Sichuan Water Supply and Sanitation PPP Project

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This project will be the first water sector PPP project supported by the World Bank Group in China. The approach developed under this project is intended to be replicated throughout Sichuan province and China. The project seeks to transform services through the creation of an integrated WSS utility that will be established through a special purpose vehicle project company (Project Company) by the winning bidder under the PPP. In line with international best practice, the PPP partner is being competitively procured (procurement is expected to be completed by the third quarter of 2020 and financial close is expected before the end of 2020) and the PPP agreement is designed to be output and performance based, to incentivize efficiency, customer service and expanded coverage. The PPP agreement will require the PPP partner to partly finance the infrastructure investments, to ensure that the PPP partner is invested in the project and is incentivized to achieve efficiency gains and connect households to the WSS networks. The prequalification criteria have been developed to ensure that only bidders with relevant operating experience are eligible to bid. SOEs are not precluded from bidding and market sounding carried out in preparation of the procurement indicated potential interest from SOEs and private companies. The Project Company will be required to hire existing members of the workforce that wish to transfer. Component 1: Institutional Strengthening and Infrastructure Investments to Improve WSS Services in Jingyang DistrictThis component has three key activity areas:a. Establishment of a Modern, Integrated WSS Utility: The project will support the establishment of the WSS utility (described above) and the systems and equipment to enable full WSS service delivery. Establishing the utility includes preparing and executing the PPP transaction as well as setting up and developing the institutional systems (e.g. management, personnel, administration, billing and accounting, etc.). Project support will also include developing an integrated smart water management platform and installing smart meters to enable the Project Company to monitor, manage, and operate WSS system assets efficiently. Establishing a modern, efficient WSS utility, with the smart management platform and metering, provides the incentives and tools to reduce NRW, energy consumption, and GHG emission – thereby improving climate change resilience.b. Establishment of WSS Utility Customer Service Mechanisms: The project will support the WSS utility to setup and conduct ongoing citizen engagement activities, including a community-based customer satisfaction survey, community meetings on WSS service quality, and WASH behavior change campaigns. The project will also support establishment of customer feedback mechanisms within the WSS utility, including a customer call center and a smartphone app to address complaints, questions, requests for repairs, and general feedback the services provided. All of the citizen engagement activities and customer feedback mechanisms will be overseen and managed by a customer relations officer designated within the Project Company, and in coordination with a social focal point within the Project Management Office (PMO) (see Section III, Institutional Arrangements).c. Support for Engineering Works: The project will support engineering works for both water supply and sanitation, as listed below. All investments under the project will be implemented and operated by the Project Company, providing the JDG with one interface and contracting party, rather than the many contractors and operators it currently oversees.i. For improved access to higher quality and more efficient piped water systems (RMB 235 million): The project will support consolidation and upgrading of the current 40 groundwater treatment facilities operated by different providers to a more integrated configuration using two newly constructed centralized surface water treatment plants (WTPs), with capacity of 25,000 m3/d (Bailong WTP) and 2,000 m3/d (Xinliu WTP), and operated by a single service provider. The project will also support: protection of drinking water source sites and water intakes/wells, construction and rehabilitation of pipe networks to expand the network and reduce losses/NRW (including 150 km of transmission main, 700 km of distribution pipe, 330 km of household connection pipe), and installation of 82,000 smart meters. These investments are linked to the project goals for climate change mitigation and adaptation. The project will also fully finance the costs of household water supply connections (targeting to cover 94 percent of households).ii. For improved access to higher quality and more efficient sanitation (RMB 507 million): The project will support upgrading of four existing wastewater treatment plants (WWTPs) with total capacity of 12,000 m3/d, and construction of 12 new WTTPs with total capacity of 735 m3/d. The project will support construction/rehabilitation of 760 km of trunk sewer pipe, 1,100 km of household service pipes, and 51 wastewater pump stations (42 new and nine existing). In hilly areas, the project will support construction of individual household septic tanks to serve 6,712 scattered households. The project will fully finance the costs of household sewer service connections and septic tanks, for a total of 50,850 households.iii. Other works: There will also be improvements to public facilities, providing disabled access. Recent projects in China have also demonstrated that making small investments in community public areas to enhance residents experience creates an environment where households become more willing to connect. The FSR design includes some small investments for rehabilitation, “greening,” and beautification of public areas for this purpose. Component 2: Institutional Capacity Building and Technical Assistance (TA) for PPP Oversight, Project Management, and Scale Up of the PPP ApproachThis component has four key activity areas:a. Engagement of a Project Manager / Independent Engineer: The Project will support the hiring of an independent engineer (consultant) to oversee the performance of the PPP Agreement, to supervise infrastructure construction, and to supervise the environmental and social management of the project. The independent engineer will also be responsible for verifying the KPI results and the energy and water efficiency gains reported by the Project Company against the targets in the PPP Agreement.b. Local Government Capacity Building for PPP Oversight and Project Management: The public counterpart to the Project Company (especially HUDC and the PMO) will have key functions that are not delegated to the Project Company, including implementation of WSS policy and regulations, regulatory oversight of the Project Company, business planning, tariff setting, long-term asset management, and WSS system planning. The project will include capacity building activities to support HUDC and the PMO carry out these functions, such as: project management and PPP oversight training, technical training, financial management and PPP procurement training, as well as study tours of successful water sector PPP projects in China and abroad. Project management and implementation support will include: management of and coordination with the independent engineer, establishment and operation of a monitoring and evaluation system, monitoring of Project Company KPI and efficiency performance, and acquisition of office equipment, vehicles, and other operating resourcesc. Coordination of Citizen Engagement Activities: The project will support the PMO to supervise and monitor the citizen engagement activities and customer feedback mechanisms executed by the Project Company (described in Component 1-b). The PMO will designate a social focal point to coordinate closely with the Project Company on the community-based satisfaction survey, the c