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LESSONS:

Sumatra Urban Development (Sector) Project

sector: Water and Other Urban Infrastructure and Services | country: Indonesia

ADB project administration needs to more rigorously dealwith design and implementation arrangements when they turn out to be problematic. This requires a mission team of diverse expertise, in particular for the mid-term review (MTR) to undertake significant redesign where necessary, or following any other event – in the case of Indonesia, the sudden decentralization – that significantly impacts project structures and outcomes.

Geographic and subsector coverage should be limited, depending on the number of subproject appraisal reports (SPARs) that can realistically be prepared as part of project preparation, and the level of representativeness of conditions in these SPARs vis-�-vis other towns. This is particularly important for areas with large cultural diversity such as Sumatra. The subsectors covered should ideally have similar institutional setups and functioning to reduce project complexity during project preparation – which results in exponentially larger preparation time – and administration. The integration of diverse urban development subsectors requires a project team with distinct subsector expertise to allow for better understanding and differentiated treatment of these.

Institutional capabilities – both managerial and technical – of local governments and local government water supply enterprises (PDAMs) to manage, operate, and maintain their investments and provide decent public services require a realistic assessment during project and SPAR preparation, coupled with adequately tailored training and capacity building to tackle deficiencies encountered. The sustainability of investments depends on understanding the function of and demand for subsector services in the eyes of local government and the community. Sufficient time is necessary during preparation and implementation to involve these parties in the development of investments and to ensure that technical and institutional capabilities are adequate for their use and sustainability.

Subproject appraisal report (SPAR) preparation and review should be rigorous. It should rely on thorough demand analysis based on community consultations, and include a description of the condition and service coverage of existing assets. Technical solutions offered by SPARs should be specific for each situation. Requirements for financial and economic evaluation should be prepared carefully. Expertise in relevant disciplines should be made available during the preparation and review process. SPARs should be produced in the local language and English; and the English translations should extend to the main text and not be confined to executive summaries, to allow proper evaluation of the proposal.

Substantial delays in consultant recruitment seriously undermine the effectiveness and sustainability of services provided. Adequate attention should be paid to this during project implementation to ensure that consultant recruitment is timely, and if it is not, that appropriate adjustments are made to the packages and the related terms of reference.

Successful implementation arrangements of previous projects, including the degree of authority and enforcement control of the executing agency, should be thoroughly assessed before transferring them to new projects. What has worked reasonably well before in smaller, centralized projects may not work for large-scale sector projects under decentralization. Adequate provision for monitoring and ensuring compliance with loan covenants by local governments and local government water supply enterprises (PDAMs) should be incorporated in the project design and implementation arrangements.

The substantial increase in local procurement irregularities after decentralization was due to inadequate contract administration procedures in most PIUs; this included lack of proper archiving procedures, and no records of as-builtdrawings of civil works and contract variations. A combination of additional training, frequent monitoring, increased quality control by the executing agency, and rigorous enforcement of sanctions is necessary to address the PIUs’ lack of capacity – and willingness – to strictly enforce procurement regulations.

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