Bhutan: Urban Infrastructure Project

Sovereign Project | 44240-013 Status: Active


ADB is supporting Bhutan’s efforts to improve infrastructure in its two largest municipalities, Phuentsholing and Thimphu, and in fast-growing urban centers, Samdrup Jongkhar Municipality and Nganglam town. The project will include upgrades and expansion of water supply and wastewater treatment systems and transport facilities, as well as support for stronger urban management.

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Procurement Documents

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Project Name Urban Infrastructure Project
Project Number 44240-013
Country Bhutan
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2816-BHU: Urban Infrastructure Project
Concessional ordinary capital resources / Asian Development Fund US$ 19.87 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Transport - Urban roads and traffic management

Water and other urban infrastructure and services - Urban policy, institutional and capacity development - Urban sewerage - Urban water supply

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project supports the Government of Bhutan's efforts toward sustainable urban development in its two largest municipalities (Phuentsholing and Thimphu) and two emerging urban centers (Samdrup Jongkhar Municipality [SJM] and Nganglam Town). It has four outputs: (i) water supply and sanitation (WSS) infrastructure rehabilitation and expansion; (ii) mobility improvement; (iii) urban management strengthening; and (iv) project management and capacity development.
Project Rationale and Linkage to Country/Regional Strategy

Unprecedented urban growth coupled with inadequate urban infrastructure has resulted in a shortfall of basic urban services for Bhutan's urban residents. Infrastructure requirements across urban centers vary, but access to water, sanitation, solid waste management, and urban transport are often inadequate. The government's Tenth Five-Year Plan identifies the need to invest in urban infrastructure and management in Bhutan's two major municipalities, Thimphu and Phuentsholing, and other larger urban centers to ensure sustainable urban management.

Thimphu Municipality is Bhutan's capital, with a population of 92,000 making up 40% of Bhutan's urban population. This population is expected to double by 2025. Thimphu's development strategy identifies four primary issues in the infrastructure and environment sector: (i) water supply; (ii) wastewater collection and treatment; (iii) drainage and flood protection; and (iv) solid waste collection and disposal. The ongoing Urban Infrastructure Development Project (UIDP) supported by the Asian Development Bank (ADB) covers water supply, solid waste management, and wastewater collection and treatment. The UIDP and Thimphu's local area plan identifies wastewater management as a priority issue in Thimphu, with water pollution from wastewater discharge, solid waste, and effluent from workshops and industries degrading the urban environment.

Following Thimphu Municipality, Phuentsholing Municipality is the second largest urban center in Bhutan. The 2005 urban population of 21,000 is expected to increase to 32,000 by 2025. It is the busiest commercial hub where most of the country's cross-border trade takes place. Its urban development plan identifies congestion and poor urban mobility as a key issue that restricts the municipality's growth. There is only one entry and exit point for the core area, which results in traffic congestion from local traffic and trucks transporting goods to and from Thimphu, and containers carrying raw materials and finished goods to and from the Pasakha industrial area. Bypass roads and bridges are required to divert traffic and reduce congestion, provide an alternative crossing over the Om Chu River to connect the eastern and western portions of the municipality, and accommodate the expected traffic from the proposed dry port. In addition, to avoid border traffic passing through the core area, a second border gate is proposed that will link directly to the proposed bypass road. The UIDP has contributed to rehabilitating and improving roads and other municipal services in Phuentsholing.

SJM has recently been designated the fourth municipality of Bhutan. The urban population of 6,000 in 2005 is expected to almost triple by 2025. In addition, the satellite town of Deothang with a current population of about 2,000 was subsumed under SJM when it was designated a part of the municipality. While the municipality serves as the gateway to six districts of eastern Bhutan and is one of the oldest urban areas, there has been considerably less investment in urban infrastructure compared with the other three municipalities (Gelphu, Phuentsholing and Thimphu). This burdens existing infrastructure in an area that is rapidly expanding and has large growth potential as a trade node with the development of the Asian Highways Project and the proposed east-west transnational highway. Structure and local area plans identify the need to improve road infrastructure, which is unplanned; water supply, which has insufficient capacity to meet current demands, lacks treatment, is of poor quality, and does not meet potable standards; water distribution, which is badly deteriorated with high leakage; sanitation, which is currently restricted to on-site facilities not properly maintained; and drainage, which is primarily an open sewer. A study commissioned by the government shows that, based on projected water demand of 3.7 million liters per day (MLD), current sources of 1.1 MLD will not be sufficient. A comparison of supply and consumption of water suggests nonrevenue water was over 50% in July 2011.

Nganglam, which was designated the growth center of southeastern Bhutan and identified as a nationally important urban center with large industrial development potential, has not adequately invested in urban infrastructure. Nganglams investment plan identifies urban expansion to the planned Rinchenthang town with water supply and urban transport as priority urban infrastructure needs. Infrastructure investments in Bhutan's urban areas need to be preceded by further planning and detailed design.

The project is consistent with government plans and strategies, and with the inclusive social development objective of ADB's Bhutan country partnership strategy, which aims to improve urban infrastructure services, upgrade city planning, and strengthen the planning and management functions of municipalities. It is consistent with ADB's Strategy 2020 as it contributes to regional outcomes in terms of Millennium Development Goal 7; Bhutan's infrastructure, specifically urban infrastructure, which is one of ADB's five core areas of specialization; and environmentally sustainable development. Lessons learned from past and ongoing urban projects and the country assistance program evaluation are incorporated in the project. These include: (i) expanded assistance for integrated urban development in key urban centers; (ii) continued involvement in the sector as key to capacity building of municipalities and for meeting municipal service requirements of rapidly growing populations; (iii) the ability of local governments to plan budgets, manage operation and maintenance (O&M), and deal with private sector service providers requires considerable strengthening and technical capacity building; (iv) local governments have low revenue bases and struggle to provide basic O&M, thus requiring gradual introduction of cost-reflective utility tariffs and user fees.

Impact Sustainable access to urban services in Chukha, Pemagatshel, SJM, and Thimphu districts (dzongkhags).

Project Outcome

Description of Outcome Phuentsholing, SJM, and Thimphu municipalities (thromde), and Nganglam Town (throm) provide improved urban infrastructure to its residents.
Progress Toward Outcome Two works contracts are ongoing: Bridge and approach road works in Phuentsholing and water supply works in Samdrup Jonghkar. Procurement is ongoing for design-build-operate contract for wastewater treatment plant for Thimphu. Consultants were already mobilized and are helping the PMU in project-related activities. Recruitment of consulting services for hygiene awareness and consultation participation program is also ongoing.
Implementation Progress
Description of Project Outputs

Water supply infrastructure is rehabilitated in SJM; and Sanitation infrastucture is rehabilitated and expanded in Thimphu Municipality.

Mobility improved in Phuentsholing Municipality

Urban management is strengthened.

Capacity strengthened for public awareness in health and hygiene; project management and implementation is strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)

Capacity strengthened for public awareness in health and hygiene; Project management and implementation is strengthened: PMC and DSC consultants are on board and helping the PMU in project-administration-related activities.

Construction of 46 meter span PC girder bridge and approach road in Phuentsholing is ongoing; contract was awarded in April 2015.

Urban management is strengthened: Comprehensive sectoral plans (water supply and sewerage) will be prepared for Samdrup Jonghkar Municipality (SJM) and will be submitted by Q4 2015. Training for staff will be conducted following the mobilization of the capacity training consultant (to be individually recruited), which is envisaged for Q4 2016 once civil works are underway in all three towns.

Bid evaluation for the water supply works in Samdrup Jonghkar and the design-build-operate contract for 12 MLD Wastewater Treatment Plant in Thimphu is ongoing. Awards of contracts are expected in the first quarter and the third quarter, respectively, of 2016.

Geographical Location

Safeguard Categories

Environment B
Involuntary Resettlement C
Indigenous Peoples C

Summary of Environmental and Social Aspects

Environmental Aspects Draft Environmental Management Plans (EMP) were prepared as part of the three Initial Environmental Examinations (IEEs), one each for Thimphu Municipality, SJM, and Phuentsholing Municipality. An Environmental Assessment and Review Framework (EARF) was prepared to guide planning studies and detailed design of future investments in preparation of future financing. These studies included under Output 3 are the following: (i) WSS planning, due diligence and detailed design for WSS infrastructure requirements consistent with plans developed for SJM and Nganglam Town; (ii) mobility and drainage planning for Phuentsholing Municipality; and (iii) due diligence and detailed design for transport infrastructure requirements consistent with plans developed for Phuentsholing Municipality. The EARF will also guide under Output 1, the environmental assessment requirements for the WWTP in Thimphu Municipality, once the treatment option is selected by the DBO contractor.
Involuntary Resettlement The project will avoid land acquisition and resettlement impacts and is classified as Category C as per ADB SPS, 2009. A resettlement framework was prepared in accordance with the ADB SPS, 2009 and government laws to guide planning studies and detailed designs of future investments in particular to guide any land pooling if required. All costs related to land acquisition and resettlement/rehabilitation will be borne by the government.
Indigenous Peoples The project will have no impacts on indigenous peoples and so ADB's Indigenous People's requirements are not applicable.
Stakeholder Communication, Participation, and Consultation
During Project Design A Gender Action Plan (GAP) was prepared for the project to address gender inequality issues in the project areas. A consultation and participation (C&P) plan was also prepared for continued consultations with various stakeholders particularly the poor and vulnerable groups.
During Project Implementation A separate consultation and participation (C&P) plan prepared for the project provides methodology and processes for continued consultations with various stakeholders, particularly the poor and vulnerable groups, during the course of project implementation. The communities will be involved in consultations for project planning, implementation and for any safeguard issues with special attention given to include the poor and female-headed households. Orientation on HIV/AIDS and other safety measures will be provided for the contractors and laborers in package training.

Business Opportunities

Consulting Services All consultants under the project were recruited in accordance with ADB's Guidelines on the Use of Consultants by the Asian Development Bank and its Borrowers (2010, as amended from time to time). Consultants were recruited using quality- and cost-based selection (the quality to cost ratio of 80/20 was used). An international consulting firm (18 person-months of international consulting services and 50 person-months of national consulting services) has been engaged as PMC to assist PMU in overall project management and implementation. Similarly, an international consulting firm (29 person-months of international consulting services and 82 person-months of national consulting services) has been engaged as DMSC to assist the PIUs in the design, monitoring, and supervision of contracts under the project. In addition, the PMC and DMSC will also work on the various master plans, designs and procurement packages for follow-on works in Nganglam, SJM and Phuentsholing.

Most of the procurement for the project will be carried out by PIUs with input from the PMU. Goods, works and services, will be procured in accordance with ADB's Procurement Guidelines (February 2010, as amended from time to time). Procurement of works estimated to cost the equivalent of more than $1 million will be carried out in accordance with international competitive bidding (ICB) procedures. Procurement of goods estimated to cost the equivalent of more than $500,000 will be carried out using international competitive bidding (ICB) method. Procurement of works estimated to cost less than $1 million will be carried out using national competitive bidding (NCB) method. The procurement of goods will preferably be grouped into packages equal to and larger than $500,000 to be suitable for ICB procedures. Goods that cannot be grouped into larger contracts and are estimated to cost less than $500,000 will be carried out using NCB, and miscellaneous minor goods expected to cost under $100,000 equivalent will be purchased using shopping procedures.

The Thimphu WWTP will be procured as DBO contract following ICB procedures. The DBO will have two parts. Part A will include the design, build component to be funded from the ADB loan and Part B for O&M will be funded by Thimphu Municipality.

A procurement capacity assessment was completed and procurement capacity was found to be sufficient. Procurement will be undertaken by the executing agency and implementing agencies. The executing agency and three of five implementing agencies have experience under UIDP and have developed capacity to issue tenders, evaluate bids and prepare bid evaluation reports. Newly formed PIUs will be trained through twinning arrangements providing on-the-job training from the PMU and DMSC. Further capacity will be built for all implementing agencies through the PMU and involving the executing agency and implementing agencies in annual in-country procurement seminars of ADB. Procurement accountability is provided through the Tender Opening, Tender Evaluation and Tender Award Committees. Each committee has to make a declaration of no Conflict of Interest . The 3-tier system provides due diligence. All government staff and consultants are subject to group and individual audits.

Responsible Staff

Responsible ADB Officer Tamaki, Keiichi
Responsible ADB Department South Asia Department
Responsible ADB Division Urban Development and Water Division, SARD
Executing Agencies
Department of Engineering Services (DES)
[email protected]
Ministry of Works & Human Settlement
Drentoen Lam, Thimphu Bhutan
Ministry of Works and Human Settlement (MoWHS)
Post Box #278


Concept Clearance 29 Oct 2010
Fact Finding 10 Aug 2011 to 23 Aug 2011
MRM 19 Sep 2011
Approval 29 Nov 2011
Last Review Mission -
Last PDS Update 20 Sep 2016

Loan 2816-BHU

Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Nov 2011 08 Feb 2012 27 Apr 2012 14 Aug 2018 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 23.38 Cumulative Contract Awards
ADB 19.87 29 Nov 2011 15.74 0.00 90%
Counterpart 3.51 Cumulative Disbursements
Cofinancing 0.00 29 Nov 2011 3.09 0.00 18%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - Satisfactory - -
Title Document Type Document Date
Urban Infrastructure Project: Procurement Plan Procurement Plans Nov 2016
Loan Agreement (Special Operations) for Urban Infrastructure Project Loan Agreement (Special Operations) Feb 2012
Project Agreement for the Urban Infrastructure Project Project/Program Agreement Feb 2012
Urban Infrastructure Project Reports and Recommendations of the President Nov 2011
Urban Infrastructure Project Summary Poverty Reduction and Social Strategies Nov 2011
Urban Infrastructure Project Gender Action Plans Nov 2011
Urban Infrastructure Project Project/Program Administration Manual Oct 2011

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

Title Document Type Document Date
Bhutan: Urban Infrastructure Project Papers and Briefs Oct 2012

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