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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No: 39085-PG
PROJECT PAPER
ON A
PROPOSED ADDITIONAL FINANCING CREDIT
IN THE AMOUNT OF SDR 24.90 MILLION
(US$37.31 MILLION EQUIVALENT)
TO THE
INDEPENDENT STATE OF PAPUA NEW GUINEA
FOR A
ROAD MAINTENANCE AND REHABILITATION PROJECT (RMRP)
(LN. 71190-PNG)
March 20,2007
Transport, Energy and Mining Sector East Asia and Pacific Region
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
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CURRENCY EQUIVALENTS
(Exchange Rate Effective end o f February 2007)
ADB AusATD AWP BRP BMS BOQs CAS CDO DOC1 DO DOT1 D O W EMP EMMP EO E P M EU FDI GoPNG IBRD I C B IDA IERR IRI ISR I S N IP JICA
CurrencyUnit = SDR SDR 1 = US$1.50122 K ina1 = US$0.33
FISCAL YEAR January1 - December31
ABBREVIATIONS AND ACRONYMS
Asian Development Bank Australian Assistance International Development Annual Work Program Bridge Restoration Project Bridge Management System Bill o f Quantities Country Assistance Strategy Community Development Officer Department o f Commerce and Industry Development Objectives Department o f Trade and Industry Department o f Works Environmental Management Plan Environmental Management and Monitoring Plan Environmental Officer Employer's Project Manager Environment Unit Functional Deficiency Index Government o f Papua N e w Guinea International Bank for Rural Development International Competitive Bidding International Development Association Internal Economic Rate o f Return International Roughness Indication Implementation Status Report Interim Strategy Note Implementation Plan Japanese International Corporation Association
LARF
M C I M P I MTDS NCB NTDP occ P A D PEPM P ID P M U PNG P W M QCBS R A M S RMRP S A I SBD SDP SDR SEA sss sw TA TIPS TSSIP TSSP WB
Land Acquisition and Resettlement Framework Maintenance Condition Index Maintenance Priority Index Medium Term Development Strategy National Competitive Bidding National Transport Development Plan Opportunity Cost o f Capital Project Appraisal Documents Provincial Employer's Project Manager Project Implementation Plan Project Management Unit Papua N e w Guinea Provincial Works Manager Quality Cost Based Selection Road Asset Management System Road Maintenance and Rehabilitation Project Structural Adequacy Index Standard Bidding Documents Sustainable Development Program Special Drawing Rights Sectoral Environmental Assessment Single Source Selection Small Works Technical Assistance Transport Infrastructure Priority Study Transport Sector Support Interim Program Transport Sector Support Program World Bank
Vice President James Adams Country Director Nigel Roberts
Sector Director Junhui Wu Task Team Leader Thakoor Persaud
FOR OFFICIAL USE ONLY
ROAD MAINTENANCE AND REHABILITATION PROJECT (RMRP).
PROPOSED ADDITIONAL FINANCING (CREDIT) PROJECT PAPER
LN 71190.PNG .
TABLE OF CONTENTS
1 . Introduction.. ............................................................................................................ 1
2 . Background and Rationale for Additional Financing .............................................. 3
. .................................................................................................... 3 Proposed Changes 7
4 . Consistency with CAS or CPS ............................................................................... 14
5 . Economic Analysis o f Scaled-up Project Activities .............................................. 14
6 . Expected Outcomes ............................................................................................... 16
7 . Benefits and Risks .................................................................................................. 17
8 . Financial Terms and Conditions for the Additional Financing ............................. 19
Annexes
1 . 2 . 3 . 4 .
Procurement Arrangements ................................................................................... 20 Economic Analysis o f Planned Road Restoration Works ...................................... 25 Revised Project Indicators in Participating Provinces ........................................... 26 Environmental and Safeguard Issues ..................................................................... 30
Attachments
1 . Details o f the Procurement Arrangement Involving International . . Competition ............................................................................................................ 24
This document has a restricted distribution and may be used by recipients only in the performance of their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .
PROJECT PAPER DATA SHEET
0.00
Date: March 20,2007 Team Leader: Thakoor Persaud Country: Independent State o f Papua N e w Sector DirectorIManager: Junhui Wu Guinea Country Director: Nige l Roberts Project Name: Road Maintenance and Environmental Category: B (Partial Rehabilitation Project (RMRP) Assessment) Project ID: P102792. Borrower: Government o f Independent State o f Papua N e w Guinea ResDonsible agency: D e w t m e n t o f Works (DOW)
0.00 0.00 58.91
Revised estimated disbursements (Bank FY/US$m) FY 2007 2008 2009 Annual 10.67 18.21 8.43 Cumulative I 10.67 128.88 I 37.31 Current closing date: December 3 1,2009 (Loan) Revised closing date: December 3 1,2009 (Credit) Does the restructured or scaled-up project require any exceptions from Bank policies? o Y e s X N o Have these been approved by Bank management? o Y e s o N o I s approval for any policy exception sought from the Board? o Y e s X N o Revised project development objectivesIoutcomes [If applicable]
NIA
Does the scaled-up or restructured project trigger any new safeguard policies? If so, click here to indicate which one(s) N o
For Additional Financing [ ] Loan [ XI Credit [ ] Grant For LoansICreditsIGrants:
Total Bank financing (US$m.): 37.31 Proposed terms: IDA (35 years, grace period o f 10 years)
Financing Plan (US$m.) Source Local I Foreirn I Total
Borrower IBRD/IDA Others
Total
1. INTRODUCTION
1.01 additional Credit in the amount o f SDR 24.90 mi l l ion (US$37.31 mi l l ion equivalent) to the Independent State o f Papua N e w Guinea Road Maintenance and Rehabilitation Project (RMRP), Loan 71 190-PNG, Project ID P 102792.
This Project Paper seeks the approval o f the Executive Directors to provide an
1.02 Utilization o f Proposed Funding. The proposed additional Credit would help finance (a) about two and a hal f years’ interim or “bridge” financing to help preserve recently-renovated project works funded by the on-going RMRP loan, AusAID and other programs in six provinces, until other currently prepared government and donor financing comes on-stream to support a more comprehensive sector program; (b) rehabilitation o f two sections o f road which were dropped from the ongoing RMRP project because o f cost increases and P N G K ina revaluation; and (c) scaling up o f key components o f the ongoing project to include additional bridge and rehabilitation works in the six original provinces as wel l similar project works in two additional provinces for which the Government o f PNG (GoPNG) has requested such assistance because it has seen the positive impact o f the ongoing project and because the provinces are not currently being assisted by other donors or lenders for such tasks.
1.03 components o f the ongoing project have also been used to appraise the scaled-up activities. The under-funded tasks financed by the Additional Finance were reevaluated and they are s t i l l found to be feasible at the new higher costs and conditions. All other changes resulting f rom the project objectives, outcome indicators or scope also meet normal appraisal standards.
The selection and evaluation criteria (including economic analysis) used for
1.04 currently gearing up to respond to the country’s transport sector needs in a more comprehensive, integrated and unified manner, in l ine with i t s Medium-Term Development Strategy (MTDS), Transport Infrastructure Priority Study (TIPS) and the National Transport Development Plan (NTDP) 2006-2010. The Credit wil l allow the GoPNG to continue financing on-going road network maintenance requirements in the participating provinces while i t finalizes i t s new program and commences operations.
With assistance from AusAID and other donors and lenders, the GoPNG i s
1.05 plans to seek donor-lender assistance for infrastructure development. It has already requested and received assistance from a jo int GoPNG, AusAID, ADB, and IBRD panel which was formed to review ongoing sector activities and to identify areas o f greater harmonization and cooperation. The Bank’s Country Assistance Strategy (CAS) i s also currently under preparation and this envisions a continued sector role for the Bank in l ine with recent government request.
In line with its National Transport Development Plan 2006-2010, the government
1.06 Maior Changes Being Proposed. At the recent 2006 Annual Meetings in Singapore, the P N G Minister o f Finance and the Treasurer requested that International Development Association (IDA) include two additional provinces, Gulf and Western, in
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the program. Western Province i s an important mining region in the country, and while it has access to substantial royalty and other funds from the extractive industries, i t has little experience in uti l iz ing these resources to maintain the province’s transport network system in an efficient and sustainable way. It is proposed that Western Province wil l self-finance the physical maintenance works needed on the road network’ but participate under the umbrella o f the RMRP to strengthen investment planning, financial and environmental management, and institutions in the province for a more holistic, life-cycle approach to infrastructure development. To date, al l national roads in Gulf Province, have been maintained by the government, with no assistance from outside donors. One o f the main national roads in the province (Hiritano Highway) acts as an important through route between Gulf Province and Central Province. A s a result o f the level o f traffic o n the road, recent regional gas-exploitation initiatives and l imited government resources, the road was upgraded to seal in 1999 (using Japanese Grant funds) but i s starting to deteriorate. The government has requested that Gulf be included under the RMRP Additional Finance so that i t can benefit f rom the maintenance funds available in order to maintain the recently-reconstructed highway.
1.07 and are o f a similar nature to those maintenance activities already undertaken and on- going in the original six participating provinces. Since the DOW has an updated database on the road and bridge conditions in these additional provinces, such inclusion i s not expected to pose any special challenges. Apart from incremental staff additions to handle the additional provincial needs, the existing Project Appraisal Document (PAD) already has guidelines for addressing any anticipated environmental and resettlement issues.
All works in the two new provinces are maintenance activities o n existing roads,
1.08 original Loan recently extended by 12 months through December 3 1,2007. I t s Performance Indicators for the six provinces have so far shown satisfactory achievement in increased percentage o f (a) National Roads in fair or better condition; (b) budget expenditures dedicated to maintenance and preservation; (c) budgeted workprogram based upon the Road Asset Management System (RAMS); and (d) expenditures bid competitively. Preliminary evidence from an ongoing socio-economic study also shows several positive impacts on household income for residents, especially for vulnerable groups who are benefiting from improved access to markets and suppliers in larger villages and towns (and thus increasing their gardening and farming activities) and to schools, clinics, etc. The D O for the combined program remains unchanged as would the existing expected beneficial impacts. Additionally, the GoPNG wil l benefit f rom having
Expected Outcomes. The ongoing RMRP i s s t i l l being implemented, with the
~
The financial investments w i l l be made through PNG Sustainable Infrastructure Ltd, a subsidiary o f PNG Sustainable Development Program Ltd. PNG SDP owns 52 percent o f Ok Tedi Mining Ltd, the dividends from which are paid into SDP’s Development and Long-Term Funds for the purposes o f “promoting development that meets the needs o f the present generation and establishes the foundations for continuing progress o f future generations o f Papua N e w Guineans” (PNG SDP Mission Statement). One-thrd o f those dividends are for investment in Western Province, while two-thuds are for investment in other areas o f Papua New Guinea.
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these physical assets maintained during the interim period as it finalizes i t s new AusAID- financed Transport Sector Support Program (TSSP).
1.09 partner for this additional Credit (it will bear 36.7 percent o f the total project costs, including GST) through budget allocations and v ia the SDP. Under the ongoing RMRP project, i t was expected that al l six provinces would have made agreed contributions to facilitate their respective provincial maintenance programs under the Loan. For several reasons (including access to softer grant funds, budget constraints and changing priorities as some o f the init ial ly identified roads were in very poor condition and beyond the scope o f routine maintenance) only two o f the provinces made significant counterpart contributions (East N e w Britain and Manus). For the proposed additional financing component, while the national roads work i s clearly delineated, the expected provincial road maintenance works wil l be programmed annually, prepared under demand-based financial commitments made by the provinces, rather than a priori commitments.
Partnership Arrangements. The GoPNG continues to be the primary financing
2. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING (US$37.31 MILLION EQUIVALENT)
2.01 RMRP Loan Profile. The Bank’s RMRP Loan for US$40 mi l l ion supports technical assistance, maintenance works and rehabilitation o f key national and provincial roads, bridges and related structures in six provinces in PNG. Total project cost was originally estimated at US$65 million, with about US$20 mi l l ion financing fi-om central government counterpart funds and about US$5 mi l l ion fi-om the six participating provinces.
2.02 2002 and became effective in February 2003. The delay in effectiveness was primari ly caused by the length o f time it took to finalize the financial administrative arrangements and to contract qualified consultants to assist the DOW with project management. The project has a 64-month implementation period (August 12,2002, to December 3 1,2007).
The project was appraised in October 2000, approved by the Board in August
2.03 and reliable roads transport system in the six participating provinces through: (a) the improvement o f selected road segments; (b) strengthening strategic planning and management o f the road sector; and (c) strengthening the institutional arrangements for road maintenance, including private sector participation.
The objective o f the project is to assist the GoPNG in promoting an efficient, safe
2.04 and restoration o f key segments o f national and provincial roads; maintenance, restoration, and replacement o f national and provincial bridges; (b) TA and related assistance for acquiring, establishing and operating laboratory testing facilities, traffic counting, and environmental monitoring equipment; provincial administrative works offices; (c) improved project management, design, supervision; accounting and auditing services, financial management and operational capacity o f DOW; and (d) training small and medium size contractors for road maintenance works; and TA for updating bridge
The above objectives are to be achieved through: (a) annual routine maintenance
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inventory, bridge management system and for a socio-economic impact assessment o f the project. Except for the replacement o f bridges and structures, most o f the works under the project have to be repeated up to three times annually for the same stretches o f road and bridges, depending upon weather conditions and other related factors. If maintenance i s not done o n a timely basis, there i s a high risk o f rapid deterioration o f the network and the need for more costly intervention at a later date.
2.05 Project Execution Agency. The Department o f Commerce and Industry, DOC1 (formerly, Department o f Trade and Industry, DOTI), assisted by consultants, i s responsible for implementing the small-contractor training component.
The DOW, assisted in i t s task by an Employer’s Project Manager (EPM), i s the
2.06 Implementation Progress. After some init ial delays, implementation progress has improved considerably, as evidenced by the rate o f disbursements (see Table 1). There were some early implementation delays, mainly due to ensuring appropriate counterpart national and provincial funds were provided in a predictable and/or timely manner in light o f the then-existing macroeconomic problems; and ensuring compliance with Bank procedures in an environment o f little previous Bank experience. These affected not only implementation progress but also tended to undermine the achievement o f the project Development Objectives. However, by January 2006, improvements were being made and by M a y 2006, these issues were largely resolved (see ISR #9), so that the project i s now in satisfactory status. Availability o f counterpart funds (for national roads and o n a demand-basis for provincial roads) i s no longer an issue, DOW is operating i t s maintenance systems in a more systematic manner, based on i t s RAMS, physical outputs and social impacts are being achieved, and the quality o f works i s improving as contractors are being held to higher performance standards. These are al l indications o f sustainable improvements having been made in achieving the Development Objectives and maintaining satisfactory Implementation Plan for the remainder o f the project.
Table 1: Commitments and Disbursements US$
(In million) Loan Amount 40 Committed (under signed contracts) 37 Disbursed 25 CommittedLoan Amount 95% DisbursedLoan Amount 68.09%
2.07 The pace o f project implementation has improved significantly over the past 18 months, with average monthly payments o f about US$1.5 million. This level o f disbursement is expected to continue for the remaining l i fe o f the project. Evidence in support o f this expectation includes the fact that the two primary reasons for the recent problems, viz., startup delays and lack o f counterpart funding should not reappear. As this i s a continuation o f an ongoing operation no startup delays are expected. Regarding the counterpart fund availability, macroeconomic conditions have substantially changed since the project began and the government has recently started to frontload i t s funding commitments. Additionally, there has been an increased awareness by the government o f
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the importance of its existing infrastructure assets. For example, the N T D P 2006-2010 has provided substantial funding for the transport sector. The N T D P states “National Government funding available for the transport network over the l i f e o f the NTDP will be directed to maintenance and rehabilitation and not to expand the transport network.” The fact that other donors and lenders (AusAID, Japan, and ADB) have also placed high priority on infrastructure maintenance will help to ensure that the government continues to fund its planned commitments. Further evidence o f implementation improvement and sustainability i s seen in the achievement o f physical targets o f the project (see Table 2) and o f the K e y Performance Indicators (para. 2.09 below).
Table 2: Physical Progress of Key Components
Activity Original Target Revised Target Achieved to Date Routine Mtnce. Nat’ l Roads (km) 2,200 543 (3 x p.a.) 538 (3 x p.a.) Restoration Nat’ l Roads (km) 440 440 436 Routine Mtnce. Prov. Roads (km) 900 200 (3 x p.a.) 192 (3 x pea.) Restoration Prov. Roads (km) 200 200 159 MtnceJRehab. Nat ’ l Bridges (#) 35 35 37 Replacement o f Nat ’ l Bridge (#) 9 6 2 Replacement o f Prov. Bridge (#) 6 1 1
2.08 commenced work in some o f the originally-identified RMRP project areas. This, coupled with higher than estimated unit costs for some o f the works (due to their deteriorated condition and l imited local contractor market), confusion in defining scope o f works (same length done three times per year) and dif f iculty with provincial counterpart funding, led to a reduction in the original targets for National and Provincial Routine Maintenance activities. N o formal change was made to reflect these reduced targets as maintenance i s carried out three times per year o n the same stretch o f road, effectively resulting in a comparable cumulative distance as specified in the original (PAD) targets. However, supervision missions discussed the reduced targets with government and accepted them, as reflected in the mission aide-memoirs.
In response to the RMRP start-up delays, AusAID and other GoPNG programs
2.09 during the early implementation phase, the project IP and DO have been rated as “Satisfactory” for the past eight months and are not expected to decline. The latest values for the performance indicators are presented in Table 3.
Performance Indicators. After being classified as “Marginally Unsatisfactory”
2.10 In some o f the provinces, AusAID has provided assistance to the sector, as such some o f the performance indicators are not solely attributable to the project. Although the project i s s t i l l over a year from completion, i t has achieved many o f the performance targets established at appraisal. The shortfall in the provincial roads indicator i s primarily due to the provinces having either decided to do their own maintenance work, as they did not have the counterpart funds required for participation in the project or they received grant assistance from other donors. For the bridges, the GoPNG recently completed i ts own national Yumi Yet bridge program, providing an alternative source o f funding to the
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provinces for this component. The project also has not pursued the unification o f DOW/provincial maintenance un i t s (nor will i t be pursued under the additional finance) because the Department no longer sees this as a priority, given the dispersed nature o f the country and the need for isolated provincial offices to be strengthened rather than be reliant on central government units. A further point to note concerning the K P I s i s that, due to very high rainfall experienced in some areas, some road sections had to be restored rather than have routine maintenance as originally envisaged. As a result, a portion o f the additional finance wil l be needed to restore sections o f road originally identified but that, due to cost increases o n the other sections, have not as yet been restored, although the indicator shows nearly full achievement o f the target.
Table 3: Compliance with Performance Indicators
Indicator Baseline Target 9-06 Actl. 9-06 Var.
% o f national roads in fair or better condition 20 45 63 +18 % o f provincial roads in fair or better conditions 10 17 39 +23 % D O W expenditures on maintenance & preservation 30 55 95 +40 % o f budgeted work program based on R A M S 70 100 100 0 # o f provinces that submit annual work programs 50 95 100 +5 # o f unified DOWProvincial Maintenance units 0 2 0 -2 # o f DOW staff trained 2 20 25 +5 % o f maintenance expenditure bid competitively. 40 82 93 +11 Tot. km Nat’ l roads with restoratiodspecific mtnce. 0 360 3 84 +24 Tot. km Prov. roads with restoratiodspecific mtnce. 0 190 120 -70 Cumulative number o f bridges replaced. 0 17 3 -14
2.1 1 Study showed several positive results in increased market gardening and farming activities by households along the project roads and improved access to markets and suppliers. O f special note i s the positive impact upon the livelihoods o f women, children and low-income residents in several towns and villages where road improvement works have taken place. Income levels have improved significantly in most o f the sample villages. The survey also found positive environmental impacts associated with upgrading and resealing o f the roads, including reduced erosion and flooding, reduced dust pollution, and reduced pollution o f watercourses as a result o f the improved transverse drainage and turbid runoff.
In terms o f qualitative indicators, a July 2006 Socio-Economic Mid-Term Impact
2.12 which i s currently being finalized and i s scheduled to be submitted to the Bank by mid- February 2007.
All critical legal covenants o f the project are being met, other than the FY05 audit
2.13 comprehensive national sector maintenance program in l ine with its M T D S and NTDP. I t has requested donors/lenders that are currently supporting the sector to provide interim financing to maintain their respective works until the national program becomes fully operational in two years time.
Rationale for Additional Financing. GoPNG i s in the process o f establishing a
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2.14 Responding to this need, AusAID has prepared the AU$40 mi l l ion Transport Sector Support Interim Program (TSSIP) along with the AU$50 mi l l ion K e y Roads for Growth Project for maintaining vital sections o f the Highlands Highway. A planned Bridge Restoration Project (BRP, for AU$60 million) for rehabilitating and replacing bridges along the Highlands Highway and in other strategic areas nationwide i s expected to be merged with AusAID’s upcoming TSSP project (anticipated to be effective from mid-2008 onwards). The ADB has also increased funding for one o f i t s ongoing projects, the Highlands Road Maintenance and Upgrading Project (US$53 mi l l ion with a supplementary Loan o f US$18 million) and JICA has been funding bridge works in the Highlands Highway. Similarly, the RMRP additional Credit wi l l be used to bridge- finance on-going maintenance works in provinces not covered by these other programs for about two and a hal f years. I t wil l also finance the rehabilitation o f two sections o f road which were dropped from the ongoing RMRP project because o f cost increases and PNG Kina revaluation. Finally, i t wil l finance the scaling-up o f key components o f the ongoing RMRP project to include similar project works in two additional provinces for which the government has requested assistance (see para. 1.04).
3. PROPOSED CHANGES
3.01 wil l increase from six to eight. Up to now, the project provided both finances and TA support; however, since the Western Province has access to significant dividend payments, i t s interest i s in accessing the TA element o f the project, so that the Sustainable Development Program (SDP) can work more efficiently both in the Western Province, as well as fulfilling i t s mandate to provide infrastructure assistance to other provinces in PNG. Some minor adjustments have been made to the project description reflecting (a) the scope o f works to be done with the credit finance; and (b) TA and other components already done under the loan. The D O wil l nevertheless remain the same.
Through the inclusion o f Gulf and Western provinces, the participating provinces
3.02 Table 4 summarizes the main physical project output targets which are adjusted under the additional credit to reflect the inclusion o f the two new provinces which, until now, have had very limited maintenance programs. The project performance indicators have also been amended and are shown in Part VI.
3.03 the Procurement Guidelines, al l major contracts will incorporate explicit provisions for employer prevention programs among their workers in the project areas. This may be achieved either by applying the provisions concerning HIV/AIDs prevention in paras 19.2 (h) and (i) o f the Bank’s “Output and Performance Based Road Contracts” where i t i s used, or by incorporating technical specifications and provisions in the contract in accordance with recently adopted D O W policy based on four focused areas to raise awareness amongst workers and villagers and to provide labor access to condoms,
Reflecting GoPNG’s pol icy on HIV/AIDS prevention, to the degree permitted in
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voluntary counseling and referral to testing,2 The BOQs are to allow for specific costs to be allocated by bidders in their submissions on all major contracts.
Table 4: Physical Outputs of Ongoing and Expanded Project
Activity Current Loan Target Credit and Loan Target Routine Mtnce. Nat’ l Roads (km) Restoration Nat’ l Roads (km) 440 640 Routine Mtnce. Prov. Roads (km)
Mtnce./Rehab. Nat’ l Bridges (#) 35 65 Replacement o f Nat’l Bridge (#) 6 6
543 (3 X pea.)
200 (3 X p.a.)
750 (3 X pea.)
50 (3 X p.a.) Restoration Prov. Roads (km) 200 220
Replacement o f Prov. Bridge (#) 1 2 Mtnce/Rehab Prov. Bridge (#) 2 2 AcquisitionAailey type Bridges 6 6
3.04 more emphasis wi l l be placed on several key areas which are mentioned in the P A D but which, because o f early start-up distractions, did not receive enough attention. These include: institutionalizing an integrated, life-cycle maintenance approach in DOW; focusing more on counterpart staff on-the-job training with the management consultants and other specialists; sharing positive experiences with, and learning from staff o f similar operations in PNG; harmonizing and using common technical norms, specifications and standards o f operation, databases, asset management systems, etc. DOW and E P M are already preparing a joint program under the current loan aimed at involving DOW staff more formally in procurement and the above implementation activities.
N o w that the counterpart funding and several start-up issues have been addressed,
3.05 reviewed and adjusted as required in order to manage the ongoing project in its final implementation phase as well as the additional financing activities scheduled to commence early in 2007. Initial indications are that the additional-finance works can be completed by mid-2009 and the proposed new Credit Closing date o f December 3 1, 2009, wi l l provide ample room for any unforeseen contingencies. To comply with the proposed workprogram, there will be the need for (i) one additional PEPM (Provincial EPM) to manage Gulf and Western Provinces; (ii) one DOW Procurement Specialist assigned to the E P M team and fully responsible for procurement o f works and services for the p r ~ j e c t ; ~ and (iii) a qualified Bridge Engineer to assist the government with design and supervision o f the priority bridges to be restored under the project. Financing o f about US$750,000 wil l be provided for advance contracting o f services (including Bridge Engineering design and other minor consultancies) and routine maintenance works, in
D O W and the E P M staffing and other resource needs wil l also have to be
D O W has adopted FIDIC’s HIV/AIDS prevention provisions for inclusion in the contract documents for AusAID funded road maintenance projects and would like to extend same to all its major works contracts. The provisions are based on best practice in Africa, and comprise: a clause for inclusion in the Particular Conditions; standard specification clauses; Bill o f Quantities items; and Contractor’s Compliance Certificate. (See: httD://wwwl .fidic.ordaboutlFIDIC hiv aids Dolicv annex.doc for the standard technical specification).
A second D O W procurement specialist w i l l be based in the Major Contracts Section o f DOW’s Operations Division, to deal with other programs and training o f field staff,
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order to facilitate bidding and commencement o f new sub-projects before the additional credit becomes effective, if required. These services and works have been identified in the procurement plan.
3.06 and o f the proposed additional Credit and funding source. The additional credit wil l be used to finance a discrete set o f sub-projects. Other than the Employer's Project Management (EPM) contract, i t i s not envisaged that any contract wi l l be funded out o f both the Loan and the Credit. Activities in the two new provinces (Gulf and Western) wi l l be funded only out o f the additional (new) credit.
Table 5 i s a summary o f the total project costs by component o f the ongoing Loan
Table 5: Total Project Costs by Component Funding
(Add'l Cr.) Original Loan Additional Credit Comb. Total
Component LOC. Fgn. Tot, LOC. Fen. Tot. LOC. Fgn. Tot. Gov. WB US$ M. Eqv.. US$ M. Eqv. US$ M. Eqv. US$ M. Eqv.
Civil Works Total: 14.71 26.29 41 13.36 26.08 39.44 28.07 52.37 80.44 13.36 26.08
National Roads 8.69 13.83 22.52 10.04 18.68 28.72 18.73 32.51 51.24 10.04 18.68 Provincial Roads 2.89 3.48 6.37 1.00 1.97 2.97 3.89 5.45 9.34 1.00 1.97 National Bridges 1.69 5.64 7.33 2.33 5.43 7.76 4.02 11.07 15.09 2.33 5.43 Provincial Bridges 1.44 3.34 4.78 0.00 0.00 0.00 1.44 3.34 4.78 0.00 0.00
Road Sector 0.01 1.92 1.93 0.00 1.01 1.01 0.01 2.93 2.94 0.00 1.01 Support Implem. Support 0.66 5.99 6.65 0.78 5.33 6.11 1.44 11.32 12.76 0.78 5.33 Physical Conting. 1.54 3.42 4.96 1.05 2.44 3.49 2.59 5.86 8.45 1.05 2.44 Price Conting. 2.27 1.97 4.24 1.05 2.44 3.49 3.32 4.41 7.73 1.05 2.44 VAT/GST 5.88 0 5.88 5.35 0 5.35 11.23 0.00 11.23 5.35 0.00 Loan front-end fee 0 0.4 0.4 0 0 0.00 0.00 0.40 0.40 0.00 0.00
Total 25.07 39.99 65.06 21.60 37.30 58.90 46.67 77.29 123.96 21.60 37.30
3.07 Table 6 shows the additional financing requirement by component.
Table 6: Additional Financing Requirement by Component
IDA % of IDA % of Total Financing Financing (US$ M)
Project Component (US$ M)
Civil Works Total: 39.44 67% 26.08 70%
% of IDA Financing
[una 1VL)
Civil Works Total: 39.44 67% 26.08 70% National Roads Provincial Roads National Bridges Provincial Bridges
Road Sector Support Implementation Support Physical Contingencies Price Contingencies VAT/GST
Total
28.72 2.97 7.76 0.00 1.01 6.11 3.49 3.49 5.35
58.89
(72.8 %)
(19.7%)
1.7% 10.4% 5.9% 5.9%
(7.5%)
(0%)
10% 100%
18.68 1.97 5.43 0.00 1.01 5.33 2.44 2.44 0.00
37.31
(7 1.6%) (7.6%)
(20 I 8 %) (0%) 2%
14.8% 6.6% 6.6% 0%
63.3%
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3.08 category under the additional credit.
Table 7 i s a summary o f the year by year total project financing required, by
Table 7: Project Financing By Year
Financing by WB (US% M) 2007 2008 2009 Total
Component
Civil Works National Roads
Routine Maintenance ( A n n ~ a l l y ) ~ Restoration Special Maintenance
Routine Maintenance (Annually) Restoration
Maintenance and Rehabilitation Replacement
Maintenance and Rehabilitation Replacement
Sub-Total
Provincial Roads
National Bridges
Provincial Bridges
Road Sector Support Training o f Construction Industry Socio-economic Impact Study and workshop Revise Std. Roamridges Specs, DOW OM, Trg. BMSiRAMS Update Condition Survey
Sub-total
EPMPEPM Bridge Engineering Design and Supervision4 Design, Bid Documents and Supervision Incremental Operating Costs Accounting & Auditing Services Training Workshops Conferences
Implementation Support
Sub-total
Total Physical Contingencies Price Contingencies
Total (excl. G S T N A T )
0.57 0.87 5.17 10.06 0.04 0.04
0.04 0.09 0.69 1.16
0.00 1.16 0.00 0.92
0.00 0.00 0.00 0.00 6.51 14.30
0.13 0.13 0.00 0.40 0.00 0.20 0.10 0.05 0.23 0.78
1.06 1.06 0.75 0.00 0.17 0.17 0.08 0.08 0.09 0.05 0.15 0.15 2.29 1.51
0.81 0.81 0.81 0.81
10.67 18.21
0.03 1.47 1.85 17.08 0.04 0.13
0.00 0.12 0.00 1.85
1.16 2.31 2.19 3.12
0.00 0.00 0.00 0.00 5.27 26.08
0.00 0.26 0.00 0.40 0.00 0.20 0.00 0.15 0.00 1.01
1.20 3.32 0.00 0.75 0.08 0.41 0.08 0.24 0.05 0.20 0.12 0.42 1.53 5.33
0.81 2.44 0.81 2.44 8.43 37.30
Total (incl. G S T N A T )
Table 8 shows the allocation o f the additional finance Credit proceeds: 3.09
Advance contracting may be required for initial routine and roadside maintenance and part payment o f bridge engineering design.
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Table 8: Allocation o f Proceeds o f Additional Credit Of Which, Additional
(US% M equivalent)
Financing (In percent)
Total RMRP Of Which, (Original Loan +
Additional Credit) Financing Share (US% M) (SDR M)
Additional Financing Share Categories
1. Civil Works (a) Under Part A . l o f the Project (b) Under Part A.2 o f the Project (c) Under Part B.1 ofthe Project (d) Under Part B.2 o f the Project (e) Under Part C.1 ofthe Project ( f ) Under Part C.2 o f the Project (g) Under Part D.l o f the Project (h) Under Part D.2 o f the Project
2. Goods under Parts C.3, E. l and E.2 o f the Project
3. Training, workshops, seminars and conferences under Parts F.l and F.2 o f the Project 4. Consultants' Services: (a) under Part E.3 o f the Project
(b) under Parts E.4, F.3 and F.4 o f the Project
(c) for training under Parts F. 1 and F.2 o f the Project
(d) under Part E.6 o f the Project
(e) for audits o f Project accounts
5. Incremental Operating costs
6. Fee
7. Unallocated Total
3.65
28.87
1.22
4.23
2.88
6.49
0.43
2.91
1.9
0.52
0
6.03
4.01
1.23
0.5
0.37
0.65
0.4
11.02 77.3
1.07
11.47
0.08
1.24
1.55
2.1
0
0
0.03
0.28
0
2.23
0.78
0.18
0
0.13
0.16
0
3.60 24.90
1.6
17.08
0.12
1.85
2.3 1
3.12
0
0
0.05
0.42
0
3.32
1.16
0.26
0
0.2
0.24
0
5.58 37.31
37%
70%
37%
70%
70%
70%
70%
70%
100% o f foreign expenditures, 100% o f local expenditures (ex- factory cost) and 65% o f local expenditures for other items procured locally
90%
83% for foreign firms and 75% for local firms
100% for foreign firms, 75% for local f i r m s and 70% for individuals. 100% for foreign firms, 75% for local f i rms and 70% for individuals. 100% for foreign firms, 75% for local f i rms and 70% for individuals. 100% for foreign f irms, 75% for local f i rms and 70% for individuals.
80%
Amount due under Section 2.04 o f Loan Agreement
-1 1-
3.10 Table 9 shows the projected additional finance Credit disbursement profile.
Table 9: Additional Finance Projected Disbursement Profile Year Quarter Ending Date Disbursements Cumulative Percent
N o (US%) (US$) 2007 1 3 1 -Mar-07 1.01 1.01 2.7%
2 3 0- Jun-07 1.5 2.51 6.7% 3 30-Sep-07 2.50 5.01 13.4% 4 3 1 -Dec-07 3.00 8.01 21.5%
2008 1 3 1 -Mar-08 3.75 11.76 3 1.5% 2 30-Jun-08 4.00 15.76 42.2% 3 30-Sep-08 5.00 20.76 55.6% 4 3 1 -Dec-08 6.50 27.26 73.1%
2009 1 3 1 -Mar-09 4.5 3 1.76 85.1% 2 30-Jun-09 3.50 35.26 94.5% 3 30-Sep-09 1.70 36.96 99.1% 4 3 1-Dec-09 0.35 37.31 100.0%
3.1 1 with the exception o f timely submission o f Audits, the Financial Management arrangements have been satisfactory and will be maintained for the additional financing. The project reporting system will require minor modifications to permit reporting on the Credit activities. As both Bank and GoPNG systems require separate reporting o f Loan and Credit activities, a new designated account wi l l be established for the additional financing. The Financial Management Information System and approved workplans are designed so that the loan and credit funds finance separate identifiable activities and so i t would not be possible to finance Additional Finance tasks through loan funds or vice versa.
Financial Management. The RMRP project has been regularly supervised and,
3.12 primarily because discussions on procedures with the Auditor General’s office. These have now been clarified with a clear understanding o f al l o f the requirements. The audit reports received to date have had unqualified opinions and a timetable has been agreed to ensure that audit arrangements are secured for both the extension o f the Loan and the additional finance Credit. If the timetable i s not met the operation o f the designated account wil l be suspended in accordance with Bank policy.
With regard to audit, the init ial arrangements took much longer than anticipated
3.13 broken out by the original loan and the additional credit.
Procurement. Table 10 shows the total project costs by expenditure category
3.14 As the additional credit will be financing some new activities, a new agreement wil l be drafted for the Credit. In addition, the Loan Agreement wi l l be amended to reflect the revised project description and consequential amendments. The closing date o f the loan will be extended to December 3 1,2009, to match the Credit. However, i t has been agreed that procurement for the proposed additional Credit wil l be exceptionally carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans
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and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997, and January 1999 and “Guidelines: Selection and Employment o f Consultants by World Bank” published by the Bank in January 1997 and revised in September 1997 and January 1999 and the provisions stipulated in the Legal Agreement for the proposed project. This design provides the means to ensure consistency in the procurement arrangements with the on-going loan. Suitable provisions will be made in the Standard Bidding Documents to address the current Fraud and Corruption clauses.
T a b l e 10: Procurement by Expenditure Categories
Categories Original Loan (US$ M) Additional Finance Credit (US$ M) Local Foreign Total Local Foreign Total
Goods 0.00 1.9 1.9 0.00 0.05 0.05 Works 14.69 24.61 39.3 13.36 26.08 39.44 Services 0.67 6.63 7.3 0.77 5.18 5.95 Training 0.01 1.07 1.08 0.05 0.41 0.46 Contingency 3.81 5.39 9.20 2.08 4.83 6.91 Loan front-end 0.00 0.40 0.40 0.00 0.00 0.00 fee Advance 0.00 0.00 0.00 0.00 0.75 0.75 Contracting (Retroactive finance) -- services and works Total 19.18 40.00 59.18 16.26 37.3 53.56 VAT 5.88 0.00 5.88 5.35 0.00 5.35 Total Finance 25.06 40.00 65.06 21.61 37.31 58.91 Required
3.15 assisted in i t s task by the EPM. While recent supervision missions show that adequate counterpart and E P M staff inputs have been available on the original project, extra staff would be put in place to handle the additional activities. D O W developed a Procurement Plan for project implementation which provides the basis for the procurement methods. T h i s plan has been agreed between the Borrower and the Project Team and will be available at DOW’s office. The Procurement Plan wil l be updated in agreement with the Project Team annually, or as required, to reflect the actual project implementation needs and improvements in institutional capacity. The Draft Procurement Plan for the f i rst 18 months i s attached as Annex 1 wi th some details subject to further technical discussions with the government.
Procurement activities will continue to be carried out by DOW, which wil l be
3.16 design and other services and initial routine and periodic maintenance works carried out on or after January 1,2007, but prior to credit effectiveness may be required. These sub- projects will be procured in accordance with the paras. 1.9 (goods) and 1.1 1 (services) o f
Advance contracting and retroactive f inancing up to US$750,000 for bridge
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the respective Guidelines. GoPNG wil l provide for the amount required to cover i t s share o f the project cost in i t s 2007 budget.
4. CONSISTENCY WITH CAS OR CPS
4.01 the Board discussed on March 18,2005. The ISN calls for support to “selected priority investments that generate high social and economic returns, , , , strengthen donor coordination, improve . , . service delivery, and enhance sustainability” al l o f which are addressed by the RMRP. Specifically, i t supports the objective o f building the foundations for improved governance and sustained recovery through targeted priority investments in basic services. Given the country’s high dependence upon i t s road transport network for both social and economic development, these investments in high priority road and bridge maintenance activities and institutional development are also expected to support IDA’S growth and poverty reduction goals for PNG. Incorporation o f employer HIVIAIDS prevention policy in new contracts i s also expected to enhance the Strategy goal o f H IV /A IDS containment. The period covered by the I S N ended around October 2006. We are in the process o f preparing a new CAS and the RMRP i s the f i rst project to go to the Board since the I S N expired.
The project i s consistent with the Bank’s Interim Strategy Note (P073741) which
5. ECONOMIC ANALYSIS OF SCALED-UP PROJECT ACTIVITIES
5.01 the ongoing project was also used for the additional finance analysis. Reflecting the expected live o f the road with an appropriate maintenance regime, a 20-year l i fe cycle (instead o f 10 years as used in the PAD) was used for the upgraded road works. As part o f the ongoing project, in preparing i t s Annual Work Program (AWP), DOW now routinely uses the RAMS and H D M - 4 models, with updated condition, traffic-count and cost data. For the bridge maintenance program, it uses the Bridge Management System (BMS) Analysis Module. An extensive Bridge Asset Management study was done in March 2005 by consultants, and major maintenance i s based on the Maintenance Priority Index (MPI) derived from economic and strategic requirements, while improvement works (e.g., replacement), are identified through the Functional Deficiency Index (FDI), Structural Adequacy Index (SAI) or Maintenance Condition Index (MCI) exceeding certain thresholds. The chart below illustrates the relative benefits o f alternative treatment for the road network.
The cost-benefit methodology described in Section E and Annex 4 o f the P A D for
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included in the E
-15-
Table 11: Planned Road Restoration Works (2 007-2008)
Est. Traf. EIRR Length cost VOl .
K 2007 Program Activity Location Scope
Works o f (km) Million 'pd ("/.I
SWRMRPIO2 Rabaul Kokopo NM4801/20 Vulcan u-s 4.0 8.00 600 19 Road SLIRMRPIO 1 Wiga Road ND3308/10-30 Wiga Road SM 30.0 4.00 305 14
SL/RMRP/05 East West NM4604/20 - 30 first 15km RG 15.0 8.50 160 16 Highway
2008 Program Activiw
SLIRMROI06 Seal Kokoda Highway S 8.0 6.0 350 24
SL/RMR0/07 Reconstruct NB Highway R 14 8.0 300 24
SWRMROIOS Special Maint Aseki Rd - SM 30 4.5 80 30
S L/RMRO/O 9 Reseal Talasea Rd -Kimbe R 27 8.75 300 28
Embara to Kumusi
Biloma to Koriri
Okinawa to Aseki
to Talasea SL/RMRO/lO Regravel Hiritano Hwy 253 RG 19 8.0 200 1g6
- 272.6km U-S= Upgrade to Seal; SM= Special Maintenance; R= Reseal; S=Seal; RG= Regravel; vpd=Vehicles Per Day.
6. EXPECTED OUTCOMES
6.01 The additional financing works are expected to help prevent deterioration o f the key national and provincial network while the GoPNG finalizes its national maintenance program. At the end o f the project period some o f the outcomes which can be expected are (a) establishment and operation o f a more comprehensive national maintenance regime in the participating provinces; (b) use o f a more harmonized and realistic annual maintenance program derived through objective technical and other criteria; (c) greater use o f DOW resources and systems, particularly asset management (RAMS, BMS) with stronger PPP linkages in contracting and implementation tasks; (d) wider donodlender use o f uniform revised specifications for roads and bridges; (e) more DOW staff trained and experienced in sector activities; ( f ) increased access by households and businesses in proximity to the maintained roads, to markets and social facilities, and an associated reduction in travel time and costs; and (g) improved income generation (for both the households and small local contractors).
6.02 in some o f the previous indicators and to better reflect some o f the social and institutional
The extended project output/impact indicators were revised to avoid ambiguities
IERR based on constrained traffic flow. Traffic flow and IERR to be updated, prior to development of bidding documents.
-16-
outcomes o f the project. The revised outputhmpact and results indicators are presented in Annex 3.
7. BENEFITS AND RISKS
7.01 Benefits. The benefits and r isks noted in the Project Appraisal Document (PAD) for the ongoing Loan are expected to also be applicable to the works funded by the additional funding. Apart from the six existing provinces, i t i s expected that the two new provinces will also show benefits; however, since they are starting out from a lower level than the other provinces, the overall average may decline initially before improvements are felt. Among the main benefits listed in the P A D are; improved physical condition and safety o f the national and provincial land transport network, reduced vehicle operating cost, improved accessibility and its impact upon the livelihood o f beneficiaries who include many poor and rural residents. Employment during construction and later maintenance work i s also expected to generate economic benefits among residents; the improved capacity o f DOW and the provinces to plan, design and maintain the system; and positive environmental impacts associated with upgrading and sealing roads, such as reduced erosion and flooding, reduced dust pollution, and reduced pollution o f water courses would also be positive factors.
7.02 Risks. The overall risk for the ongoing operation i s rated as “High” in the original Project Appraisal Document (PAD). This i s now expected to be lessened to “Substantial” for the Additional Financing works due to a number o f factors. During the original appraisal o f the ongoing project, the high-risk items included: (a) late or inadequate counterpart funding; (b) knowledge drain from DOW; and (c) land-acquisition and procurement problems. Substantial r isks included: (a) political interference in workplan preparation; and (b) inappropriate selection o f contractors or consultants. Medium risks were expected for: (a) lack o f local support for the works; (b) inability to recruit competent works supervisors; and (c) inability to get participating communities to do routine maintenance according to contract conditions.
7.03 poses some additional risk o f utilization o f the lower-cost credit before the loan. In this project, this risk i s deemed to be l ow because the ongoing loan i s about 85 percent committed with about 70 percent already disbursed and the rest in various stages o f implementation with funds already drawn from the loan account. Additionally, there are separate accounts for the loan and credit and the Financial Management Information System and approved workplans are designed so that the loan and credit funds finance separate identifiable activities and so i t would not be possible to finance tasks identified for credit financing from loan proceeds or vice versa.
Having a loan and a credit being implemented at the same time by the same entity
7.04 RMRP works well underway, Bank assessment shows adequate counterpart and E P M staff and management capacity, once the proposed incremental increases are in place. Design and procurement preparations for most o f the f i rst year’s program for the
Regarding the risk o f knowledge drain, with most o f the remaining ongoing
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additional financing are already being planned and this should also facilitate implementation and lower staffing risk issues. There has been no land acquisition problem so far and none i s anticipated for the remaining works.
7.05 For the two new provinces, since the project activities for Western wil l be mostly TA and those o f the Gulf involve maintenance o f existing roads and structures already in use, with the additional staffing needs mentioned above in place, there should be no capacity constraint problem.
7.06 Environmental Management. N o new land or environment issues wil l be triggered by the works financed by the proposed additional financing as they involve an on-going cycle o f maintenance on the same stretches o f roads as before, or in the case o f the two new provinces, wil l involve restoration works (e.g., re-gravelling) o f existing road alignments. Therefore the potential negative environmental impact o f the project i s expected to be minimal and limited to the effects o f exploitation o f road aggregates, runoff, erosion, dust and noise from construction activities, al l o f which are manageable with proven road maintenance mitigation techniques. The B Category i s consistent with OP4.01. N o sub-projects are identified as requiring a full EIA.
7.07 under the original RMRP to address environmental and social issues. It i s financed by paying the Contractor through a l ine i tem in the Bill o f Quantities. Upon award o f the contract, the contractor drafts and submits an E M M P for approval by the DOW Environmental Officer (EO). This plan i s then assessed in accordance with EMMP. After review and approval by the EO, the Supervising Engineer monitors i t s implementation with the E O periodically visiting the sites to audit the works carried-out. DOW has a well-qualified environmental specialist.
An Environmental Management and Monitoring Plan (EMMP) was produced
7.08 during supervision missions, and when needed, recommendations are made to rectify any deficiencies noted. Because if the special geographical and geological features o f several provinces, a Senior Civ i l and Structural Engineer was hired in 2006 to review several technical and environmental issues in one o f the provinces (ENB). The finding was that there was a high degree o f compliance in the works reviewed in that province. Quarterly progress reports also provide feedback on compliance with environmental plans. When problems do arise, these usually trigger visits by the Environmental Officer
Within the project team, the project engineer reviews environmental aspects
7.09 Since many o f these works are scattered and in very remote areas, the country has a very small pool o f contractors, many o f whom are not familiar with project environmental requirements, the D O W held workshops to orient the participants on these. During implementation o f the training o f the small contractors component, the environmental plan requirements were again repeated. In general, overall compliance on site has been good but there i s need for more intensive interaction and follow-up activities to get well-prepared plans as preparation o f environmental plans i s not a normal activity among contractors. Getting such plans i s not an easy task; however, in doing the actual works, there i s generally a high level o f compliance with good practices. I t should
-1 8-
be also noted that because other employers do not usually insist on such environmental plans and there i s a small pool o f qualified contractors, DOW has to carefully manage i t s interaction with contractors. An unanticipated problem has been the increasing incidence o f residents removing structures and material for their private use (e.g., making fishing traps from gabion baskets) after the mitigation works are complete. For the additional works, resources have been provided for the EO to make more frequent routine visits to each o f the provinces. Also, during the next mission, there are plans to have a Bank Environmental Specialist conduct an overall assessment o f the system, and if needed, a special environmental supervision strengthening program will be prepared along with provisions for any required follow-up actions to address any weakness identified.
7.10 since the works are all within the existing road corridors. A land acquisition and resettlement framework (LARF) was prepared for the original loan in 2002. It meets current safeguards requirements and its provisions wil l be applicable if necessary to the new credit. An updated ISDS has been prepared.
Resettlement Plan. No land acquisition or involuntary resettlements are foreseen,
8. FINANCIAL TERMS AND CONDITIONS FOR THE ADDITIONAL FINANCING
8.01 ongoing project is financed by a Loan, the financing terms and conditions wil l be different. Processing the legal, financial accounts and related document also has to be carried out separately because o f IDA funding.
The additional financing wil l be in the form o f an IDA Credit and since the
8.02 To avoid any possible start-up delay, i t i s recommended that the Special Account be maintained in P N G Kina as was the practice for the ongoing Loan. Also, because o f recent mining sector activities and close affiliation with the Australian currency, the K ina has appreciated about 11 percent against the US$ over the l i fe o f the ongoing project so far. A Kina denominated Special Account would mitigate some o f the risk associated with possible future volatility o f the US$.
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Annex 1: Procurement Arrangements
A. General
Procurement for the proposed additional Credit would be exceptionally carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999, and “Guidelines: Selection and Employment o f Consultants by World Bank” published by the Bank in January 1997 and revised in September 1997, January 1999 and M a y 2002, and the provisions stipulated in the Legal Agreement for the proposed project. T h i s design provides the means to ensure consistency in the procurement arrangements. Suitable provisions would be made in the Standard Bidding Documents to incorporate the current Fraud and Corruption clauses o f the M a y 2004 Procurement Guidelines. The general description o f various items under different expenditure category i s described below.
I. Procurement of Works (US$39.4 million, Credit and Government Financing): Works procured under this project, would include road reconstruction, annual routine and roadside maintenance o f key segments o f national and provincial roads and maintenance, restoration and replacement o f national and provincial bridges. The procurement wi l l be done using the Bank’s Standard Bidding Documents (SBD) for all I C B and National SBD already in use and agreed with the Bank, after incorporating the current Fraud and Corruption clauses
(a) International Competitive Bidding (ICB): The project i s expected to include fourteen I C B civ i l works contracts (Le. contracts estimated to cost more than US$500,000 per contract), which would basically involve major road reconstructions (eight contracts) and restoration and replacement o f national and provincial bridges (six contracts). The estimated aggregate amount under this method i s US$28 mi l l ion
(b) National Competitive Bidding (NCB): Eighteen contracts (estimated to cost US$500,000 or less but more than US$50,000) are expected to be procured under NCB. Those contracts would be used for routine maintenance mainly (with one contract for bridge maintenance). The estimated aggregate amount under this method i s US$3.5 mi l l ion
(c) Small Works (SW): A total o f twenty contracts (estimated to cost less than US$50,000) are expected to be procured under SW and would be applied for small and routine roadside maintenance The estimated aggregate amount under this method i s US$0.5 million,
participating in the routine maintenance (vegetation control, drain and culvert cleaning and bridge waterway maintenance) on road sections adjacent to their villages. This practice would be continued under this project where the Provincial Works Manager (PWM) reaches agreement (format already in place) with the relevant community by applying unit rates determined in consultation with DoW. The unit rates are reviewed by the Employer’s Project Manager (EPM) for reasonableness prior to final approval. The unit rates are published
(d) Community Participation: By tradition village communities have been
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regularly in the P WM Office and Provincial Administrations. Generally, these contracts cost US$8,000 equivalent or less. The total number o f agreement using this method i s about eighteen, with a total aggregate cost o f US$ 50,000. Force Account: Experience has demonstrated that small c iv i l works contracts in remote provinces are unlikely attract bidders and also that emergency type works (e.g. special maintenance due to unforeseen conditions) require DOW’s prompt response. As such, routine and special maintenance works (all estimated to cost less than US$200,000 per work) would use o f the Borrower’s own personnel and equipment. The estimate aggregate value o f works under this method i s US$0.5 million. Department o f Works (DoW) would be responsible for carrying out the works. D o W has had previous experiences with Force Account and the Task Team found i t to have the overall capacity to implement such activities. The use o f Force Account would have to be managed through Work Orders so that productivity controls are in place. The Employer Project Manager would monitor DoW’s performance and ensure that Work Orders are properly acquitted. Advance Contracting and Retroactive Financing: With regards to works contracts relating to road restoration and maintenance, while advance contracting may be initiated, in accordance to para 1.9 o f the Procurement Guidelines, retroactive financing would be limited to US$750,000 equivalent.
11. Procurement of Goods (US$50,000, Credit and Government Financing): Goods procured under this project, would include laboratory testing equipment Provision o f laboratory equipment to help improve the quality o f c iv i l works.
(8) Shopping: There i s a single goods’ contract, which i s estimated to cost less than US$50,000. I t would be procured through Shopping. If such goods are available in the local market from reputed local suppliers, who provide such goods as a part o f their normal business, then they may be procured through national shopping. Otherwise, they shall be procured through international shopping.
111. Selection of Consultants (US$5.8 million, Credit and Government Financing): The main consultants’ services would consist o f the services to be provided by the EPM, design and supervision for bridge construction, capacity building for small contractors, socio-economic impact studies, condition survey and auditing.
(a) Quality Cost Based Selection (QCBS): For the design and supervision o f bridge construction, qualified consultants firm shall be selected through QCBS at an estimated cost o f US$0.75 million.
(b) Single Source Selection (SSS): For E P M assignment this method would be appropriate so as to ensure continuity for the project’s implementation. The EPM’s assignment includes development o f the annual work programs, procurement assistance, supervision o f the works, training o f D o W staff, preparation progress reports, maintaining internal financial controls for the project, and preparation o f the project implementation completion report. The initial assignment was awarded on competitive basis and the original Request for Proposal outlined the possibility for continuation. D o W has rated the
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Consultant’s performance as highly satisfactory. The estimated amount for this contract i s US$4.0 million.
international advisors as well as local consultants may be appointed by D o W to assist in project implementation and to provide technical assistance. They should be selected through a comparison o f qualifications o f at least three qualified consultants among those who have expressed interest in the assignments or have been approached directly by DoW. In addition, with appropriate justifications and after concurrence by the Bank, individual consultants may be selected on a sole-source basis in exceptional cases, such as: tasks that are continuation o f previous work that the consultants have carried out and for which the consultants were selected competitively; assignments lasting less than six months; and when the individual consultant i s the only consultant qualified for the assignment.
consulting services for the design and supervision for bridge construction, D o W decided to proceed with advance contracting and retroactive financing (if necessary) in accordance to para. 1-1 1 o f the Consultant Guidelines.
(e) Short l i s ts composed entirely o f national consultants wi l l not be applicable
(c) Individual Consultants: Although not identified in the procurement plan,
(d) Advance contracting and Retroactive Financing: With regards to the
IV. Incremental Operational Costs (US$0.24 million, Credit and Government Financing): Selected qualified DoW, PWM, and Provincial Administration staff w i l l manage the project and provide supervision o f construction o f the c iv i l works. The eligible incremental costs would cover local transportation and per diem o f the staff, but excluding salaries.
V. Other: training, conferences, and workshops (US$0.42 million, Credit and Government Financing): Training (domestic and overseas) will be necessary to strength the capacity o f the D O W and provincial administration agencies in the carrying out o f works for road maintenance.
B. Assessment of the agency’s capacitv to implement procurement
Procurement activities would continue to be carried out by DOW, which would be assisted in i t s task by the EPM. Recent supervision missions have confirmed that their performance has been satisfactory. In addition, adequate counterpart and E P M staff, would be put in place to handle the additional activities.
Considering the country situation, the overall project risk for procurement remains high.
C. Procurement Plan
DOW developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team and will be available at DoW’s office. It wil l also be available in the Project’s database and in the Bank’s external website. The Procurement Plan wil l be
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updated in agreement wi th the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
In addition to the prior review supervision to be carried out from Bank offices, yearly supervision missions to visit the field to carry out post review o f procurement actions would be appropriate.
E. Prior Review Thresholds
(a) Civ i l Works will include: (a) all contracts awarded on the basis o f ICB; (b) contracts estimated to cost US$200,000 or more awarded on the basis o f NCB. The remaining contracts wil l be subject to post review on a sample basis.
(b) Goods wil l include: (a) al l contracts awarded on the basis o f ICB; and (b) f i rst three contracts awarded on the basis o f Shopping. All other contracts would be subject to post review on a sample basis.
(c) Consultant services wil l involve: (a) prior review o f all Terms o f Reference regardless o f the estimated value; (b) contracts greater than US$lOO,OOO equivalent for consultant services provided by f i r m s ; (c) al l consulting f i r m s selected through Single-Source Selection; and (d) all Individual consultants selected through Sole Source, regardless o f value. All other procurement o f consultant services wil l be subject to post review on a sample basis.
(d) All the prior review contracts wi l l be stated in the Procurement Plan
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Attachment 1: Details of the Procurement Arrangement Involving International Competition.
I SDecial Maint o f Wisa Rd O k m -
1. Works: List o f contract Packages which wil l be procured following ICB
I Prior
Ref. No.
SLIRMRPIO1
SLIRMRPI02
I Estimate Bank’s I (USD) 1 Method I Review Contract Description
I
30km 1,320,000 ICB Review Upgrade to seal Rabaul Kokopo Rd Vulcan 2,640,000 ICB Review Reseal Kokoda Hwy PPN Town to
Prior
Prior
SLIRMRPIO8
SLIRMRPIO9
SLiRMRPIlO
Special Maint Aseki Rd -0kinawa to Aseki 1,485,000 ICB Review Reseal Talasea Rd -Kimbe to Talasea 2,887,500 ICB Review Regravel Hiritano Hwy 253 - 272.6km 2,640,000 ICB Review
Prior
Prior
Prior
Ref. No.
SLIRMRPICSIOI
SLIRMRPICSIO2
2. Consulting Services: List o f Consulting Assignments with short-list o f
Assignment’s Description Estimate (USD)
Management Consultant (EPM) 4,000,000
Design and Construction Supervision 750,000 o f : Kwikila 2 & 3 Bridges in Central
international f i rms.
Method
sss
QCBS
QCBS
QCBS
QCBS
Bank’s Expected Bid Review opening / Bid
Prior Mar. 3 1,07
Prior Mar. 3 I, 07
Receipt
Review
Review
Prior Jun. 30,07 Review
Post Jan. 31,07 Review
Jan. 3 1,07 Prior Review
SLIRMRPICSIO3 1 Update o f Road and Bridge I I Specifications and Assistwith Roll- I 200,000
4 10,000
Expected Bid Opening /
Bid Receipt
Jul 19,07
Jul. 24,07
Jul. 3 1,07
Jan. 17,08
Jan. 29,08
Mar. 10. 08
Apr. 13,08
Dec. 29,07
Jan. 21,08
Jan. 26,08
Feb. 08,08
Aug. 06,07
Jan. 03,08
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Annex 2: Economic Analysis of Planned Road Restoration Works (2007-2008)
2007 Program ActiviQ
Town to Irihambo
U-S= Upgrade to Seal; SM= Special Maintenance; R= Reseal; S=Seal; RG= Regravel; vpd=Vehicles Per Day.
Assumptions for basic re-gravelling costs (current terms) for minimum accessibility: (a) Grading works triggered with IRI>=15 at cost o f K800/km; re-gravelling every 5 years at cost o f K5O/m3; vegetation control twice/year at cost o f K 4 5 0 k d y r ; clearing ditches every 2 years at a cost o f K250/km/yr; maintain road furniture every 3 years at a cost o f K277/km/yr; culvert maintenance every 5 years at a cost o f K250km/yr.
Assumptions for Rehabilitating Existing Unsealed Road: (a) Initial gravel works cost K18O,OOO/km; at IRI >=7 grading done at K800km; re-gravelling done every 3 years at a cost o f K50/m3; vegetation control twice per year at a cost o f K450/km/yr; clearing ditches done every 2 years at a cost o f K250/km/yr; maintain road furniture every 3 years at a cost o f K277/km/yr; culvert maintenance every 5 years at a cost o f K250/km/yr.
Assumptions for Upgrading to Seal Works: (a) Init ial sealing costs K770,000/km; at IRI >=6.5 pavement rehabilitation done at K16.5/m2; edge repair >=0.45 m2/km triggers repair at K17/m2; vegetation control twice per year at a cost o f K450/km/yr; clearing ditches done every 2 years at a cost o f K250/km/yr; road furniture maintained every 3 years at a cost o f K277/km/yr; culvert maintenance every 5 years at a cost o f K250/km/yr.
’ IERR based o n constrained traf f ic flow. Traf f ic flow and IERR to b e updated, pr ior to development o f bidding document.
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Annex 4: Environmental Safeguard Issues
I
1. With a population o f just under six mi l l ion and a land size o f approximately 463,000 km2, Papua New Guinea (PNG) sits on the southwestern Pacific ring o f fire and thus experiences frequent seismic activity. I t i s a very mountainous country (reaching about 4500 m above sea level) and i s mostly covered in tropical rain forests. The country has a significant number o f flora and fauna and i s also believed to have considerable undiscovered species o f plant and animals. I t has very large wetland areas surrounding the Sepik River and the Fly River, and has around fifteen terrestrial eco-regions ranging from island lowland rain forests to central range sub-alpine grasslands. With regards demographics, there are hundreds o f ethnic groups.
2. Given this geology, r ich biodiversity and diverse ethnology, the project’s activities are carefully screened to ensure that any impacts, positive and/or negative are clearly understood.
3. As stated in the main body o f this document, the activities funded by this additional financing wil l be identical to those funded under the existing RMRP, but wil l be scaled up to finance activities in two regions, which are Western Province and Gulf Province.
4. The activities to be financed which may have potential adverse environmental impacts are routine maintenance and restoratiodrehabilitation types works on national and provincial roads and bridges. These works wil l al l be on existing alignments, and any works requiring new alignments wi l l not be eligible for financing under this project.
5. The particular sub-projects to be undertaken in each province are identified in a systematic manner based on the Department o f Work’s (DoW’s) Annual Work Program (AWP). The A W P in turn i s derived from economic and strategic requirements based on the Road and Asset Management System (RAMS) and Bridge Management System (BMS). Design and procurement preparations the first year’s program for the additional financing are already being planned. For the succeeding years, sub-projects wil l be financed as they arise as priorities on the R A M S or BMS. For the two new provinces, the project activities for Western wi l l be mostly TA and those in the Gulf Province involve maintenance o f existing roads and structures already in use.
6. Therefore, the potential environmental issues associated with planning and construction o f these types o f works would be the same as that o f the RMRP. The environmental issues for planning are: (a) adequate storm water and run-off disposal and management along the alignment; (b) public road safety; and (c) traffic noise control. For construction impacts, these are: (a) contractors base camps for storage, maintenance, servicing and use o f plant, equipment, materials such as lubricants, fuels and bitumen, and labor; (b) quarry management; (c) soil erosion, transportation and sedimentation control and management o f its impact on water quality o f surface watercourses; (d) dust and noise control during
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7.
8.
I
construction period; (e) soil disposal and management; and ( f ) waste management, for both solid waste and hazardous liquid waste and used lubricants.
In compliance with the Environmental Planning Act o f 1978 and the World Bank’s own Environmental Policy OP4.01, in 2001, the GoPNG prepared a Sectoral Environmental Assessment (SEA) and Environmental Management Plan (EMP) as one document, which addressed the above environmental concerns associated with the RMRP at both the strategic level and directly on a road by road basis, and these two documents were cleared by the World Bank. The overall rating by the Task Team o f the GoPNG’s performance for implementation o f these documents in the RMRP is: Satisfactory.
The key features o f the SEA were an analysis o f the regulatory, institutional and governance framework for the environmental management o f road sector projects in PNG. An environmental analysis was done to determine the potential adverse environmental impacts. Further, the SEA called for the establishment o f an Environment Unit (EU), in the Department o f Works. This unit was established in March 2002, and i s manned by a well-qualified and experienced senior Environmental Engineer, whose main functions are:
Establishment a comprehensive database for preliminary project screening (including roads, environmental conditions including sensitive areas, protected areas and other relevant information).
Undertaking preliminary screening o f al l infrastructure projects falling under the jurisdiction o f D O W to identify the need for environmental studies as per World Bank requirements and PNG regulations
Co-ordination with DEC and other agencies with respect to obtaining the appropriate approvals for these projects.
Liaison with the project management offices o f al l donor-funded projects.
Organization training seminars and workshops (in close co-ordination with DEC) for environmental management o f transport projects.
Co-ordination with DEC on the further discussion and approval o f environmental management guidelines for road and bridge projects.
Development o f procedures for effective environmental management within the infrastructure (transport) sector. This should include the design o f an effective supervision and monitoring system for environmental impacts. This would involve close co-ordination with DOW at provincial level as wel l as the Provincial Administration and could include the further development o f contractual clauses related to environmental matters.
(viii) Development o f environmental management guidelines for other infrastructure projects under the jurisdiction o f DOW.
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I
(ix) Provision o f input to a revision o f the standard specifications for road and bridge construction in order to ensure that existing practices take into account more fully environmental aspects.
9. The training requirements contained in the SEA are being carried out. The following are some o f the details:
Initial training for D O W and P A was conducted in 2000.
The senior environmental engineer in the EU has conducted training for DOW and Provincial Administration staff in al l the six project provinces in 2003. This would now be extended to the two new provinces, in 2007.
Each province had nominated a Community Development Officer (CDO) to deal with social and environmental issues in RMRP sub- project areas. Most CDOs were environmentally qualified. Their training was in 2005 in Port Moresby. This would also now be done for the two new provinces.
The senior env i rohen ta l engineer also took part in the training o f small and medium sized contractors on environmental issues along with the lead consultant engaged for overall training.
10. With regards the EMP, the key features are the screening requirements for each sub projecthoad, detailed mitigation measures and plans corresponding to each type o f potential impact identified in the SEA, and detailed monitoring requirements.
1 1. The Implementation arrangements for the EMP during the implementation o f the ongoing RMRP were as follows:
(i) The senior environmental engineer took part in the training o f small and medium sized contractors on environmental issues along with the lead consultant engaged for overall training. An item has been provided under group 1 o f the Bill o f Quantities for
the preparation and implementation o f an environmental management plan.
(iii) I t i s a prerequisite that in order to start work at site, a contractor i s required to submit an environmental management plan. This plan i s then studied by the D O W Environment Engineer and passed back to the contractor with his comments, if any, for adjustments. To make i t mandatory for the contractor to comply with these
requirements, a clause has been included under specifications which allow the employer to suspend all the payments to the contractor until they implement the environmental program. Contractors’ Environmental Management Plan (EMP) i s closely monitored by all supervising staff and any problem area is immediately brought to the contractor’s attention for appropriate action.
(ii)
(iv)
(v)
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I
(vi) Contractors are expected to submit monthly reports on the implementation o f their EMP and this report i s discussed in detail and appropriate decisions are taken at monthly meetings. (A copy of the report submitted by Shorncl3e (PNG) Ltd at the September 2006 site meeting for reconstruction of New Britain Highway between Mosa and Kimbe Town is attached for reference.)
implementation o f EMP.
and investigated immediately.
(vii) In addition, CDO visit the sites regularly to monitor the
(viii) Complains from the stakeholders as wel l as public are taken seriously
12. The original SEA and EMP were approved and were publicly disclosed in June 2001 I
13. Some lessons learned so far from that process were identified as: (i) adverse environmental impacts were very minimal and localized and were effectively mitigated through the use o f appropriate measures detailed in the EMMP paid for through the civ i l works contracts; (ii) this WB project was the only exposure contractors had to incorporate EMMP’s into their works and as such, many o f them were very reluctant to do so initially, as other non-World Bank roads contracts do not require it; (iii) the roads in many cases are in extremely remote and mountainous areas making supervision o f these measures extremely difficult and relatively expensive; (iv) beneficiaries tend to dismantle and remove material from completed mitigation works for their own use; and (v) retentive capacity for environmental management o f these types o f activities within the D o W and with contractors, i s limited beyond the l i f e o f this project .
14. In light o f the above, the task team i s reviewing how the original SEA and EMP which in any case would apply to activities financed from the additional financing, may be revised and improved upon, taking into account these lessons learned. Also, since the new additional financing would scale up the works to two new provinces, as part o f the revision o f the SEA and EMP, the D o W wil l undertake consultations with key stakeholders in these two new provinces and will report back on how stakeholder views were considered. T h i s would be included in the project periodic reports. If there i s any need to revise the documents after this exercise, the revised documents would be reviewed by the World Bank and wil l be publicly re-disclosed.
15. Finally, the task team i s working with counterpart staff and other donors-lenders to identify areas where the project would be able to assist the GoPNG in addressing long term environmental management issues in the roads sector beyond the l i fe o f this project.
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