. If the pilot phase is successful and the Program is extended at a national level, the Local Government Support Program is expected to benefit all 1,283 municipalities in Morocco. The Program will directly benefit public official and decision maker, who will receive the necessary means to better exercise their functions. It will indirectly benefit all users of municipal services through enhanced service delivery.

PDO Level Results Indicators

30. Progress towards the objective will be monitored by a series of indicators that will measure:

(a) For the PDO:

(i) The Local Government Support Program (PACT) is set-up and operational;

(ii) The financial incentive of the PACT is financed adequately and there is formal commitment to fund the program after grant closure; and

(iii) Number of beneficiaries (male/female) (core sector indicator).

(b) For component one. Deconcentrated LG Support Centers:

(i) The number of deconcentrated single-window LG support centers established;

(ii) The number of Government Departments offering services through the established support centers; and

(iii) The number of LGs who benefitted from support.

(c) For component two. Inter-municipal Cooperation and Institutional Reform for Local Service Delivery:

(i)The number of conurbation associations created or expanded (geographically or in sector terms) with clear/sustainable legal, financial, governance, and staffing arrangements;

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(ii) The number of conurbations with operational asset companies or similar institutional arrangement; and

(iii) Lessons learned from the pilot projects assessed and existence of a plan to continue supporting inter-municipal cooperation.

(d) For component three. Project management, monitoring and evaluation

(i) A monitoring and evaluation system for the Program is operational.

III. PROJECT DESCRIPTION

A. Project Components

31. The proposed grant will finance two main activities, shown in the graph below, in addition to program management. The project activities are described below (more details are included in annex 2).

32. Component 1 – Deconcentrated LG Support Centers (US$1,950,000, of which US$900,000 in terms of local contributions). This component will design and pilot a support mechanism that will provide LGs with technical assistance to prepare and manage projects. Based on the results of the pilot, the support mechanism is expected to be rolled out at a national level. This roll-out is outside the scope of this project.

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33. This activity will draw on existing LG support experiences and mechanisms in Morocco4 and elsewhere to establish local single-window Support Centers for LGs. In these Support Centers a small team of well-trained staff will be able to either directly provide assistance to elected local officials and municipal staff or direct them to available resources and programs at national level or in other LGs (for example it could maintain a roster of sector experts in relevant institutions, e.g. ONEE, basin authorities, etc.). These Centers will provide expertise and information to help officials and technical staff transform ideas or broad objectives into actual projects through assisting with carrying out the steps required by a project, from identification through feasibility studies, bidding, contract management, etc. The Centers could also take a pro-active role in raising local decision-makers’ awareness of existing support programs and tools. Finally, the Centers could foster networking and knowledge exchanges among LGs. Incentive and M&E systems will be set up to ensure the Support Centers’ responsiveness to LG demand and a high quality of services, evaluate their performance and draw lessons for their expansion.

34. Although the design and piloting phase will be led by the Ministry of Interior, LGs will be heavily involved and are expected to assume a leading role in the roll-out of the support mechanism.

35. Sub-component 1.1 - Initial studies and implementation planning. The proposed grant is expected to fund expertise to assist the Moroccan Government with reviewing implementation options and organizing a consultative process to define, in partnership with LGs, central government departments and other stakeholders, the optimal legal and administrative form, territorial mapping, and deployment plan of such Support Centers. This will also include staffing requirements, IT and other resources, budget, etc. The Support Centers will likely be new structures.

36. Sub-component 1.2 - Setting up and operation of a small number of Support Centers on a pilot basis. The proposed grant would also fund the establishment of the first two to three Support Centers and possibly the strengthening of a centralized support unit.

37. Sub-component 1.3 – Tools development. The proposed grant is expected to fund an inventory of existing resources and the system to make them publicly available, so that each Support Center can offer them to LGs. If the inventory shows significant gaps, it would also fund the design of new tools, including possible software and hardware, and/or selected studies.

38. Component 2 – Inter-Municipal Cooperation and Institutional Reform for Local Service Delivery (US$5,950,000, of which US$3,000,000 of local contributions in terms of incentives). This component will include specific consulting services and incentives towards accelerating the formation of inter-municipal cooperation structures and the creation of new service delivery models on a pilot basis. Inter-municipal cooperation structures are necessary to manage local network services, such as urban transport which often needs to go beyond municipal boarders, in an efficient and effective way.

39. Within the framework of these associations, the grant will also finance the creation of

4 For instance, the pilot Support Center in the Region of Rabat- Salé-Zemmour-Zaeir, which given its location close to the central government and other institutions in Rabat could become a lead center providing resources and training to a network of Support Centers.

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inter-municipal or regional public asset companies (sociétés de patrimoine or SP) or other types of institutional arrangements in charge of the day-to-day service delivery on a pilot basis. These companies would have the responsibility of planning and financing infrastructure investments and contracting the operation of service to public or private operators. Whether they would be multi-sector or sector-specific would be decided in a feasibility study.

40. Sub-component 2.1 – Technical Assistance to LGs to set up associations. The grant would finance consulting services to provide hands-on expertise to a limited number of municipalities wishing to form an association on a pilot basis. This assistance would help them design adequate arrangements for governance, budgeting and financial transfers, staffing, incentive mechanisms, etc.

41. Sub-component 2.2 – Stocktaking of private sector participation (PSP) issues, design of a sustainable sector financing framework, design and set up of asset companies (SP). This would include studies, such as a brief study to re-assess what conditions would be optimal in Morocco for preserving effective private sector involvement. Such study would be based on the results of existing sector-specific studies and complement them to draw generic lessons, with a view to designing the new pilots. The grant would also finance the review of possible designs for SPs or other types of institutional arrangements based on international benchmarks.

42. To ensure the financial sustainability of the SPs, the grant would finance the design of sustainable financing models for local service delivery, with an assessment of options for (i) investment financing and debt service, and (ii) the funding of possible structural operating deficits, in particular in the case of urban transport. This would also include exploring the use of financial engineering instruments and structures, as well as the possibility for the SP shareholding structure to include entities other than the conurbation associations or the State.

43. Finally, the grant would finance the support/advice necessary to set up a number of SPs or other executing structures for these associations on a pilot basis. Although the advice will not include the preparation of any specific investments (for instance the program will not fund feasibility studies), it will incorporate the need for SPs to have an Environmental and Social Management System, with the necessary expertise (staffing, budgeting, etc.) to be able to meet the Moroccan environmental impact assessment requirements for downstream investments.

44. Sub-component 2.3 - Incentive mechanisms. The proposed program will also fund an incentive mechanism for the formation of new associations, which could be in the form of a contribution to set-up costs or to all or part of the associations’ incremental operating costs for a defined period.

45. Component 3 – Program Management (US$450,000 + US$100,000 for contingencies). In addition to normal implementation functions, such as project management, procurement and financial management, this component would include planning the deployment of the project activities with participating government departments, regularly following up with each of them on progress towards meeting their commitments, and organizing continued consultations with stakeholders and in particular LGs all along project implementation. The grant would also finance incremental operating costs for the Program Management Team (PMT) and monitoring and evaluation (M&E). The PMT will be in charge of ensuring the overall quality of

17

services provided to LGs through the deconcentrated Support Centers and bringing in international experience and benchmarks as needed.

B. Project Financing

Lending Instrument

46. The financing instrument will be a technical assistance operation financed through a grant by the MENA Transition Fund.

Project Cost and Financing

47. Total project costs are estimated at US$ 8,450,000, which includes US$100,000 for contingency funding (see table below).

48. The proposed MENA transition fund grant would finance project activities up to US$4,550,000 (54% of estimated total requirements). Grant funds would be used to finance 100% of the external expertise and consultant services required for the project activities as well as for the development of tools needed under sub-component 1.3 (such as guidebooks, software, etc.).

49. For Component 1: Deconcentrated LG Support Centers, the Ministry of Interior would provide in-kind contributions to cover project costs for a value estimated at US$900,000 equivalent. These contributions would include staff time made available to the support centers, facilities, conference venues, and transportation.

50. For Component 2: Inter-municipal Cooperation and Institutional Reform for Local Service Delivery, the Ministry of Interior, through the General Directorate of Local Governments (DGCL), would fund the incentive mechanism to be put in place under sub-component 2.3.

51. The funds would come from the VAT funds managed by the DGCL on behalf of LGs. The incentive mechanism would be designed in the early phase of project implementation under sub-components 2.1 and 2.2. The amount required would depend on the characteristics of the mechanism. For instance, the incentive offered might consist of a contribution to initial set-up costs of the new inter-municipal institutions (other than those already covered under the grant) or a contribution to the initial investment plans of these entities, which would be higher. The amount of US$3,000,000 equivalent in the table below is a lower bound for such incentives for which the DGCL has confirmed commitment, and it might be increased once the full design of the incentive mechanism is agreed upon.

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Table of Project costs and Financing (Appraisal stage)

ComponentsFinancing

requirements(in USD)

Sources of financing (in USD)Transition

fundCountry co-

financing Total

Component 1: Deconcentrated LG Support Centers 1,950,000 1,050,000 900,000 1/ 1,950,000Sub-component 1.1: Initial studies and implementation planning 70,000 70,000 70,000Sub-component 1.2: Setting-up and operation of support centers 1,480,000 580,000 900,000 1,480,000Sub-component 1.3: Tools development 400,000 400,000 400,000

Component 2: Inter-municipal Cooperation and Institutional Reform for Local Service Delivery 5,950,000 2,950,000 3,000,000 5,950,000

Sub-component 2.1: Technical assistance to LGs to set up associations 1,000,000 1,000,000 1,000,000Sub-component 2.2: Stock-taking of PSP issues, design of a sustainable sector financing framework, design and set-up of asset companies (SPs) 1,950,000 1,950,000 1,950,000

Sub-component 2.3: Incentives 3,000,000 3,000,000 2/ 3,000,000

Component 3: Program Management 450,000 450,000 450,000

Unallocated (contingencies) 100,000 100,000 100,000

Total 8,450,000 4,550,000 3,900,000 8,450,000Percentage 100% 54% 46% 100%

Notes1/ In-kind contributions.2/ The amount for the financial incentive is a lower bound and will be re-evaluated during the initial design, depending on the instrument used.

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C. Lessons Learned and Reflected in the Project Design

52. Continued coordination among ministries, national entities and local governments is needed for sustained successful results. One of the major impacts of the first Municipal Solid Waste Sector DPL programmatic series was to mainstream coordinated planning to support the local service agenda. This was a major milestone in the way the Government conducts business, not only in the solid waste sector but in other reform areas like in the Urban Transport Sector. The Bank was able to act as a catalyst for a new modus operandi for inter-ministerial collaboration and accompany the Government in a new spirit of openness in which the ministries were looking for partnerships but were not yet working together on cross-sectoral issues.

53. Stability of the implementation unit staff is important. Bank experience also shows that continuity and comprehensiveness of the reform process, which is particularly important in the case of complex institutional reforms, can be unsatisfactory due to frequent changes of the team in charge of implementation. The impact of staff changes is lessened, however, when goals are clearly defined and there are arrangements for monitoring progress.

54. Consensus building among stakeholders, particularly the various government agencies, is crucial. Ensuring the buy-in and cooperation of the various stakeholders is therefore essential for the smooth implementation and the success of the proposed reforms. The experience to date with DPLs in Morocco has shown that the Bank can play a catalyst role in fostering coordination among stakeholders, and the Bank’s involvement helps ensure that key government agencies, at central and local levels, cooperate effectively to carry out sector reforms. It is also evident that the engagement and participation of transport users in service planning and performance will help ensure efficient service provision.

55. Service quality, cost effectiveness and affordability are still suffering from weak managerial and technical capacity at the local level with potential risks affecting the sustainability of private sector participation. Regarding municipal solid waste management, Government efforts were mostly dedicated to help municipalities strengthen their financial and technical capacity to plan and prepare MSW projects (including through the PPIAF-supported introduction of a new generation of bidding documents and model contracts that incorporate international good practice). Despite some improvements, most municipalities are still experiencing difficulties to prepare quality projects as well as to supervise PSP contracts and manage them day-to-day resulting in the accumulation of high amounts of arrears and a number of disputes. This is mostly due to: (a) weak municipal administration and the inability to attract/hire appropriate skills to develop and manage such complex projects/contracts; (b) interference of local politics in project preparation and management unchecked by appropriate governance mechanisms; and (c) ineffective dialogue between public and private partners coupled with a lack of a conciliation mechanism. Institutional responses to address these issues will need to be framed within the new decentralization agenda. The financial and technical capacity of local governments to implement reforms in the urban transport sector is also key. In Morocco as in most countries, local governments have an essential role in the implementation and follow up of urban transport reforms, yet they lack the necessary technical and financial capacity to support these complex reforms.

56. As the focus of the different municipal service support shifts from the initiation

20

stage, focused on large and well-resourced cities, to medium sized and smaller municipalities, the planning and management of capacity-building activities will become increasingly important. Municipalities have been benefiting from intense capacity-building support provided by the Ministry of Interior as well as donors like the AFD, GIZ and KfW. Yet the capacity of regional and local institutions remains below what is needed to take the program into the next phase, including carrying out inter-communal planning.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

57. The Program will be managed by the Ministry of Interior through a project management team (PMT) based on the Ministry's existing organization. The PMT will include the Director for Legal Matters, Studies and Documentation (Directeur des Affaires Juridiques, des Etudes et de la Documentation - DAJED), which is part of the General Directorate for Local Governments (DGCL), the Director of Local Utilities and Concessioned Services (Directeur des Régies et des Services Concédés), and the Director for Administrative Matters (DAA). The PMT will include a Financial Management (FM) consultant and a procurement consultant.

58. The DAJED will be responsible for the implementation of the activities under component 1 and the Director of Local Utilities and Concessioned Services will be in charge of the implementation of component 2. This includes, among others, planning and defining the project activities under each component, preparing TORs, participating in selection processes, organizing consultations and coordinating among stakeholders, reviewing products, implementing and supervision the activities, and monitoring and evaluating. The DAJED and the DAA will jointly be responsible for the project management component 3. This mainly includes disbursement and FM activities, and progress reporting. The DAJED has experience with implementing several LG technical assistance programs funded by either donors, such as the Canadian International Development Agency (CIDA), USAID, and AFD.

59. As already mentioned, fiduciary matters (procurement and FM) will be initially handled by the Directorate for Administrative Affairs (DAA) of the Ministry of Interior, which has experienced staff for these functions and has been handling all procurement and financial management for the Ministry of Interior. To avoid implementation delays experienced in other donor-financed programs, specific staff members would be assigned to this project, supported in the initial phases by external consultants.

60. Starting in 2013, the DGCL has been granted administrative autonomy, which means that it now approves expenditures in its own budget (“ordonnateur”). Therefore, for a more effective implementation of the PACT, fiduciary management might be transferred to the DGCL starting in 2014 (it would be difficult earlier due to the way budgeting functions for grants obtained in mid-year). The principle of this change was discussed with and is supported by both the DGCL and the DAA. It would be conditional to a satisfactory appraisal by the Bank of the newly-acquired fiduciary capacity of the DGCL and to implementation support measures similar to the ones described for the DAA.

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61. In order to ensure an adequate involvement of LGs and other stakeholders in the design and piloting of this Program, a Project Committee will be created. This Committee would be composed of the Secretary General of the MI or her/his representative, the General Director for Local Governments or her or his representative, and LG representatives for activities directly relevant to them. Again, other stakeholders may be invited as appropriate. The Committee will meet whenever necessary (normally at least at monthly basis) at the invitation of the PMT to discuss the needs, validate the overall planning and agree on specific activities or products (TOR, study reports, etc.).

62. Finally, a Steering Committee will be set up to provide strategic directions for the Program. The Steering Committee will include the Secretary General of the MI, the General Director for Local Governments, other Ministries concerned, such as the Ministry of Environment or the Ministry of Urban Planning, and representatives of the LGs. Other stakeholder, such as civil society representatives, representatives of the regions, etc. would join as appropriate. The Steering Committee will meet once or twice a year to define and validate the strategic orientation of the program, to allocate resources, and take other high level decisions.

B. Results Monitoring and Evaluation

63. The Project Management Team would be in charge of implementing and running a robust monitoring and evaluation (M&E) system to track progress and results. Because the proposed project is considered a learning projects, quality M&E is key to help draw lessons from the pilot LG support centers and inter-municipal arrangements being set up. This will provides inputs for design and capacity to implement a future national comprehensive program to support efficiently local Governments through decentralized centers and inter-municipal arrangements. The results framework described in Annex 1 provides the key indicators, targets, and data collection arrangements.

C. Sustainability

64. The PDO of this operation is to set up a lasting support program, which goes beyond the project duration. In particular, the project will design and pilot a support program to provide LGs with access to decentralized support services and assistance to institutionalize inter-municipal cooperation. In particular, the objective of doing pilots is to design and test new structures to ensure they are sustainable, which is all the more essential since the ultimate goal is to scale the program up nationally. The design of the pilots will involve broad consultation and a thorough participatory approach involving different municipal service, central government agencies, donors active in the field and others. It will also build as much as possible on existing structures, instruments and service provision models. The lessons learned from this pilot will be used to set-up a systematic approach to the provision of these support services to LGs, which can subsequently be expanded beyond the pilot municipalities.

65. The project’s sustainability is facilitated by strong country ownership. The decentralization agenda is a key priority the Moroccan Government and there is a recognition at

22

all levels that capacity al local level is essential to make decentralization work. Therefore, the proposed project plays a key role in piloting the creation of the national program to provide LGs with the support services and assistance they need. Additionally, the Moroccan Government is aware of the key role of inter-municipal cooperation in this context and the Ministry of Interior envisages the creation of financial incentives to inter-municipal cooperation in the new LG finance law.

66. Finally, the project also emphasizes on capacity building which will further enhance sustainability. The capacity and institutional building activities seek to create self-sustained LGs, mainly at the project implementation level. Through the project activities, this operation aims at equipping the participating LGs in the pilot project with the necessary capacity and structure to plan, design and manage projects that will improve the service provision to citizens. A strong focus on monitoring and evaluation will help to assess the pilot experiences and draw valuable less for the design of the final program.

V. KEY RISKS AND MITIGATION MEASURES

67. The key potential risks are described in details in the Operational Risk Assessment Framework (ORAF) in Annex 4. The overall preparation risk is rated Low and the overall implementation risk is rated Moderate. Risks identified are manageable and mitigation measures are in place.

A. Risk Ratings Summary Table

Stakeholder Risk M Project Risk

- Design M

M - Social and Environmental L

L - Program and Donor L

Implementing Agency Risk - Delivery Monitoring and Sustainability S

- Capacity M Other (Optional) M

- Governance M Other (Optional)

Overall Implementation Risk M

B. Overall Risk Rating Explanation

68. The overall preparation risk is rated Low and the overall implementation risk is rated Moderate. In the design phase, limited participation by LGs is expected to be overcome by early consultations with interested LGs. In the delivery phase, the upcoming regional and municipal elections, some mistrust in the model of private delivery of local public services, and the difficulties inherent in inter-departmental coordination and the setting up of inter-municipal bodies pose additional uncertainty with regard to the achievement of the PDO and its sustainability. These risks will mainly be mitigated through timely outreach to municipalities after elections, continuous consultations and a their strong involvement in the program, a focus on municipalities that have already started or plan to form inter-municipality arrangement, broad

23

consultations with an array of stakeholders on the results of studies and the design of the Program, and an approach, which starts with a few departments and gradually expands as well as the additional support of the Ministry of Finance.

VI. APPRAISAL SUMMARY

A. Economic and Financial Analyses

69. Economic. Economic benefits from the project would stem from a more effective delivery of municipal services through better-executed investment projects and from better-managed operations and maintenance. Economic benefits would also stem from the increase in LGs’ investments resulting from an increased capacity to prepare good quality projects.

70. However, it is not possible to assess in quantitative terms the contribution of a capacity-building and technical assistance project to increased LGs’ investments and enhanced service provision effectiveness. Therefore, although the economic benefits of the proposed PACT are real, they cannot be reliably estimated.

71. Financial. An essential element of the support to be provided to LGs under the PACT will be the support to ensure that projects benefit from improved financial evaluations. In addition, under Component 2, medium-term financial plans for the proposed inter-municipal institutions will be developed, thus contributing to improving the financial sustainability of LGs’ finances through better planning.

B. Technical

72. The rationale for this operation stems from work and carried out in the framework of several sectoral operations, in particular the Solid Waste and Urban Transport DPLs and the associated analytical work. These operations, the underlying analytical work, and the related consultative activities identified an urgent need to provide local authorities with a comprehensive support mechanism, structures and institutional instruments necessary to enable them to take advantage in an efficient and effective manner of their existing powers as well as the decentralization momentum created by the new Constitution and accompanying laws.

73. Two alternatives to the proposed approach of creating a support program for LGs through the central level, where a considerable amount of experience, capacity and resources exists, were considered. The first alternative was to directly work with local authorities through the grant. This approach was discarded mainly because of (i) its complexity given the large number of local authorities, (ii) the difficulty to reach out to and coordinate a large number of local governments through the grant, (iii) the relative low capacity and resources of local authorities, which would also have been complicated in terms of fiduciary aspects, and (iv) continuity and sustainability concerns.

74. The second alternative was to strengthen the existing support units at central level. However, these units are not exclusively dedicated to the support function, are frequently overwhelmed by administrative tasks, and, most importantly, are far away from the needs and

24

concerns on the ground.

75. The design of this intervention benefitted the views of different stakeholder, including central ministries, local and provincial authorities, regional councils, other donors, private provider of public services and users.

76. Finally, the specific gender implications of this project were assessed. The needs of public officials and decision makers, to whom the support services are targeted, are not different whether theses staff are female or male. Consequently, there is no need to differentiate these services according to the gender of the direct beneficiaries. However, wherever relevant based on the project for which officials are seeking advice, the assistance provided by the Support Centers would ensure that tools provided, such as reference TORs for feasibility studies, mainstream the gender aspects into project preparation. In terms of indicators, the project would report on project beneficiaries separately by gender even it is a priori not expected to make any substantial difference.

C. Financial Management

77. The financial management system of the Directorate of Administrative Matters (DAA) within the Ministry of Interior, and specifically the Division of Accounting within the DAA, was appraised to determine if it complies with the requirements of the Bank in respect to OP/BP10.02. The financial management assessment of these entities covered the areas of accounting and financial management, as well as the reporting and auditing processes of the project. The financial management system, including necessary arrangements to respond to the needs of the financial monitoring of the project, satisfies the minimum requirements of the Bank.

78. The assessment concluded that the DAA and the Division of Accounting within the Ministry of Interior, strengthened by the suggested arrangements for project management (for details see Annex 3), will have sufficient capacity to manage project financial matters and administer grant funds. The main responsibilities will include project budgeting, treasury, general accounting and reporting. The FM inherent risk for the country, the entity, and the project is considered Low.

79. Disbursement will be handled through the PMT at the Ministry of Interior following established procedures. Interim unaudited financial report, which will cover all the activities and sources of funds of the project, will be prepared biannually by the PMT. The project team within the Ministry of Interior will ensure that interim unaudited financial reports for the project are prepared and furnished to the World Bank not later than forty five (45) days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank.

80. The Ministry of Interior shall have its Financial Statements for the project audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period.

81. Financial flow of funds will come from the grant funds of the Bank. Flow of funds

25

between the World Bank and the Ministry of Interior will be organized according to the disbursement procedures of the Bank.

D. Procurement

82. Procurement under the project is mostly for the selection of consultants for technical assistance and services to LGs, acquisition of goods and services (other than consultant services) related to project management, organization of continued consultations with stakeholders, in particular LGs, and capacity building events. The consultant services include inter alia the preparation and management of projects; initial studies to assist with the implementation of Support Centers, the establishment of Support Centers and the strengthening of a centralized support unit, services related to inter-municipal cooperation structures, creation of new service delivery models, studies on private sector participation (PSP) in asset companies (SP), support to set up a number of SPs, support for project management (procurement, FM, …), etc. Goods and services to be procured concern essentially software and hardware for the Support Centers including M&E systems, equipment for project management and training and workshops.

83. The Procurement Division (“Division des achats et des approvisionnements- DAAP”) within the Directorate of Administrative Matters (Direction des Affaires Administratives - DAA) of the Ministry of Interior will have the responsibility, together with the other concerned units and departments, for planning and carrying out procurement activities. A capacity assessment of the DAAP was conducted on March 15 and 19, 2013. Overall, it showed that the DAAP has very limited experience in implementing a Bank project. This experience consists of implementing the program management component together with the National Coordination (CN), under the National Initiative for Humane Development (INDH I). Furthermore, the staff does not have practical experience in using Bank procedures to select consultants, which represent the majority of the contracts in this project. Staff has also not been trained in Bank procurement procedures. However, the assessment also showed that the DAAP is well-structured to carry out procurement functions. The different services include a service for technical studies (services des études techniques), a procurement management service (service de la gestion des marchés) and a quality control service (service de controle qualité). The DAAP is staffed with very experienced procurement agents (some of them being trainers). The DAAP has also experience in working with donors (e.g. EU, French and Spanish cooperation, etc.) for operations implemented using national procurement procedures. For procurement execution and monitoring, the DAAP relies on simplified Excel based electronic tools, which enormously facilitate both procurement processes and contracts management.

84. The overall risk for procurement is considered substantial. This is because of: (i) the lack of experience of DAAP in Bank procedures for selection of consultant and very limited experience with other procurement procedures and (ii) the absence of training in Bank procurement procedures for its staff. To help better mitigate the risk and facilitate project implementation the following measures are recommended: (i) recruitment of an external consultant to help carry out procurement and build capacities within the DAAP (the TOR will be ready by negotiation, (ii) training in procurement for all staff involved in project implementation (DAAP, DAA, DGCL, LGs staff…) once the grant is effective (iii) preparation of standard bidding documents (SBD) for National Competitive Bidding (NCB) complying with procedures

26

for NCB acceptable to the Bank by negotiation; and (iv) preparation of an implementation manual for the project by negotiation. More details are provided in Annex 3.

E. Social (including Safeguards)

85. By providing LGs with access to decentralized support services and assistance to institutionalize inter-municipal cooperation, the project will strengthen their service delivery capacity. In the longer run, this is expected to improve transport, waste management, and other public services provided by LGs to citizens and consequently improve their quality of life.

86. The proposed operation only supports technical assistance, capacity strengthening and institution building. There are no physical interventions which might trigger the need for a safeguard analysis. The studies, institution-building, capacity-strengthening, and technical assistance to be provided under this grant are simply geared to strengthen the public service delivery capacity of local governments.

87. Therefore, since the project activities only consist of capacity building and technical assistance activities, they do not involve involuntary resettlement or involuntary land acquisition and OP 4.12 does not apply.

F. Environment (including Safeguards)

88. Strengthening LGs’ service delivery capacity and institutional structure is eventually also expected to positively impact the environmental performance of these entities.

89. As seen in paragraph 86, the proposed operation only supports technical assistance, capacity strengthening, and institution building. No negative environmental and social impacts are foreseen and there are no physical interventions which might trigger the need for a safeguard analysis. This is commensurate with the C rating.

90. Nevertheless, although the technical assistance and advice will not include the preparation of any specific investments (for instance, the program will not fund feasibility studies), it will incorporate the need for SPs to have an Environmental and Social Management System, with the necessary expertise (staffing, budgeting, etc.) to be able to meet the Moroccan environmental impact assessment requirements for downstream investments.

G. Other Safeguards Policies Triggered

91. No safeguard policies are triggered.

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Annex 1: Results Framework and Monitoring

MOROCCO: LOCAL GOVERNMENT SUPPORT PROGRAM (PACT)

Project Development Objective (PDO): The PDO of the proposed Grant is to set up a lasting program to provide LGs access to decentralized support services and assistance to institutionalize inter-municipal cooperation.

PDO Level Results Indicators

Unit of Measure Baseline

Cumulative Target Values Fre-quency

Data Source/ Responsibilit

y for Data Collection

Description (indicator definition etc.)

YR1 YR2 YR3 YR4 YR5 Methodology

Indicator 1:The Local Government Support Program (PACT) is set-up and operational.

yes/no No No No Yes Yes Yes Annually Official Gazette

Implementing organization

Support Centers are providing services to LGs.

Indicator 2: The financial incentive of the PACT is financed adequately and there is a formal commitment to fund the Program after grant closure.

eq. US$ m 0 0 0 0 1,000 3,000 Annually Biannual report


Incentive funds in a cumulative amount of US$3 million are allocated. After grant closure an adequate amount is budgeted for the Program.

Indicator 3:Number of beneficiaries (male/female) (core sector indicator)

Population 0 0TBD

in YR1

TBD in

YR1

TBD in

YR1

TBD in YR1 Annually Census

dataImplementing organization

Population of the LGs benefitting from the program, and % male/female – targets to be determined in YR1 when design will be finalized.

Intermediate results

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Intermediate results of component 1: Deconcentrated Local Government Support Centers

Intermediate Result Indicator 1.1:The number of Local Government support centers established.

number 0 0 0 1 2 3 Annually Biannual report


Intermediate Result Indicator 1.2:The number of Government Departments offering services through the established support centers.



Intermediate Result Indicator 1.3:The number of Municipalities benefiting from support of the LG Support Centers.



Intermediate results of component 2: Inter-municipal Cooperation and Institutional Reform for Local Service Delivery

Intermediate Result Indicator 2.1:The number of conurbation associations created and/or expanded (geographically or in sector terms) with clear/sustainable legal, financial, governance, and



29

staffing arrangements.

Intermediate Result Indicator 2.2:The number of conurbations with operational asset companies or similar institutional arrangements.



Intermediate Result Indicator 2.3:Lessons learnt from the pilot phase drawn and program to further support to inter-municipal cooperation developed.

Yes/no No No No No No Yes Annually Biannual report


Document with lessons learned and plan to continue with the support to inter-municipal cooperation available.

Intermediate results of component 3: Project Management, Monitoring and Evaluation

Intermediate Result Indicator 3.1:The monitoring and evaluation system for the Program is operational.

Yes/no No No No Yes Yes Yes Annually Biannual report


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Annex 2: Detailed Project Description


1. The proposed operation has three components. Two components correspond to the two main groups of activities as shown in the graph below, and the third component is dedicated to program management.

2. Component 1 – Deconcentrated LG Support Centers (US$ 1,950,000). This component will design the roadmap and the setup of the support mechanism that will provide LGs with technical assistance to prepare and manage projects. These may include infrastructure projects, the improvement or introduction of a new public service or the contracting of a public service to the private sector. The roadmap design will draw on existing LG support experiences and mechanisms in Spain, France, Morocco (e.g. “Maison de l’Elu”) and elsewhere. The design will heavily involve LGs in order to identify their real needs and expectations and create ownership. It will also include consultations with current provider of support services, such as the Wilayas and the central government and donors. The design will be piloted and a roll-out plan for the Support Centers at national level will be prepared. The roll-out will be outside the scope of this project. Although for practical reason the design and pilot phase will be led by the Ministry of Interior, LGs are expected to take ownership in the roll-out.

3. In the Support Centers a small team of well-trained staff will be able to either directly

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provide assistance to elected local officials and municipal staff or direct them to available resources and programs at national level or in other LGs. These Centers will function on a demand-driven basis by providing expertise and information to help officials and technical staff transform ideas or broad objectives into actual projects through assisting with carrying out the steps required by a project, from identification through feasibility studies, bidding, contract management, etc. The Centers could also take a pro-active role in raising local decision-makers’ awareness of existing support programs and tools offered by central Government departments or partner State-owned enterprises (SOEs), including investment incentive programs for service modernization (such as the National Solid Waste Program, the National Sanitation Program, the National Urban Upgrading Program, etc.), training programs for staff, ICT tools, sector-specific technical assistance, etc. Finally, the Centers could foster networking and knowledge exchanges among LGs. Incentive and M&E systems will be set up to ensure the Support Centers’ responsiveness to LG demand and a high quality of services, evaluate their performance and draw lessons for their expansion.

4. Sub-component 1.1 - Initial studies and implementation planning. The proposed grant is expected to fund expertise to assist the Moroccan Government with reviewing implementation options and organizing a consultative process to define, in partnership with LGs, central government departments and other stakeholders, the optimal legal and administrative form, territorial mapping, and deployment plan of such Support Centers. This will also include staffing requirements, IT and other resources, budget, etc. In principle, the Centers will be new entities, which build as much as possible on existing structures. It is also expected to to place them geographically close to the LGs and provide LGs with key responsibilities to avoid the perception that “everything is decided in Rabat”. A distinction will probably be made between large and small municipalities, which have different needs and capacities.

5. Sub-component 1.2 - Setting up and operation of a small number of Support Centers on a pilot basis. The proposed grant would also fund the establishment of the first two to three Support Centers and possibly the strengthening of a centralized support unit, covering possible consulting services and their incremental operating costs for a defined duration. It is likely that these Support Centers will be set up by gradually incorporating different support services and sectors.

6. Sub-component 1.3 – Tools development. In the area of municipal service delivery, many tools, how-to guides, procedure books, model organizational diagrams, etc. already exist for the benefit of LGs. The proposed grant is expected to fund an inventory of existing resources and the system to make them publicly available, so that each Support Center can offer them to LGs. If the inventory shows significant gaps, it would also fund the design of new tools, including possible software and hardware, and/or selected studies (such as for example in the area of contract management).

7. Component 2 – Inter-Municipal Cooperation and Institutional Reform for Local Service Delivery (US$ 5,950,000). This component will include specific consulting services and incentives towards accelerating the formation of inter-municipal cooperation structures and the creation of new service delivery models on a pilot basis. Inter-municipal cooperation structures are necessary to manage local network services, such as urban transport which often needs to go beyond municipal boarders, in an efficient and effective way. There are two types of inter-

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municipal structures in Moroccan law, which are not expected to change under the upcoming LOCT: conurbation associations (groupements d’agglomération), and associations of municipalities (groupements de communes).5To date, few associations of municipalities have been created. There is only one conurbation association, which is responsible for urban transport services in the Rabat-Salé-Temara area. It is likely to be expanded to other municipalities and the other services listed in the law. It has no executing structure yet.

8. Within the framework of these associations, the grant will also finance the creation of inter-municipal or regional public asset companies (sociétés de patrimoine or SP) or other types of institutional arrangements in charge of the day-to-day service delivery on a pilot basis. These companies would have the responsibility of planning and financing infrastructure investments and contracting the operation of service to public or private operators. Whether they would be multi-sector or sector-specific would be decided in a feasibility study. They would likely include in their shareholding national-level operators who would provide technical and management expertise. The objective of such new arrangements include: (i) clarifying the governance of service delivery and separating the strategic guidance provided at political level from the daily running of operations, (ii) professionalizing project management and management of contracts with the operators through hiring more qualified staff dedicated to the project, (iii) clarifying financial relationships towards greater sustainability, (iv) giving a greater financial “surface” for long-term capital planning and raising financing, (v) involving national-level entities (State, state-owned entities, the state-owned development Bank CDG) within a clearly defined financial/governance platform.

9. Sub-component 2.1 – Technical Assistance to LGs to set up associations. The grant would finance consulting services to provide hands-on expertise to a limited number of municipalities wishing to form an association on a pilot basis. This assistance would help them design adequate arrangements for governance, budgeting and financial transfers, staffing, incentive mechanisms, etc. This will ensure that such associations are (i) effectively operated, (ii) financially sustainable, (iii) not subject to decisional uncertainty for their daily operations, and (iv) not adding costs to the existing overhead but rather seeing matching transfers of responsibilities, costs and resources.

10. Sub-component 2.2 – Stocktaking of private sector participation (PSP) issues, design of sustainable sector financing framework, design and set up of asset companies (SP). This would include studies, such as a brief study to re-assess what conditions would be optimal in Morocco for preserving effective private sector involvement. Such study would be based on the results of existing sector-specific studies (e.g. 2008 study on the reform of distribution, 1 st and 2nd PPIAF-financed reviews of PSP in solid waste) and complement them to draw generic lessons, with a view to designing the new pilots.

11. The grant would also finance the review of possible designs for SPs or other types of institutional arrangements based on international benchmarks, possibly including issues of general nature such as the legal structure, the relationship with municipalities and private operators, financing, etc. This review would lead to a roadmap, which will pay particular

5Conurbation associations concern urban areas of more than 200,000 inhabitants. Once created they are by law in charge of providing urban planning, urban transport, waste management, sanitation, water supply and electricity distribution services. The associations of municipalities can include any municipalities that wish to regroup to deliver certain services.

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attention to ensure that (i) the proposed options are subject to adequate feasibility and strategic analysis, including the foremost important issue of financial sustainability, and (ii) SPs are not used to do away with private sector participation. No SP should be created without a clear, long-term business plan demonstrating financial sustainability and identifying the share of commercial revenues, contributions from local or sector-specific taxes (including possible new sensible subsidy schemes), and State-provided investment support.

12. 42. As part of such financial sustainability analysis, the grant would finance the design of sustainable financing models for local service delivery, with an assessment of options for (i) investment financing and debt service, and (ii) the funding of possible structural operating deficits, in particular in the case of urban transport. This would also include exploring the use of financial engineering instruments and structures, as well as the possibility for the SP shareholding structure to include entities other than the conurbation associations or the State.

13. Finally, sub-component 2.2 would finance the support necessary to set up a number of SPs or other executing structures for these associations on a pilot basis. This could include high-caliber expertise to municipalities to provide them with legal, financial, and operational transaction advisory services to guide them through the roadmap, economic and business planning, staffing requirements. Although the advice will not include the preparation of any specific investments (for instance the program will not fund feasibility studies), it will incorporate the need for SPs to have an Environmental and Social Management System, with the necessary expertise (staffing, budgeting, etc.) to be able to meet the Moroccan environmental impact assessment requirements for downstream investments.

14. Possible pilot urban areas for both sub-components could include Rabat-Salé-Temara, Agadir, Tangiers, and the greater Casablanca. Since it is likely that different sector will be incorporated gradually, urban transport is a good candidate for an initial experiment. Finally, the pilot arrangements set up under this operation will be evaluated and recommendations will be prepared to extend and generalize their use.

15. Sub-component 2.3 - Incentive mechanisms. The proposed program will also fund an incentive mechanism for the formation of new associations, which could be in the form of a contribution to set-up costs or to all or part of the associations’ incremental operating costs for a defined period. The incentive formula will be determined in the initial design studies and will only be covered by the program for a limited time period.

16. Component 3 – Program Management (US$800,000 + US$100,000 for contingencies). In addition to normal implementation functions, such as project management, procurement and financial management, this component would include planning the deployment of the project activities with participating government departments, regularly following up with each of them on progress towards meeting their commitments, and organizing continued consultations with stakeholders and in particular LGs all along project implementation. The grant would also finance incremental operating costs for the Program Management Team (PMT) and the implementation of a monitoring and evaluation (M&E) system of the LG demand for external support, performance of the support provided by the LG support centers, and the development of inter-municipal arrangements.

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17. The PMT will be in charge of ensuring the overall quality of services provided to LGs through the deconcentrated Support Centers and bringing in international experience and benchmarks as needed. Such international knowledge exchanges could also be in the form of study tours.

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Annex 3: Implementation Arrangements


Project Institutional and Implementation Arrangements

1. The Program will be managed by the Ministry of Interior through a project management team (PMT) based on the Ministry's existing organization. The PMT will include the Director for Legal Matters, Studies and Documentation (Directeur des Affaires Juridiques, des Etudes et de la Documentation - DAJED), which is part of the General Directorate for Local Governments, the Director of Local Utilities and Concessioned Services (Directeur des Régies et des Services Concédés), and the Director for Administrative Matters (DAA). The PMT will include a Financial Management (FM) consultant and a procurement consultant.

2. The DAJED will be responsible for the implementation of the activities under component 1 and the Director of Local Utilities and Concessioned Services will be in charge of the implementation of component 2. This includes, among others, planning and defining the project activities under each component, preparing TORs, participating in selection processes, organizing consultations and coordinating among stakeholders, reviewing products, implementing and supervision the activities, and monitoring and evaluating. The DAJED and the DAA will jointly be responsible for the project management component 3. This mainly includes disbursement and FM activities, and progress reporting. The DAJED has experience with implementing several LG technical assistance programs funded by either donors, such as the Canadian International Development Agency (CIDA), USAID, and AFD.

3. As already mentioned, fiduciary matters (procurement and FM) will be initially handled by the Directorate for Administrative Affairs (DAA) of the Ministry of Interior, which has experienced staff for these functions and has been handling all procurement and financial management for the Ministry of Interior. To avoid implementation delays experienced in other donor-financed programs, specific staff members would be assigned to this project, supported in the initial phases by external consultants.

4. Starting in 2013, the DGCL has been granted administrative autonomy, which means that it now approves expenditures in its own budget (“ordonnateur”). Therefore, for a more effective implementation of the PACT, fiduciary management might be transferred to the DGCL starting in 2014 (it would be difficult earlier due to the way budgeting functions for grants obtained in mid-year). The principle of this change was discussed with and is supported by both the DGCL and the DAA. It would be conditional to a satisfactory appraisal by the Bank of the newly-acquired fiduciary capacity of the DGCL and to implementation support measures similar to the ones described for the DAA.

5. In order to ensure an adequate involvement of LGs and other stakeholders in the design and piloting of this Program, a Project Committee will be created. This Committee would be composed of the Secretary General of the MI or her/his representative, the General Director for Local Governments or her or his representative, and LG representatives for activities directly relevant to them. Again, other stakeholders may be invited as appropriate. The

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Committee will meet whenever necessary (normally at least at monthly basis) at the invitation of the PMT to discuss the needs, validate the overall planning and agree on specific activities or products (TOR, study reports, etc.).

6. Finally, a Steering Committee will be set up to provide strategic directions for the Program. The Steering Committee will include the Secretary General of the MI, the General Director for Local Governments, other Ministries concerned, such as the Ministry of Environment or the Ministry of Urban Planning, and representatives of the LGs. Other stakeholder, such as civil society representatives, representatives of the regions, etc. would join as appropriate. The Steering Committee will meet once or twice a year to define and validate the strategic orientation of the program, to allocate resources, and take other high level decisions.

Financial Management, Disbursements and Procurement

Financial Management and Disbursements

7. General framework. The project is financed by the Transition Fund for $4.55 million and by the Moroccan Government for $3.9 million in co-financing. The total estimated project

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cost is $8.45 million. The project will be executed in a period of 5 years.

8. Public Financial Management. The Bank’s experience in Morocco and the main conclusions of the 2009 PEFA indicate that the Moroccan public finance system is governed by an elaborate legal and regulatory framework. The financial management risk of the Moroccan public finance system is considered low.

9. Assessment of the Financial Management System (FMS). An assessment of the financial management system in place at Ministry of Interior was carried out to determine if it complies with the Bank minimum requirements for the project management in respect to the OP/BP10.02. The FMS in place in the executing agency is based on principles and procedures defined by the legal framework applicable to the public sector and more specifically to governmental institutions.

10. Risk Analysis. The inherent and control risks are presented in the tables below.

Inherent risk

Risk Rating Mitigation of risk Risk rating after

mitigation

Country levelThe Moroccan public finance system is governed by a complex legal and regulatory framework that offers guarantees of high reliability and transparency.Morocco’s compliance with rules and regulations and existing accountability arrangements provide an adequate framework for the use of public funds and public financial management (PFM) is considered broadly transparent.

Low Low

Project levelThe Ministry of Interior (Direction des Affaires Administrative et Direction de la Comptabilité) does not have experience in Bank’s financed projects; however it has a large experience in participating and managing projects in this field with different international and national organizations. Its activity report displays all the projects where it has strong involvement.

Substantial Capacity building of financial management staff of the project.

Close monitoring by the World Bank financial management team.

A project implementation manual acceptable to the World Bank to ensure that project activities are covered in their entirety and that the risk level is mitigated.

A Project Management Team will have a dedicated consultant for FM (financial management), who will work closely with the PMT.

Moderate

Inherent risk before mitigation Moderate Inherent risk after mitigation Moderate

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Control Risk

Risks Rating Mitigation of risk

Rating after

mitigation of risk

BudgetThe Ministry of Interior is responsible for the preparation and implementation of the annual budget for operating and investment programs of the Department. The budget is submitted to the Minister and afterwards to the Prime Minister by the Direction Committee for approval. The draft budget is submitted for adoption by the first and second chambers of Parliament.

Low

AccountingThe accounting system is based on accounting regulations applicable to public institutions (Royal Decree no. 330-66, April 21, 1967, O.G. No. 2840, April 26, 1967, p. 452; relating to the maintenance of public accounting in accordance with the General Code of Accounting Standards.

Low

Financial ReportingThe accounting system of the executing agency will not allow producing Financial Monitoring Reports for the project from the system.The Ministry’s general accounting information is managed in the Integrated Expenditures Management System (Gesiton Intégrée de la Dépense – GID).

Substantiel The FM consultant will prepare the financial report in an excel sheet, compare the information with the one in the GID and submit it to the head of the Directorate of General Affairs for review, validation and approval.The financial report will then be submitted to the PMT directors for approval and submission to the Bank within the deadlines.

Moderate

Funds FlowThe financial flows come from the World Bank. The flow of funds from the World Bank are organized according to the Bank's disbursement procedures.

Low

Internal controlThe Ministry is using the GID (IFMIS system). However it might have difficulty extracting the project information with the level of detail requested.

Moderate The internal control procedures will be included in the implementation manual.The FM specialist will extract the information on the project from the GID, will document

Low

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Risks Rating Mitigation of risk

Rating after

mitigation of risk

the additions of information needed to complete the required reporting and will explain the details of the entire validation process until the submission of the financial reporting to the World Bank. The financial report must be validated by the project director.

AuditingDelays in the submission of the audit report of the project to the Bank.

Moderate The Bank team will ensure that the auditor’s terms of reference are acceptable to the Bank and that the audit work is started timely to deliver the required report within the deadlines.

Low

Inherent risk before mitigation Moderate Inherent risk after mitigation Low

11. Residual FM risk. Given the measures to be taken to reduce the level of exposure and to manage and reduce the risks and weaknesses identified, the residual financial management risk at this stage is considered Low.

12. Implementing Agency. A Project Management Team (PMT) will be established within the ministry of Interior. The FM team will be composed by the head of the Directorate of Administrative Matters (DAA), who will be supported by an external consultant in FM. The DAA within the Ministry of Interior has experience in managing projects financed by international donors.

13. Procedures and policies. The Ministry of Interior (Direction des Affaires Administrative et Division de la Comptabilité) has a budgetary and accounting manual which is well elaborated. Hence, to ensure successful implementation of the project, an implementation manual will be required. This manual will be submitted to the Bank for approval.

14. Budgeting. For this project, the Grant will be received by the Ministry of Interior. However, each Ministry prepares its own budget and submits it to the Ministry of Economy and Finance (MEF) for approval through the Finance Law (“Loi de Finance”). In this case, the Ministry of Interior will include the amount of the grant in its budget and submit it to the MEF through the “Loi de Finance” or through the support funds (“Fonds de Concours”) for approval.

15. The Ministry has adopted budgetary accounting to monitor the budget and expenditures. They use the Integrated Expenditures Management System (GID) of the Kingdom’s General Treasury (TGR) for monitoring their commitments and their budget.

16. Staffing. The PMT will manage the day to day implementation of the project. The PMT will be housed at the Ministry of Interior and include the respective Directors in charge of implementation, a Procurement consultant, and an FM consultant, who will be under the

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supervision of the head of the Directorate of General Affairs.

17. The head of the Directorate of General Affairs is qualified. However, he handles many responsibilities and will not be able to fully dedicate his time to this project. Hence, the recruitment of an FM consultant is important to strengthen the team and to provide support to the project. The head of the Directorate of General Affairs will have to control and supervise the work of the consultant to ensure ownership of the project by the Ministry.

18. Accounting. An acceptable cash-based accounting system with the outline of budget components is operational according to the regulations described in the public accounting law. The transactions in terms of commitments and disbursements are reflected in the well-functioning Integrated Financial Management Information System (IFMIS), named GID (Gestion Intégrée des Dépenses).

19. The overall principles for project accounting are outlined below: (a) Records of accounts for the project will be maintained on cash basis principles, Financial reports will be maintained to reflect all the transaction flow of funds and the interim unaudited financial report (IUFR) will be issued each semester; and (b) Project accounting will cover all sources and utilization of project funds. This will include payments made and expenditures incurred. All project-related transactions will be prepared in an excel spreadsheet, which will be validated and approved by the PMT directors before transmission to the Bank within the deadlines.

20. Financial Management Reporting of the Project. Interim Unaudited Financial Reports (IUFR) will be maintained in an Excel spreadsheet. The FM consultant will compare the information prepared with the information extracted from GID (as GID will not extract project information only). The Director of Administrative Matters will review, approve and submit it to the Project Directors for approval and submission to the Bank. The PMT will produce the IUFRs every semester and send them to the World Bank within 45 days from the end of each semester.

21. In addition to a summary of project progress, the Financial Monitoring Reports (FMRs) include the following:

- Summary of funding sources and uses of funds- Uses of funds by project component and by project category- Cash withdrawal- Cash forecast

22. The FMRs will be prepared every semester and sent to the bank within 45 days of the close of each reporting period. The Bank guidelines on financial monitoring will be communicated to the project. A sample of FMR to use for the project will be agreed upon and will be annexed to the operational manual of the project.

23. Annually, audited Project Financial Statements (PFS) will be submitted to the Bank. PFS will include: (i) a statement of sources and utilization of funds or balance sheet, indicating funds received from various sources, project expenditures, and assets and liabilities of the project; (ii) schedules classifying project expenditures by components, expenditure categories; and (iii) a statement of reimbursement made on the basis of statements of Expenditure (SOEs).

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24. Controls. In Morocco, the rules governing funds commitments and payment authorizations are clear, well known, and enforced. The control framework is based on the segregation of duties between commitment (ordonnateur) and payment (comptable).

25. In addition, an Operational Manual will be prepared and submitted to the Bank before effectiveness in order to document the control environment for the project. The Operational Manual will describe, among others, control mechanisms at central and decentralized level, and transfer and accountability mechanisms for beneficiaries. Fiduciary responsibility for control of budget execution and monitoring is assigned to the General Inspectorate of Finance (IGF) and to the Audit Court. The Budget Directorate within the MEF plays an important role in controlling transactions financed by external donors. IGAT is also the internal inspection of the Ministry of Interior that has the right to inspect the Ministry of Interior’s activities.

26. External Audit Arrangements. Annual project financial statements audited by auditors acceptable to the Bank will be submitted to the Bank within 6 months after the end of each Fiscal Year. The audit will be comprehensive and cover all aspects of the project (i.e., all sources and utilization of funds, and expenditures incurred). The audit will be carried out in accordance with International Standards on Auditing. The Project team will provide the auditor with access to project related documents and records as well as information required for the purposes of the audit. The implementing agency will retain an auditor acceptable to the bank to perform an annual audit in accordance with International Standards on Auditing (ISA), as issued by the international Federation of Accountants and with terms of reference acceptable to the Bank.

27. During the FM assessment, the Ministry agreed on the need to be supported by a FM consultant.

28. Funds flow. The funds after their budgeting in the “Loi de Finance” will be transferred to the Ministry of Interior according to Bank disbursement guidelines and according to the method agreed through the disbursement letter. The payment justifications supporting documents will be sent to the Directorate of Budget (MEF) for verification, approval and then electronically submitted to the Bank.

29. Disbursements. The proceeds of the grant would be disbursed in accordance with the traditional disbursement procedures of the Bank, i.e. Direct Payment and Reimbursement accompanied by appropriate supporting documentation (Summary Sheets with records and/or SOEs) in accordance with the procedures described in the Disbursement Letter and the Bank's “Disbursement Guidelines”. The minimum application size for direct payment and reimbursement will be the equivalent of US$400,000. In order to allow a continuation of related activities, retroactive Financing up to 20% of the Grant amount will be established for payments made by the Recipient not more than 12 months before the date of the Grant Agreement signing, as per the Bank’s Operational Policy “OP 6.00 - Bank Financing”.

30. The Bank will honor eligible expenditures for services rendered and goods delivered by the Project closing date. A four months' grace period will be granted to allow for the payment of any eligible expenditure incurred before the grant closing dates.

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31. Necessary supporting documents will be sent to the Bank in connection with contracts that are above the prior review threshold, except for expenditures under contracts with an estimated value of (i) US$300,000 or less for works, goods and consulting firms; (ii) US$100,000 or less for individual consultants, (iii) US$50,000 or less for individual consultants, as well as (iv) all operating costs, training, workshops and field visits, which will be claimed on the basis of SOEs. The documentation supporting expenditures will be retained at the DE and will be readily accessible for review by the external auditors and Bank supervision missions. All disbursements will be subject to the conditions of the Grant Agreement and disbursement procedures as defined in the Disbursement Letter.

32. Planning of Supervision. A FM supervision mission will be conducted every six months based on the risk assessment of the project. The mission’s objectives will include: (i) ensuring that strong financial management systems are maintained for the project throughout its life; and (ii) semi-annual review of IUFRs, review of annual audited financial statements and management letters.

33. Action Plan. The following action plan was agreed.

Actions to be undertaken When

Prepare the Operational Manual Negotiation

Recruitment of a consultant in Financial Management

ToR to be approved by the Bank by negotiation and recruitment immediately after effectiveness

Procurement

General

34. Procurement for the proposed project would be carried out in accordance with (i) the World Bank’s Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, known as the ‘Anti-Corruption Guidelines’ dated on October 15, 2006 and revised in January, 2011; (ii) the ‘Guidelines: Procurement of Goods, Works, and non-consulting services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ (known as Procurement Guidelines) published by the Bank in January 2011; (iii) the ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,’ (known as Consultant Guidelines) dated January 2011; and (iv) all the accompanying standard bidding documents for any new procurement and the provisions stipulated in the Grant Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the grant, the different procurement methods or consultant selection methods, the estimated costs, prior review requirements, and agreed time frame are set out in the Procurement Plan. The procurement procedures and Standard Bidding Documents (SBD) that will be used by the recipient will also be well defined in the Operational Manual, which will include specific and detailed sections regarding Procurement.

35. Procurement under the Project is mostly for the selection of consultants for technical

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assistance and services to LGs, acquisition of goods and services (other than consultant services) related to project management, organization of continued consultations with stakeholders, in particular LGs and capacity building events. The consultant services include inter alia the preparation and management of projects; initial studies to assist for the implementation of Support Centers, the establishment of Support Centers and the strengthening of a centralized support unit, services related to inter-municipal cooperation structures, creation of new service delivery models, studies on private sector participation (PSP) in asset companies (SP), support to set up a number of SPs, support for project management (procurement, FM,…), etc. Goods and services to be procured concern essentially software and hardware for the support centers including M&E systems, equipment for project management and training and workshops.

36. National Competitive Bidding (NCB) procedures adjusted as indicated below will be used for all Goods and Non-Consulting Services contracts estimated to cost less than the equivalent of three million US dollars (USD 3,000,000). To ensure broad consistency with the Procurement Guidelines, the following provisions will apply when using NCB under this project. Said procedures shall ensure that, inter alia:

a) The bidding documents include explicitly the bid evaluation method, award criteria and bidder qualification criteria;

b) Technical, administrative and financial envelopes are opened immediately after the bid opening session has started and prices are read aloud;

c) The bids are evaluated on the basis of the price and any other criteria expressed either in pass/fail terms or in monetary terms;

d) Contracts are awarded to the qualified bidder who has submitted the least-cost evaluated and substantially responsive bid as stipulated in the bidding document; and

e) Standard bidding documents and bid evaluation reports found acceptable by the Bank are used.

37. Moreover, it has been agreed with the borrower that each contract financed from the proceeds of this grant shall provide that suppliers, contractors and subcontractors shall permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract and to have said accounts and records audited by auditors appointed by the Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to “obstructive practice”.

38. The procedures and standard bidding documents (SBD) of the borrower adjusted to be acceptable by the Bank will be used under National Competitive Bidding (NCB). Thus prior to issuing the first call for bids, a draft SBD to be used under NCB procurement must be submitted to the Bank for approval.

39. Procurement Plan. A Project Procurement Plan in a format acceptable to the Bank will be prepared and updated at least once a year. The procurement plan for the first eighteen (18) month period will be agreed during the negotiations. The procurement plan shall indicate which contracts shall be subject to the Bank’s prior review. All other contracts shall be subject to Post Review.

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Procurement Arrangements

40. No works contracts are contemplated under the project.

41. Procurement of Goods and non-consulting Services. Procurement of Goods and Non consulting services comprising the acquisition of equipment, material and office supplies for the PMT, logistics for workshops, capacity building events among others, will be carried out using the following methods:

a) National Competitive Bidding (NCB): Each package estimated to cost less than the equivalent of US$ 3,000,000 may be procured on the basis of NCB procedures as found acceptable by the Bank. Bidding documents acceptable to the Bank will be used.

b) Shopping: Goods and non-consulting services estimated to cost US$ 500,000 or less may be procured using Shopping procedures.

c) Direct Contracting: Under circumstances which meet the requirements of paragraph 3.7 of the Procurement Guidelines, goods, non-consulting Services and works may be procured in accordance with the paragraph 3.7 of the Procurement Guidelines using the Direct Contracting procurement method.

42. Selection of Consultants. Consultants’ services comprise mostly the selection of consultants to design the Program, provide technical assistance to set up the Support Centers and inter-municipal cooperation structures, assist in the management of the program and for studies. The following Bank methods and corresponding standard documents will be used:

a) Quality & Cost Based Selection (QCBS) for all types of consultant services. b) Least-cost Selection. Services for assignments which meet the requirements of paragraph

3.6 of the Consultant Guidelines may be procured using the Least-cost Selection method in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultant Guidelines.

c) Selection Based on Consultant’s Qualifications (CQS). Services estimated to cost less than US$100,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines.

d) Single Source Selection. Under circumstances which meet the requirements of paragraph 3.8 of the Consultant Guidelines for Single Source Selection, consultant services may be procured in accordance with the provisions of paragraph 3.8 through 3.11 of the Consultant Guidelines, with the Bank’s prior agreement.

e) Individual Consultants (IC). Services for assignments that meet the requirements set forth in the paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provision of paragraph 5.2 and 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.6 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis.

43. Shortlists may be composed entirely of national consultants for contracts of less than US$ 200,000 equivalent per contract, complying with the remarks mentioned above.

44. Publication of Results and Debriefing. Online (UN Development Business, and /or Client Connection) publication of contract awards would be required for all Direct Contracting,

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and the Selection of Consultants for contracts exceeding a value of US$200,000. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals. The borrower would be required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing.

45. Fraud, Coercion, and Corruption. All procuring entities, as well as bidders, suppliers, and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 & 1.17 of the Procurement Guidelines and paragraphs 1.23 & 1.24 of the Consultants Guidelines.

46. Frequency of Procurement Supervision. Supervision of Procurement by the World Bank is an integral part of Project supervision and implementation monitoring. In addition to the prior review supervision to be carried out from Bank offices, it is recommended that two (2) supervision missions take place during a year to visit the project and to carry out post review of procurement actions.

47. Based on the risk associated with procurement (substantial), as mitigation measures, the following actions need to be implemented:

a) Recruitment of an external consultant to help carry out procurement and build capacities within the Ministry of Interior (DAAP, DAA, DGCL, staff of LG,…). The TOR will be ready by negotiation;

b) Training in procurement for all staff involved in the project implementation (DAAP, DAA, DGCL, staff of LG,…) once the grant is effective;

c) Preparation of Standard Bidding Documents for NCB in accordance with the Procurement Guidelines and found acceptable by the World Bank for Goods and Non-consulting Services; these documents, taking into consideration required adjustment in order to be acceptable to the Bank, will be submitted for review and approval to the World Bank by negotiation;

d) Adoption of an Operational Manual. This manual will clearly describe procurement procedures, responsibility sharing and document flow among the parties involved in Project implementation. The manual should comprise in annex, all standard bidding documents that will be used under the project. This action needs to be completed by negotiation; and

e) Preparation of the procurement plan for the first eighteen (18) months: by negotiation.

Environmental and Social (including safeguards)

48. The proposed operation focuses on technical assistance, capacity strengthening and institution building and its impacts are expected to be positive, both in environmental and social terms. By providing LGs with access to decentralized support services and assistance to institutionalize inter-municipal cooperation, the project will strengthen their service delivery capacity. In the longer run, this is expected to improve transport, waste management, and other public services provided by LGs to citizens and consequently improve their quality of life. Similarly, strengthening LGs’ service delivery capacity and institutional structure is eventually

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also expected to positively impact the environmental performance of these entities.

49. There are no physical interventions which might trigger the need for a safeguard analysis. The studies, institution-building, capacity-strengthening, and technical assistance to be provided under this grant are simply geared to strengthen the public service delivery capacity of local governments.

50. Nevertheless, although the technical assistance and advice will not include the preparation of any specific investments (for instance, the program will not fund feasibility studies), it will incorporate the need for SPs to have an Environmental and Social Management System, with the necessary expertise (staffing, budgeting, etc.) to be able to meet the Moroccan environmental impact assessment requirements for downstream investments.

51. The absence of foreseen negative environmental and social impacts commensurate with the C rating. As the activities focus only on capacity strengthening and institution building and do not involve involuntary resettlement and/or involuntary land acquisition, OP 4.12 does not apply.

SAFEGUARD POLICIES THAT MIGHT APPLY

Safeguard Policies Triggered? Explanation (Optional)

Environmental Assessment OP/BP 4.01

No -

Natural Habitats OP/BP 4.04 No -

Forests OP/BP 4.36 No -

Pest Management OP 4.09 No -

Physical Cultural Resources OP/BP 4.11

No -

Indigenous Peoples OP/BP 4.10 No -

Involuntary Resettlement OP/BP 4.12

No

Safety of Dams OP/BP 4.37 No -

Projects on International Waterways OP/BP 7.50

No -

Projects in Disputed Areas OP/BP 7.60

No -

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Monitoring & Evaluation

52. The PMT will be in charge of implementing and running a robust monitoring and evaluation (M&E) system to track progress and results. Because the proposed project is considered a learning projects, quality M&E is key to help draw lessons from the pilot LG support centers and inter-municipal arrangements being set up. This will provides inputs for design and capacity to implement a future national comprehensive program to support efficiently local Governments through decentralized centers and inter-municipal arrangements. The results framework described in annex 1 provides the key indicators, targets, and data collection arrangements.

53. While the chosen indicators are simple and easy to collect, the “lessons learned” that will need to be drawn from the pilots, and used in the course of the project to adjust activities as necessary, require a skilled specialist. An M&E Specialist will therefore be hired under Component 3 to perform such evaluations.

Role of Partners

54. The Bank team has organized a coordination meeting with donors active in the area of decentralization and governance to ensure that the project’s activities are complementary with their activities and explore synergies (for details see paragraph 13). A close interaction with these entities and other donors will continue throughout the life of the project.

55. In particular, the Spanish Agency for International Cooperation and Development (AECID) has funded significant work on decentralization in Morocco in previous years, and has expressed strong interest to collaborate in the PACT, possibly through co-funding for additional pilot areas through parallel financing.

56. AECID has also committed to support the Project through facilitating the exchange of experiences with Spanish local governments. In particular, some regions in Spain have implemented Support Centers similar to the ones envisaged under the PACT; and some Spanish “Empresas Mistas” may provide an interesting model to use as an international benchmark in the design of the SPs.

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Annex 4: Operational Risk Assessment Framework (ORAF)

MOROCCO: LOCAL GOVERNMENT SUPPORT PROGRAM (PACT)Stage: Appraisal

1. Project Stakeholder Risks Rating MDescription :A. Ownership: The risk of weak overall support program

ownership is relatively low. The proposed activities respond to an acute demand on the ground, which is fully recognized at all level. Indeed, the central government is providing varies types of support service and a more comprehensive and efficient mechanism is warranted.

B. Municipal elections: Municipal elections are to be scheduled after the vote of the new Fundamental Law on Local Governments, possibly at the end of 2013/beginning of 2014. Possible political majority changes in participating municipalities, in particular in those benefiting from component 2 (Inter-municipal Cooperation and Institutional Reform for Local Service Delivery) constitute a risk that new municipal management teams may want to reconsider change processes initiated by previous management teams with the support of the Program, which would impact Program outcomes.

C. Civil society and general public criticism: The private delivery of local public services (“Gestion déléguée”), and its difficulties, have been widely discussed in the Moroccan press over the last few years, in particular as some concessionaires defaulted on, or pulled out of their contracts. As the proposed Program does not propose to roll back on private sector participation but rather to improve its chances of success through supporting a three-layer delivery model, which might be perceived as more complex, it may become an easy target for civil society and general public criticism.

Risk Management:A. No specific mitigation measures are foreseen.B. The participation in the support program will be formalized with LGs through the signature of

agreements. In case the elections change the management teams in municipalities participating in component 2, the PMT will need to timely reach out to new municipal teams.

C. In partnership with participating LGs, the PMT will organize consultations to disseminate and debate the conclusions of the initial design studies with an appropriate panel of stakeholders and thus reinforce the understanding of the proposed Program objectives and means of action. Broader communication activities will be organized as warranted.

Resp: Client and Bank Stage: Implementation

Due Date: A. Not applicable. B. As needed after municipal electionsC. After the completion of the initial studies

Status: Not yet due

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2. Implementing Agency Risks (including fiduciary)3.1.3.2. Capacity Rating: M

Description :A. Capacity: Project implementation will be under the

responsibility of established Directorates of the Ministry of Interior. DGCL has good experience with implementing donor-funded programs and the Ministry of Interior has competent staff for procurement and funds management. DGCL has also competent technical staff. DAA has some Bank project experience (INDH1).

Risk Management :A. Regular procurement and financial management supervision missions and reviews will be

carried out. The Bank team will have a close technical involvement in this project. All terms of reference will require Bank clearance.

Resp: Client and Bank Stage: Preparation and Implementation Due Date : Continuous Status: In

progress

3.3.3.4. Governance Rating: MDescription :A. Oversight and controls: Like for other government

agencies, anti-corruption rules are in effect. Strict implementation/enforcement will require awareness rising within the PMT and some capacity issues regarding oversight and controls may have to be addressed.

Risk Management :A. Detailed fiduciary assessments was undertaken to assess potential risks and mitigation

measures. A PMT will be established within the Ministry of Interior with dedicated consultants, especially for fiduciary functions, i.e. procurement and financial management. Annual audits will provide greater oversight regarding utilization of financial resources and, in addition, the World Bank will conduct very close supervision of provincial level teams through its local consultants, in addition to the formal supervision missions.

B. The project will monitor the quality and timeliness of annual audited financial statements and the effectiveness of internal audit functions, and ensure follow-up of audit recommendations.

Resp: Client and Bank Stage: Preparation and Implementation Due Date : Continuous Status: In

progressC.

4. Project Risks4.1.4.2. Design Rating: M

Description :A. Limited participation by LGs: Municipalities are aware

of their weaknesses and are asking for support. Additionally, the need for support program is recognized by the central government and the donor community. Nevertheless, a risk that there will not be a strong demand and by-in from LGs in the project activities could be due in particular to lack of ownership created by perceptions that the proposed program is driven by the central government (Ministry of Interior).

B. Difficulty of setting up inter-municipal structures: The success of component 2 will be measured by the number of functional inter-municipal bodies created or expanded (either in size or in array of services). Throughout the

Risk Management :A. An outreach to LGs has already taken place prior to appraisal and they showed a lot of interest.

This outreach and consultation process will continue. LGs will also take an active participation in the design and the governance of the Program through feedbacks and participation in the Steering Committee. Finally, the support units will be placed physically closer to LGs.

B. Early consultations with interested LGs have taken place and will continue. High-caliber expertise and appropriate incentive mechanisms will be provided. In addition, the support will start with municipalities that have already formed an association and these associations need to be expanded in scope and lack a clear design for some key features (e.g. financial arrangements, staffing, etc.).

Resp: Client and Bank Stage: Preparation and Implementation

Due Date : Continuous until component 2 is

Status: Ongoing

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world, inter-municipal cooperation is difficult. under way4.3.4.4. Social & Environmental Rating: L

Description :A. Social or environmental impacts: Social and

environmental safeguards related impacts are not expected due to the advisory nature of project activities.

Risk Management :A. To help manage any residual risk that may exist, asset companies (sociétés de patrimoine or

SP) are expected to have an Environmental and Social Management System, with the necessary expertise (staffing, budgeting, etc.) to be able to meet the Moroccan environmental impact assessment requirements for downstream investments.

Resp: Client Stage: Implementation Due Date : Before operationalizing SPs

Status: Not yet due

4.5.4.6. Program & Donor Rating: LDescription :A. Delivery timetable: Should the total amounts of grant

requests to the Transition Fund exceed the immediately available funds, there is some uncertainty as to how proposals will be prioritized or as to when donors would be able to disburse funds for the remainder of their commitments. This might pose a risk to the timetable for delivery.

Risk Management :A. The timetable for signature of the Grant Agreement and implementation start will be revised

following the next MENA Transition Fund Steering Committee meeting.

Resp: Client and Bank Stage: PreparationDue Date : Before Grant Agreement Signature

Status: Not yet due

4.7.4.8. Delivery Monitoring & Sustainability Rating: SDescription :A. Inter-departmental coordination and political economy

of service delivery: The program will only be fully successful if it can ultimately offer services from a large number of sectors/central government departments. A lesson learned from previous operations is that inter-ministerial coordination can be particularly difficult in Morocco.

B. M&E System. The needed participation of multiple government departments, and the physical decentralization of the LG support units, will require the implementation of a centralized M&E system to follow implementation progress and results.

C. Continuation of funding: Sustainability will require continued support program funding beyond the MENA Transition Fund grant.

D. Delays in the creation of inter-municipal cooperation structures. The complexity of Moroccan politics and the often difficult process for decision makers to reach a consensus could delay the implementation of the pilot projects.

Risk Management :A. The approach is to start with a few departments and the additional support of the Ministry of

Finance. Consultations with several sectors (e.g. urban transport, solid waste) have already been taken place and will continue. These consultations showed a high interest in the support program. The Moroccan Government has also committed itself in principle to the implementation of a Local Government Support Program through the “Letter of Sector Development Policy” sent prior to the Board Approval of the Third Solid Waste Sector DPL.

B. The Program design includes a specific sub-component and funding for designing and implementing an M&E system.

C. If the pilot phase is successful and the support program proves effective, the Government and in particular the Ministries of Interior and Finance will have a strong incentive to continue funding it as it will leverage increased efficiency for other government investments. Funding could come from using a share of the VAT receipts that are allocated each year to national programs supporting service delivery in LGs.

D. Early consultations with interested LGs have been taken place and will continue. High-caliber expertise and appropriate incentive mechanisms will be provides. In addition, the operations expects to start with municipalities that have already formed an association and whose association needs to be expanded in scope and lacks a clear design for some key features (financial arrangements, staffing, etc.).

Resp: Client Stage: A., B. and D. Preparation and Implementation

C. Final phase of

Due Date: A., B. and D. ContinuousC. After project closure

Status: A., B. and D. OngoingC. Not yet due

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implementation and post-implementation

4.9.4.10. Other Rating: MDescription :A. Delays and lack personal of champions at central level:

There are several vacant positions within the Ministry of Interior, including in key directorates for the Program, such as the Director for State Owned-Companies and Concessions (Direction des Régies et des Services Concédés), the Director for Planning and Equipment, (Direction de la Planification et de l’Équipement). A reshuffle of key director positions may happen at any moment, with possible impacts on the Program.

Risk Management :A. The team has been involving during preparation the largest possible panel of officials, up to

the Secretary General level, to validate key design decisions and thus ensure continuity of buy-in in the event of staff changes.

Resp: Client and Bank Stage: Preparation and Implementation Due Date : Continuous Status: Ongoing

4.11.4.12. Other Rating:Description : Risk Management :

Resp: Stage: Due Date : Status:5. Overall Risk Following ReviewNote: Include on average no more than 3 Risk Management Measures per Risk Category

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Annex 5: Implementation Support Plan


Strategy and Approach for Implementation Support

1. The Bank’s approach for Implementation Support (IS) will be characterized by flexibility and adaptability. The Bank’s team will be able to provide just-in-time support to the Ministry of Interior because senior team members of the core team, including in particular key FM and procurement staff, will be present in-country.

2. The initial period (first 18 months) will be critical as the design of the support centers and the options review for the asset companies (SP) will have a critical impact on the success of the pilots. Bank support during that period will be strengthened to ensure a very high quality of the terms of reference and selection criteria for the various consultancy packages, high-quality reviews of the outputs, and assistance with linking to relevant international experience.

3. The Bank team will closely follow-up on the critical evaluation of existing experiences and will advise the PMT in identifying the most appropriate LGs for the implementation of the pilots in terms of inter-municipal cooperation and the entities and place to establish the LG Support Centers. This will include support to formalize the respective roles and responsibilities of the parties early during project implementation. This will consist of reviewing the drafts of cooperation agreements and providing technical advice to ensure that such agreements provide the required clarity for each partner agency. Whenever possible, the Bank team will participate in consultations and will ensure the dialogue with other donors active in this area. The Bank team will also review the terms of reference for all activities and studies to be undertaken under the project and will provide comments and suggestions regarding all project outputs.

4. The implementation support will also focus on facilitating the gradual strengthening of the involvement of a number of other relevant Government Departments, State-owned companies and other stakeholders.

5. The Bank team will closely supervise the M&E activities. Towards the end of grant implementation, increased effort will be put on supporting the client with evaluation and the drawing of lessons learned. The pilot nature of the proposed activities render this phase particularly important for the success of the PACT, which will in particular be measured by whether it is sustained or not beyond the duration of the grant, and geographically extended..

6. The piloting of a Local Government Support Program, particularly the implementation of the LG Support Centers, will give stakeholders a major role in identifying some project activities. Regular reviews will therefore be built into the design process of this Program to enable stakeholders to provide feedback on the appropriateness of the approach. This feedback will be incorporated in the final design of the Support Program. It is expected that civil society organizations (CSOs), other donors active in the area of governance and institutional buildings, and end users of public services will also be heavily involved in this process.

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7. The Bank’s technical assistance will be complemented through institutional capacity building built into the project. Component 2 provides for tailored technical assistance to local authorities wishing to set up inter-municipal coordination arrangements. In addition, some training and specific technical assistance activities will also be carried out under component 1, which will strengthen the service delivery capacity of local service providers. Finally, the PMT and the Bank team will jointly be involved in the quality control for this operation.

Implementation Support Plan

8. The following tables identify the main points of focus and the resources needed during implementation (there are likely synergies with other Bank-supported operations, such as the Urban Transport and Solid Waste DPLs):

What would be the main focus in terms of support to implementation during:Time Focus Skills Needed Resource

EstimatePartner Role

First twelve months

Preparation of Operations Manual

Establish Project Management and fiduciary systems

Setting up of a robust M&E system

Detailed design of support centers

Detailed options design for SPs

Task Team Leader Senior Urban

Infrastructure / Service Specialists

Institutional Specialist

M&E Specialist Procurement Spec. FM Specialist Program Assistant Specific

Consultants

US$120,000 Review and comment on designs based on experience in other programs

12-60 months Quality control of TA services

Implementation and adaptability of solutions

Task Team Leader Senior Urban

Infrastructure / Service Specialists

Institutional Specialist

M&E Specialist Procurement Spec. FM Specialist Program Assistant Specific

Consultants

US$300,000 Review and comment on designs based on experience in other programs

30-60 months Lessons learned M&E Specialist Task Team Leader

US$20,000

Skills Mix Required:Skills Needed Number of Staff

WeeksNumber of Trips Comments

Task Team Leader 30 10Senior Urban Infrastructure / 20 10

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Service SpecialistsInstitutional Specialist 15 3M&E Specialist 8 5Sr. Private Sector Dev. Specialist

8 2

Procurement Specialist 15 0Financial Management Specialist

15 0

Program Assistant 5 0Specific Consultants 5 2

PartnersName Institution/

CountryRole

AECID Government of Spain

Provision of international benchmark experience, and possible parallel funding

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