Project Risks and Mitigation Measures

Monthly Progress Report February 2015 Western I ndonesia National Roads I mprovement Project 7 - 1 7 ISSUES and RECOMMENDATIONS

7.1 Current Situation

The main issues during this month of February 2015 are as follows: a The slow progress of procurement proceedings. b Provisions for additional funds to cover claims for contract escalations and expected variation orders. c The official approval of the Revised Project Management Manual PMM. d The big negative slippage behind schedule of three 3 on-going construction sub- projects. e Finalization of documentation documents by POKJA for the award and contract signing of agreement between Government of Indonesia and the winning bidder for Package No.5 Sp. Rampa Poriaha. f Delayed land acquisition and compensation payments of Project Affected People PAP in two 2 sub-projects. There are 2,564 affected people in Package 13 Sp. Rukis Tj.Kemuning and in Package 17 Sp. Gunung Kemala Pugung Tampak 1,885 persons are affected. Contract Agreements between GOI and the two 2 winning bidders have already been signed, but Notice To Proceed NTP to commence the works cannot be issued due to the uncleared Right of Ways ROW. g Delayed action in processing the justification of the Field Engineering for the four 4 on- going construction packages Packages 1, 2, 3 and 4

7.2 Actions Required

a The main cause of the delay in procurement is attributed to the flow of communication between POKJA, PMU, CTC and the World Bank in finalizing the procurement documents. To minimize or totally eliminate the delays in securing Bank s concurrence and issuance of No Objection Letter NOL, special meeting shall be held regularly among all concerned to discuss each comments and suggestions which are to be incorporated in any documents prior to formally submitting to the Bank. b As the budgets for the price escalation and expected variation orders were not included in the original cost estimates, PMU shall discuss this matter with the higher authorities to request fund allocation or request the World Bank that the funds to cover the additional cost will be charged against the unallocated funds of the original loan amount. c As there are now four 4 on-going civil works contract packages under construction and sooner another seven 7 civil works contracts will be implemented, the Revised Project Management Manual PMM shall be formally approved. Although the Revised PMM has been already disseminated to all concerned parties, official approval is needed prior to furnishing copy to the World Bank. d Three 3 of the four 4 on-going construction packages were on critical stage due to big negative progress slippages. To be on schedule or reduce the negative slippage to a manageable level, Design Supervision Consultant DSC shall closely monitor, preferably on a weekly basis, the Contractors progress output, Contractors shall prepare a Catch- Up Schedule on how to completed the remaining works within available contract time left. Monthly Progress Report February 2015 Western I ndonesia National Roads I mprovement Project 7 - 2 The situation is too alarming due to the huge value of remaining works that are still to be done with just only less than 50 of the contract time left. e Procurement Committee BALAI Medan have to expedite the processing of the documents to avoid further extension of the bid validity period. f Concerned authorities in the acquisition of the road right of way shall expedite the process with the intervention of DGH to accelerate the LARAP implementation. We suggest that the compensation payment scheme shall be scheduled or concentrated in a continuous strip leaving no unsettled affected area along the stretch in order to attain a substantial stretch of fully cleared Right of Ways ROW and a strip map shall be prepared for any substantially completed stretch. In the event that there is already an available substantially cleared length of the road, a request letter shall be written to the World Bank to interpose no objection to a partial or sectional turnover of the stretch of the road to the Contractor. g DSC and Contractors shall constantly follow-up with the authorities concerned the early approval of the Field Engineering. To date, not even one 1 Field Engineering had been finalized and approved. Monthly Progress Report February 2015 Western I ndonesia National Roads I mprovement Project 8 - 1 8 CORRESPONDENCES During the period the CTC received and issued letters. Lists of letters received and issued are shown in Appendix J.