Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4344b-JM

STAFF APPRAISAL REPORT

HIGHWAY MAINTENANCE PROJECT

JAMAICA

April 28, 1983

Projects DepartmentLatin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Currency Equivalents

Currency Unit = Jamaican Dollar (J$)

Approximate Selling Rate at theOfficial Parallel Market

Official Rate (Since January 1983)

US$1 = J$ 1.78 US$1.0 = J$ 2.60J$ 1.0 = US$0.56 J$ 1.0 = US$0.38

Fiscal Year

April 1 to March 31

Weights and Measures

British/US Units Metric Equivalent

1 foot (ft) = 0.305 meter (m)1 mile (mi) = 1.609 kilometers (km)1 sq mile (mi2) = 2.589 square kilometers (km2)1 pound (1 lb) = 0.454 kilogram (kg)1 short ton (2,000 lbs) = 0.907 metric ton (m ton)1 long ton (2,240-lbs) = 1.016 metric ton (m ton)

Abbreviations and Acronyms

AAJ Airport Authority of JamaicaADT Annual Average Daily TrafficDC Directorate of Construction (MOC)DEMS Directorate of Electrical and Mechanical Services (MOC)DM Directorate of Maintenance (MOC)DMP Directorate of Major Projects (MOC)DTS Directorate of Technical Services (MOC)FMS Financial Management SystemGDP Gross Domestic ProductGNP Gross National ProductHSF Hire Funding SchemeICB International Competitive BiddingIDB Inter-American Development BankITA Island Traffic AuthorityJMM Jamaica Merchant MarineJRC Jamaica Railway CorporationKSAC Kingston and St. Andrew CorporationMA Ministry of AgricultureMLG Ministry of Local GovernmentMOC, Ministry of Construction (Works)MPUT Ministry of Public Utilities and TransportNPV Net Present ValuePAJ Port Authority of JamaicaPSIP Public Sector Investment ProgramRMCS Road Maintenance Works Costing SystemRMP Road Maintenance Program for FY 1983/84-1986/87ROMGRAM Road Maintenance Programing SystemRRIP Rural Roads Improvements ProjectsSOE Statement of ExpenditureTAA Traffic Area AuthorityTPOS T.P.O'Sullivan and Partners, Consulting EngineersTRRL Transport and Road Research Laboratory, UK

FOR OFFICIAL USE ONLYSTAFF APPRAISAL REPORT

HIGHWAY MAINTENANCE PROJECT

JAMAICA

TABLE OF CONTENTS

Page No.

I. PROJECT DEVELOPMENT, OBJECTIVES AND SCOPE .................... 1

A. Project Development .................................... I..1B. Project Objectives and Description .. 1.....................

II. THE TRANSPORT SECTOR . ............. . .... ..................... 2

A. The Transport System ........ *.. .......... ............... 2B. The Transport Sector Organization .......... .............. 3C. Sector Issues and Strategies ............................. 3D. Roads and Road Transport ... ........... .............. 5

III. INSTITUTIONAL CONSIDERATIONS .... .......................... 8

A. Organization and Staffing . ............................. . . 8B. Road Planning ......................................................... 9C. Highway Maintenance ..# ...... ... .. . . ......................... 9D. Hire Funding Scheme .. ............ .......................... . 12E. The Equipment Fleet . .................... ... ........ . ... 13F. Training ................................................. 13G. Financial Management, Accounting and Auditing ............ 14

IV. THE ROAD MAINTENANCE PROGRAM AND THE PROJECT .......... ...... 14

A. Road Maintenance Program FYs 1983/84-1986/87 ............. 14B. Project Components .................. .................... 16C. Cost Estimates,-Financing and Disbursement . ............. 18D. Implementation and Procurement ........... .. .............. 21E. Financial Reporting, Auditing and Monitoring ........... 22F. Summary of Economic Evaluation ......................... 23G. Project Risks ............................... . 24

V. AGREEMENTS REACHED AND RECOMMENDATION ........................ 24

This report is based on the findings of an appraisal mission which visitedJamaica in October 1982. The mission comprised Messrs. 0. Raggambi (HighwayEngineer), G. Morra (Training Specialist) and J. Wesberry (FinancialAnalyst/Consultant), Ms. K. Sierra (Economist) and Ms. M. Pokorny(Economist/Consultant). The report has been edited by Ms. Virginia Foster.

I This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (Continued)

Page No.

TABLES

2.1 Transport Infrastructure Investment by Mode in Comparisonwith the Gross Domestic Product (1977/78-1981/82) .... ..... 27

2.2 Gasoline and Diesel Consumption (1970-1981) .... ............. 28

2.3 Highway Expenditures and Road User Contributions toGovernment Revenues (1973/74-1981/82) ..................... 29

2.4 Ministry of Construction (Works) Expenditures on Roads(1978/79-1982/83) ......................................... 30

3.1 Expenditure on Routine Road Maintenance (1979/80-1982/83) ... 31

4.1 Phase I Overlay Program ................ .. ................... 32

4.2 Phase I Reseal and Seal Program ............ .. ............... 33

4.3 List and Cost of Maintenance Equipment ........ .. ............ 34

4.4 Schedule of Estimated Disbursements .......... .. ............. 35

4.5 Implementation Schedule (Chart 24783) ......... .. ............ 36

ANNEXES

1. Past Bank Assistance in the Highway Subsector .... ........... 372. Transport Sector: Background ............................... 403. Outline Terms of Reference for the Road Planning Unit ...... 444. Training Program ......... ................................... 485. Economic Evaluation ......................................... 526. Selected Documents and Data Available in Project File ....... 59

CHARTS

1. 24781 - Ministry of Construction (Works) .602. 24782 - Directorate of Maintenance .61

MAPS

IBRD 14241R - Jamaica - Previous Bank Highway Projects

IBRD 16846 - Jamaica - Highway Maintenance Project

I. PROJECT DEVELOPMENT, OBJECTIVES AND SCOPE

A. Project Development

1.01 Jamaica's main arterial road network developed gradually from theera of horse-drawn carriages and bridle roads to the age of the motorvehicle. Asphaltic pavements were provided mainly between 1950 and 1960, andthe increasing volume of traffic during the 1960s necessitated the recon-struction and expansion of the network, particularly where it served majorpopulation areas. The Government's priority in the early 1970s, however,shifted from new construction and major improvements to the preservation ofthe network, which, by that time, was showing signs of deterioration due toaging and lack of maintenance. The country's efforts at systematic mainte-nance of the road network were supported by the Bank-financed Second HighwayProject (Loan 899-JM, US$ 9.3 million, May 1973), which comprised a programfor periodic maintenance, procurement of maintenance equipment, and technicalassistance for improving the capability of the Ministry of Construction(Works) (MOC) in road maintenance operations and management. Following acomprehensive study of road maintenance needs under the technical assistancecomponent of the same project, the Government adopted a Five-Year RoadMaintenance Program for FYs 1979/80-1983/84. The Fourth Highway Project(Loan 1740-JM, US$16.0 million, June 1979) covered the periodic maintenancecomponent of the program and provided continuity to equipment supply andinstitutional measures initiated under the Second Highway Project.

1.02 In early 1982, in view of the expected completion of the FourthHighway Project by mid-1983, the Government requested and the Bank agreed tothe financing of a Study 1/ for the development of the next phase of theroad maintenance program from the proceeds of the Fourth Highway Loan. TheStudy was undertaken by consultants T.P.O'Sullivan and Partners (TPOS)(UK) inthe second half of 1982. The consultants' findings and recommendationsprovided the basis for formulating the Government's Road Maintenance Programfor FYs 1983/84-1986/87 (RMP), and, within that, the proposed project.

B. Project Objectives and Description

1.03 The principal objective of the proposed highway maintenance projectis to help provide continuity to the road subsector of Jamaica in support ofthe Government's strategy for preserving rather than expanding the country'smain highway network. The project is designed to provide for urgently neededmaintenance of selected sections of the network, procurement of vehicles andmaintenance equipment and further strengthening of the institutionalcapability of MOC in areas of planning, maintenance operations, equipmentmanagement and staff training. The project is in line with a strategy whichemphasizes the preservation/extension of the life of existing facilities andstresses the importance of improving maintenance and management practices.The scope of the Government's RMP, including that of the proposed project, is

1/ Road Improvement and Maintenance Project (RIMP) Stage III Study;referred to throughout this report as "The Study."

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well balanced between the most pressing needs of the subsector and thecountry's financial resources and institutional capabilities.

1.04 In detail, the proposed project comprises:

(a) Periodic road maintenance consisting of:

(i) Asphaltic concrete overlay of existing pavement on about160 miles of roads;

(ii) Asphaltic sealing and resealing with double surface treatmentof some 360 miles of roads; and

(iii) Preparatory work, such as drainage improvement andsurface patching, for (i) and (ii) preceding;

(b) Procurement of utility vehicles, dump trucks and miscellaneousmaintenance equipment, tools for maintenance and repair of equip-ment; equipment for training; and

(c) About 245 man-months of technical assistance by consultants for thestrengthening of MOC's planning, maintenance and equipment manage-ment and training capabilities.

1.05 The staff of MOC gained valuable experience in formulating andexecuting maintenance programs through working in close association withconsultants engaged under previous Bank-financed highway projects (Annex 1and Map IBRD 14241R). With the additional strengthening of its organizationunder the proposed project, it is considered that MOC would be capable ofplanning, evaluating and monitoring the road maintenance activities and ofimplementing the proposed project under the "sectoral" concept. Accordingly,during appraisal, only the first phase of a broadly formulated three-phasedperiodic maintenance program was firmly defined, and the road sections forthe remaining phases of the program would be selected by MOC, usingevaluation criteria developed during the Study. A list of roads, withjustification for their selection, would be submitted to the Bank for reviewand approval (para 4.03).

II. THE TRANSPORT SECTOR

A. The Transport System

2.01 The basic transport infrastructure required to meet Jamaica'seconomic development needs is in place. The country's land transport systemis well developed and consists of about 12,000 miles of roads and a 200-milelong railway system, which is almost entirely Government-owned. Apart frombauxite-industry-related exports and imports, all internal freight is by roadtransport, and practically all passenger traffic travels on the road system.International freight traffic through 12 ports amounted to 13.4 million tonsof cargo in 1981. Six of those ports handle bauxite-alumina exports, whilefour ports specialize in the export of banana and sugar. The ports ofKingston and Montego Bay deal with general cargo, and Kingston, Jamaica's

most important port, operates a container terminal partly for transshipment.Air transport is served by two international airports as well as by severalsmall domestic airports and airstrips. The two international airports are atMontego Bay, which serves the north coast and the tourist traffic, and atKingston, which serves the southern coast and caters mainly to businesstravel. Transport modes other than roads are treated in detail in Annex 2.The road subsector is discussed in paragraphs 2.09-2.16.

B. The Transport Sector Organization

2.02 Except for the road subsector, responsiblity for transportadministration in Jamaica falls under the Ministry of Public Utilities andTransport (MPUT). Within the road subsector, MOC is responsible for theconstruction and maintenance of the main road network, and the Ministry ofLocal Government (MLG) is responsible for roads maintained by ParishCouncils, while both the Ministry of Agriculture (MA) and MOC constructagricultural feeder roads which are maintained by MA. Planning for thegreater Kingston area is performed by the Kingston and St. Andrew Corporation(KSAC). The Jamaica Railway Corporation (JRC) operates the public railwaysystem, while the Port Authority of Jamaica (PAJ) controls the port ofKingston and sets port tariffs for the rest of the Jamaican ports. TheJamaica Merchant Marine (JMM), established in 1976, is Jamaica's nationalshipping company. The Airport Authority of Jamaica (AAJ) is in charge of thecountry's public airports, and Air Jamaica is the national airline. Theseautonomous corporations report to MPUT.

C. Sector Issues and Strategies

2.03 Since Jamaica already has the necessary transport infrastructure tomeet the demands of a reviving economy, large capital investments will not beneeded in the foreseeable future. Instead, moderate capital expenditures tomaintain the level of serviceability of existing facilities should be themajor focus in the coming years. Given the strained condition of publicsector finances, there is a need to ensure that the sector becomesfinancially self-sufficient, with users meeting the costs of services andtransport infrastructure being used more efficiently. The Government'splanning capabilities should be strengthened in order to increase the sectorefficiency through adequate pricing and appropriate regulatory policies andinvestment mix.

(i) Transport Planning and Coordination

2.04 The lack of a centralized agency for planning and coordinatingtransport policy was a main source of concern in the early 1970s when theGovernment intended to make sizable investments in the transport sector;therefore, provisions were made in the Third and Fourth Highway Projects(Loans 1032-JM and 1740-JM) for technical assistance to establish a permanentTransport Planning Unit within MPUT. However, because of budgetaryconstraints, the Government postponed the establishment of the Unit.

2.05 Since overall limitations on public investment have resulted inabandoning the ambitious plans of the early 1970s, the lack of intermodalplanning and coordination capabilities has not led to any serious misalloca-tion of resources. However, the Government recognizes the need to improve

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planning capabilities within the agencies in charge of the differenttransport subsectors. To that end, a Road Planning Unit (para 3.04) isbeing established within MOC to plan and coordinate all road construction andnaintenance programs undertaken by that Ministry. It is envisaged that the

scope of the Unit's work will eventually be expanded to include all planningactivities associated with the country's entire road network. Technicalassistance for the Unit is included in the proposed project (para 4.10). Inaddition, the Government intends to expand the present capacity of MPUT's

kdvisory and Monitoring Unit to evaluate and monitor user charges, prices andregulations affecting the transport-related public enterprises and to preparestrategies for the development of land transportation. It is intended that

technical assistance, comprising the services of a Transport Planner and aSurface Transport Specialist, would be provided under the Bank's proposedKingston Metropolitan Region Urban Transport Project.

(ii) Financial Performance of the Revenue-Earning Transport Enterprises

2.06 The program for the recovery and stabilization of the Jamaican

economy calls for a substantial improvement in the financial performance ofthe public sector. Among the transport sector public enterprises, only PAJgenerates an operating surplus. The burden caused to the Government by thecritical financial situation of JRC and Air Jamaica is one of the mainsectoral issues currently being addressed. Despite Air Jamaica's aggressivemanagement aimed at reducing costs and eliminating unprofitable services,coupled with a determined effort of the island's Tourist Board which has ledto improved traffic levels, its financial situation continues to bedifficult, mainly because promotional fares offered to compete with North'merican carriers have increased break-even load factors. In the case ofJRC, the Non-Urban Transport Study, carried out under Loan 1032-JM,identified several measures to rationalize railway operations, including theclosing of uneconomic lines. As a followup to the study's recommendations,JRC, with Bank financing under the Technical Assistance Loan (2106-JM), has

engaged a financial expert to review the railway's financial management andpricing policies and to prepare an action plan to rationalize the railwayservices, including the introduction of tariff revisions and the closing ofuneconomic lines. Preparation and implementation of this action plan wouldbe a condition under the proposed Second Structural Adjustment Loan.

(iii) Investment Strategy

2.07 Public transportation investment for the period 1977/78-1981/82represented about 2% of GDP. The roads subsector accounted for an averageof 63% of transport investment for the same period, while rail, airports,Air Jamaica, and ports accounted for 6%, 10%, 2% and 13% respectively(Table 2.1). Over the next three years, public sector investment intransport is expected to increase slightly as a percent of GDP. The increaseis attributed mainly to investments contemplated by JMM in bulk vessels forbauxite transport. Excluding this enterprise, transport investment isexpected to remain at about 2% of GDP, with the modal distribution ofinvestment basically unchanged from that of previous years. The plannedlevel and distribution of investment between modes is in line with overallpriorities in the sector.

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2.08 The most critical need in the sector is the execution of an

adequately funded program of road rehabilitation and maintenance, a matter

being addressed under the proposed project. In the railway subsector, needed

investment in deferred maintenance of the bauxite-related railway lines is

under way, while capital expenditures for the rest of the network are being

postponed until appropriate measures for the rationalization of railway

services have been determined. In the aviation subsector, investment in

runway lengthening and related works (such as paving of the parallel taxiway

and improvements to instrument landing systems) at Montego Bay's Sangster

Airport could be warranted and would support Government objectives to promote

tourism. In the port subsector, facilities are adequate to meet the needs of

the economy and to support the promotion of Kingston as a major transshipmentcenter for the Caribbean. Investments are being concentrated on the Kingston

Free Zone adjacent to the port.

D. Roads and Road Transport

(i) The Road Network and Traffic

2.09 Jamaica's road network is relatively extensive and totals about

12,000 miles. The main non-urban network, which is the responsibility of the

Ministry of Construction, totals about 2,900 miles, of which about 90% are

paved. The remainder of the island's roads total some 9,100 miles, of which

8,200 are administered by Parish Councils and about 900 miles of urban-typeroads in the Metropolitan Kingston area are administered by KSAC. In

addition, MA is responsible for agricultural feeder roads. The primary road

system can be characterized as a coastal ring with three main roads crossing

the mountains and connecting the northern and southern coasts directly.

Since the present road network is basically complete, the Government's

investment strategy is expected to focus on the preservation of the existing

road system.

2.10 A high proportion of the main road network was not originally

constructed to specific engineering standards, much of it having been built

before the advent of the motorcar. There is considerable variation in thestandards of alignment, construction and drainage within comparatively short

lengths. Because of these inconsistencies, many of the roads have been

maintained on a piecemeal basis, further accentuating the uneven, fragmented

nature of the network, particularly in regard to surfacing. Some major

improvements have been made, however, to the primary and secondary networks

over the past 20 years. The primary road network (all of which has an

asphaltic wearing course) is in reasonable condition. However, the conditionof part of the secondary road network and the tertiary road network has

steadily declined in recent years since the maintenance budget allocations

were inadequate to arrest the deterioration of these roads, which

predominantly have sealed surfaces.

2.11 Traffic on the island's main roads grew at rates between 6% and 9%

during the 1968-1974 period, and then, because of the oil crisis of 1974 and

the subsequent economic downturn, stagnated and declined after 1976. Traffic

counts made in 1979 showed that there had been a decrease in traffic of up to

16% between 1978 and 1979. This decrease probably continued during 1980,

despite the influx of vehicles (mainlv cars) in that year, which had a

greater effect on urban traffic flows than on rural traffic levels. Readily

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available data on gasoline sales, a reasonable proxy for traffic levels,confirm these variations and show that the declining trend was reversed in1981 as a consequence of the improvement in the country's economicperformance. Diesel sales for road traffic are more difficult to identifybecause of the consumption of diesel for non-transport uses, but appear tohave followed much the same pattern (Table 2.2).

(ii) Road User Charges

2.12 Road user charges have not been based upon clearly statedobjectives or upon a comprehensive analysis of their impact on the transportsector. Although road user charges would more than cover all recurrent andcapital road expenditure requirements, receipts from these charges have beenpartly used for other sectors while road maintenance remained underfunded(para 3.09 and Table 2.3). Fuel taxes are the most important revenuesource. In August 1982, the retail price of gasoline was US$2.19 per USgallon and that of diesel US$1.36 per US gallon. The tax component ofgasoline and diesel oil retail prices is 40% and 12% respectively. Fuelprices are sufficient to cover the c.i.f. import price and commercializationcosts. It is not clear, however, whether the structure and level of chargeson heavy vehicles are sufficient to ensure that such vehicles pay enough tocover the damage which they cause to the road system. A road user chargesstudy should be one of the priorities of MPUT's Advisory and Monitoring Unit,once it is suitably staffed (para 2.05).

(iii) The Road Transport Industry

2.13 The road freight transport industry, which is not closely regu-lated, is relatively efficient. However, the industry has been affected bythe reduction of vehicle and spare part imports since 1976, which has led toa reduction in the effective size of the vehicle fleet. The cost resultingfrom the stress imposed on the country's road pavements by heavy vehicles hadbeen a concern for both the Government and the Bank for some time. At thenegotiations for the Fourth Highway Loan, the Government agreed that, inaddition to taking necessary actions to enforce vehicle dimension and weightcontrol according to its regulations, it would also introduce changes in itsregulations based on its Axle Load Program formulated in late 1978. The pro-gram was scheduled to be completed in three phases during 1979-1982. Therehas been considerable delay in the implementation of the program, and legis-lative action related to axle load limits and enforcement of axle load con-trol measures was approved by cabinet only in early 1982. Several other ele-ments of the program such as the purchase of additional weigh bridges andload meters, increase in patrol strength, and carrying out of a road haulagestudy have not yet been implemented. Assurances were obtained from theGovernment at loan negotiations that it would continue the implementation ofits 1978 Axle Load Control Program, satisfactory to the Bank.

(iv) Investment in the Road Subsector

2.14 Road expenditures are financed from annual budget allocations pro-vided by the Government and from loans from international agencies. Totalexpenditures on roads increased in real terms by 78% between 1973/74 and1976/77, and then declined until 1980/81, when they amounted to only 26% ofthe level attained in 1976/77 (Table 2.3). This situation, only slightlyreversed in 1981/82, reflects a decrease in budget allocation caused by the

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Government's policy to reduce public outlays. Road investments by MOCaccounted for an average of about 62% of all capital expenditures on roadsduring the period 1978/79-1982/83 (Table 2.4).

2.15 The Government's Public Sector Investment Program (PSIP) for1983/84 through 1985/86 provides about J$ 59.7 million (US$33.4 million) inMOC's capital budget for roads for 1983/84. This represents a 13% increasefrom the previous year's budget. This budget envisages reduced expendituresfor main road improvements. Provisions for periodic maintenance of mainroads would decline slightly in 1983/84 because of the anticipated gapbetween works financed under the Fourth Highway Project and the proposedproject. The pace of investment in main road periodic maintenance would pickup in the later years of the PSIP as programed under the Road MaintenanceProgram supported by this project (para 4.01). For 1983/84, the Government'sRoad Maintenance Program represents 25% of MOC's capital budget. 2/

(v) Rural Roads Improvement Program (RRIP)

2.16 The Government introduced the RRIP in 1982/83 with the majorobjectives of:

(a) arresting the deterioration of the tertiary and feeder road net-work; and

(b) providing employment in economically depressed, high unemploymentareas.

Approximately US$25 million was spent on the program in 1982/83. While thefocus of this program is correctly aimed at the rehabilitation of the ruralroad network in the program's initial year of implementation, the roadsincluded were not selected on any defined economic criteria. Recognizing theneed to rationalize the program, the Government, with the assistance ofconsultants financed under Loan 1740-JM, has defined selection criteria andmethodologies to be followed in future investments under the program. Thesecriteria, which would also be applied more generally to all road investmentsundertaken by the Government, were reviewed at negotiations and found to beappropriate by the Bank. The Road Planning Unit would be responsible forcollecting necessary data and carrying out the economic analysis required fordevelopment of the program (para 3.06).

(vi) Road Traffic Safety

2.17 The Island Traffic Authority (ITA) and Traffic Area Authority (TAA)are responsible for the administration of traffic management measures, whichinclude motor vehicle inspection, issuing of driving licenses, keepingrecords of traffic accidents and issuing special vehicle permits. Theenforcement of road traffic regulations is the responsibility of the Police

2/ This program does not include the maintenance works, amounting toJ$ 4.0 million, being carried out under the Fourth Highway Project. Inaddition to capital investment, RMP provides for routine maintenanceunder the MOC recurrent budget.

Traffic Department, while MOC, through its Traffic Engineering Branch,provides and maintains the island's traffic control devices. It alsoinitiates improvements to accident-prone locations based on the analysis ofaccident statistics. Despite the efforts being made by these authorities toimprove road safety standards and enforce traffic regulations, the frequencyand severity of road traffic accidents are considered high. The lack ofsystematic monitoring, analysis and evaluation of traffic safety information,however, makes it difficult to assess the effectiveness of the existingpractices. In the interest of developing a more comprehensive road safetyprogram, assurances were obtained from the Government, at loan negotiations,that, with the support of ITA and TAA, current road safety practices would bereviewed, and specific programs, aimed at improving present road safetyoperations, would be implemented.

III. INSTITUTIONAL CONSIDERATIONS

A. Organization and Staffing

3.01 MOC, which would be the executing agency for the proposed project,is responsible for improving and maintaining the main road network.It is organized into seven directorates, of which five are technical and twoare responsible for administrative and personnel matters (Chart 1). TheDirectorate of Maintenance (DM) is responsible for ensuring the maintenanceof roads, bridges, drainage channels and buildings. The Directorate ofConstruction (DC) executes and administers projects financed by MOC's capitalexpenditure budget, while the Directorate of Major Projects (DMP) administersexternally financed projects. The Directorate of Electrical and MechanicalServices (DEMS) is responsible for purchasing, maintaining and repairing allMinistry vehicles and equipment and is, therefore, also closely associatedwith the operation of the Hire Funding Scheme (HFS) (para 3.16). The Direc-torate of Technical Services (DTS) is responsible for survey, design, costestimates, specifications, procurement of contract works financed from MOC'sbudget, land acquisition, traffic surveys and laboratory investigations.There has been some recent expansion of MOC for specific functions. A unitfor the implementation of RRIP was set up in early 1982, and a Road PlanningUnit is now being established, primarily for coordinating road investmentprograms within MOC (para 3.04).

3.02 The lack of qualified staff has been a serious problem in allGovernment offices. The prevailing low Government salary levels, compared tothose in the private sector, are recognized to be the major reason for thestaff shortages. At present, about half of the 90 professional positions inMOC are unfilled, and MOC is faced with further difficulties in retainingexperienced staff and recruiting staff for new positions required for thestrengthening of its organizational structure. In recognition of thisproblem, the Government, as part of its staffing strategy for the proposedproject (para 4.20), has made appropriate arrangements to contract to MOCprincipal professional staff, essential to the execution of the project, onsuitable terms. In addition, the Government is in the process of improvingthe pay structure for the civil service as a whole.

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B. Road Planning

3.03 In the absence of a planning unit within MOC, major road investmentprograms in the past were prepared by foreign consultants, usually inconnection with externally financed projects. Although the consultants'recommendations had been reviewed by MOC, that Ministry was not appropriatelyequipped to assess the impact of the proposed investment on the subsector asa whole. This deficiency has been further aggravated by a lack of central-ized transport planning within the Government. As one consequence, roadprograms have been initiated and implemented without adequate coordinationamong the various ministries, such as MOC, MLG and MA.

3.04 In order to alleviate the above-mentioned shortcomings, a RoadPlanning Unit is being set up within MOC. The principal task of the Unitinitially would be to coordinate the various programs being carried out inthe Ministry in order to prevent overlap and duplication of efforts, whichhave occurred in the past. Also, in order to ensure the optimum allocationof available funds, the Unit would develop a systematic approach to invest-ment planning for the subsector according to appropriate technical andeconomic criteria.

3.05 With respect to maintenance operations, the Unit would be respon-sible for the formulation of the yearly periodic maintenance programs, usingthe economic evaluation model developed under the Study, and for the updatingand refinement of the model itself through periodic review of vehicle opera-ting costs, road condition reports and unit costs of construction. The Unitwould also modify existing maintenance management systems and proceduresrelated to the annual allocation of routine maintenance funds, the programingand scheduling of road maintenance activities and road maintenance costing(para 3.15).

3.06 The principal staff of the Unit comprises a highway planningengineer, a transport economist and a systems analyst. These posts are beingfilled by consultants who would be assigned sufficiently qualified localcounterparts. The counterparts are expected eventually to take over thesepositions as permanent MOC staff. The services of the highway planningengineer from TPOS are financed from Loan 1740-JM, while those of thetransport economist and the systems analyst are being provided by IDB. Inaddition, a second transport economist would be engaged, under the project,for a period of 18 months, primarily to assist in the planning of the RRIP(para 2.16). Since the contract of the highway planning engineer wouldexpire in September 1983 and those of the two IDB-financed consultants inApril 1984, the Government requested that, in the interest of extendedin-service training for counterpart staff, provision be made under theproject for extension of the consultants' services. In total, the projectwould provide for some 60 man-months of consultant services (para 4.10). Awork program, as set forth in the outline terms of reference for the RoadPlanning Unit (Annex 3), was agreed between the Government and the Bank atloan negotiations.

C. Highway Maintenance

(i) Administration

3.07 The administration and operations of DM are divided among the head-quarters in Kingston, seven area offices, 13 parish offices, and 43 divi-sions. Of the divisions, 33 have responsibility for roads and 10 are

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concerned with maintenance of buildings. The DM organization is shown onChart 2. The central administration, in addition to the Director, consistsof two Chief Superintendents and a Chief Engineer. The Chief Engineer, whilebeing technical advisor to the Director, is also the Project Director ofthe ongoing Fourth Highway Project and controls the project implementation inthe field through three County Engineers, the Senior Superintendents and theParish Superintendents. DM's approved organizational structure provides for23 officers at headquarters and about 500 technical and clerical personnel inthe field.

3.08 Based on the experience gained during the implementation of theFourth Highway Project, the additional staffing needs of DM have beenconsideret in formulating the RMP and the proposed project. Accordingly,assurances were obtained from the Government at loan negotiations that newpositions for a Contracts Engineer and three Field Engineers would beestablished. The Contracts Engineer would initially be counterpart to theconsultant to be appointed under the technical assistance (para 4.09), whileone Field Engineer would be assigned to each County Engineer.

(ii) Routine and Periodic Maintenance Operations

3.09 Because of the heavy demand on the country's financial resources,allocations for routine maintenance during FYs 1979/80-1982/83 remained about40% below the levels envisaged by the Government in 1979 (Table 3.1). More-over, the analysis of the expenditure pattern of maintenance funds revealedthat the overhead and administrative expenses of the maintenance organizationhave been absorbing an increasingly disproportionate portion of the funds andthat the funds remaining were expended predominantly on general road mainte-nance activities, such as bushing and clearing of roadway, side drains andculverts, while pavement patching had been performed to only a limitedextent.

3.10 In order to reduce the accumulated backlog in pavement patching,the Government has included in its RMP a pavement patching and rehabilitationprogram, which provides for patching on about 600 miles per annum (about 20%of the network). In addition, under the same program, DM would carry outrehabilitation works for 30-40 miles of roads annually, comprising the recon-struction of road base and application of surface treatment. It is antici-pated that this program, over a four-year period, would reduce the accumu-lated backlog in routine pavement maintenance by about 80%. The estimatedcost of this pavement patching and rehabilitation program is J$ 5.0 millionper annum (in 1982 prices), which would be financed from the Government'scapital budget. The FY 1982/83 level of annual allocation for generalroutine maintenance operation of J$ 5.1 million (excluding overhead andadministration, and emergency maintenance expenses) is expected to be main-tained in real terms during the RMP (para 4.02).

3.11 While the lack of funds has adversely affected the levels ofroutine maintenance operations, the periodic maintenance program sufferedsomewhat less because of Bank financing of overlay, resealing and rehabilita-tion works under the Second and Fourth Highway Loans. Under these loans,243 miles of roads were or are being overlayed and 457 miles sealed andresealed. Also, under the Fourth Highway Project, about 260 miles ofsecondary and tertiary roads were rehabilitated by MOC. The quality of workhas been good on overlays and fair to good on seal and reseal works. The

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lower quality of seal and reseal works can be attributed to an inadequatesupply of good quality aggregate and an insufficient level of fieldsupervision. Also, the limited capacity of the construction industry andadministrative delays in contracting procedures contributed to the relativelylow level (70 miles per annum) of periodic maintenance works during the lastthree years. These areas will receive increased attention during theimplementation of the RMP, as outlined in the following paragraphs.

3.12 Since the availability and quality of aggregate for maintenanceworks has been a concern for some time, the status of the aggregate industrywas investigated as part of the Study. While there is sufficient capacity inthe industry to meet the expected demand in the future, the sporadic short-falls in both quantity and quality of aggregate material are the result ofpoor management, lack of incentive, aged crushing plant and shortage of spareparts. As a means of securing regular supplies of good quality aggregate formaintenance works, assurances were obtained from the Government at loannegotiations that it would:

(a) define the aggregate requirement for its RMP one year in advance;

(b) give advance notice of aggregate requirements to quarries in thevarious regions; and

(c) make foreign exchange available for the purchase of approved newequipment and spares in the interest of increasing the quantity andquality of production.

3.13 To ensure closer adherence to the technical specifications forasphaltic overlay and reseal works, field supervision for the implementationof the RMP would be strengthened through the engagement of additional staff,as indicated in paragraph 3.08. Furthermore, under the training programincluded in the proposed project, intensive training would be provided for DMstaff (para 4.12 and Annex 4).

3.14 The asphaltic overlay and almost all of the reseal works under theFourth Highway Project were executed by contract following local competitivebidding procedures. Some asphaltic overlay contracts were awarded throughdirect negotiations, reflecting the lack of competitiveness for this type ofworks in the country. Compared to its depressed state in the late 1970s,however, the construction industry is showing signs of gradual strengthen-ing. During the last four years, there has been an increase in the number ofcontractors for both reseal and overlay works, and, at present, there are 19firms sufficiently experienced to undertake seal and reseal works and fivefirms to carry out asphaltic overlay. The capacity of the industry, however,is still constrained by shortage of equipment and spare parts due to restric-tions on the availability of foreign exchange. In order to further increasethe capacity and efficiency of the road construction industry, assuranceswere obtained from the Government at loan negotiations that foreign exchangewould be made available to contractors participating in the RMP for thepurchase of new equipment and spare parts. Such assistance, combined withthe already increased capacity of individual contractors as well as of thecontracting industry as a whole, would allow about an 80% increase in thesize of contract packages and an annual overlay and seal and reseal programon the order of 150 miles. Furthermore, contract administration would be

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strengthened by the engagement, under the technical assistance, of aContracts Engineer who would be assisted by a counterpart to be assigned byMOC.

(iii) Maintenance Management Systems

3.15 During 1974 and 1975, DM introduced three interrelated systems astools for routine maintenance management. The Annual Allocation System wasdeveloped to calculate the annual funding for routine maintenance for eachcontrol section of the main road network. The Road Maintenance ProgramingSystem (ROMGRAM) is the followup system for the annual programing andscheduling of routine road maintenance activities for the road control sec-tions, while the Road Maintenance Works Costing System (RMCS) was designed toprovide detailed monthly expenditure information on road maintenance activi-ties. The introduction of these systems has been beneficial since, throughtheir application, the concept of planning and financial control for routinemaintenance has been accepted at various levels of DM. However, the inaccu-racies in basic data, and the errors and delays in processing prevented thesesystems from becoming effective tools of maintenance management. It will bethe task of the new Road Planning Unit to appropriately modify theseplanning, financial control and monitoring systems and to ensure that theinformation, produced on time, will lead to more effective management.

D. Hire Funding Scheme

3.16 In early 1976, a Hire Funding Scheme (HFS) was introduced into MOCwith the main objectives of (a) reducing the overall cost to the Governmentof owning, maintaining and running the fleet through improved management; and(b) developing funds needed for equipment replacement and spare parts bycharging rental rates to users. It was envisaged that the scheme wouldprogress through stages of development to eventually become a self-financingquasi-Government corporation. In 1976, MOC agreed to the setting up of aBoard for the management of HFS with a view to accelerating its developmentas an independent agency. However, the Director of DEMS, in addition to hisother duties, became responsible for the operation of HFS, and, consequently,HFS's operation remained very closely linked to that of DEMS, which lackssufficiently qualified and experienced staff for administering the scheme.

3.17 Over more than six years of existence, HFS has made very limitedprogress. Despite initial efforts to establish and operate an appropriateaccounting system, monthly accounts are one year in arrears and basicfinancial information is difficult to obtain. Record-keeping systems are notfunctioning as intended, and information which would facilitate timelymanagement decisions is not readily available. Operating costs areexcessive, and HFS has, so far, been unable to generate funds for equipmentreplacement. In fact, despite an annual Government subsidy of about J$ 4.4million, the net loss on operating expenses over income, in FY 1981/82,amounted to almost J$ 2.0 million.

3.18 The operation of HFS was comprehensively reviewed as part of theStudy, and several alternatives were considered for its future development.The consultant concluded that the major deficiencies of the scheme's opera-tion are mainly attributable to its organizational framework and that, there-fore, the scheme should be separated organizationally as well as physicallyfrom DEMS and operated on a commercial basis. The Government has acceptedthis view and has proposed a plan for reestablishment of the HFS. The majorelements of the plan are:

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(i) An interim Equipment Management Board comprising members of thecivil service and the private sector would be appointed by July 1,1983 with the mandate of causing the HFS to be reestablished, bynot later than December 31, 1983, as a commercially operatedcorporation.

(ii) Sufficiently qualified and experienced personnel would be appointedto fill the posts of Hire Funding, Fleet and Service Managers andChief Accountant. To assist this local team, consultants would beappointed under the technical assistance component of the project(para 4.11).

(iii) The operation of the reconstituted Scheme would be divorced fromthat of DEMS.

(iv) Financing sufficient to cover start-up expenses and adequateworking capital would be provided to the Scheme by the Government.

Assurances were obtained from the Government at loan negotiations that theplan, which is considered to provide a sound framework for the viableoperation of the HFS, would be implemented in a manner satisfactory to theBank.

E. The Equipment Fleet

3.19 The condition of the equipment fleet has a significant bearing uponthe viable operation of HFS. Over the past four years, the maximum number ofvehicles and equipment available at any one time has rarely exceeded 500, outof a fleet varying from 800 to 1,000 units. This low availability has beendue to aged equipment, poor spares supply, inefficient operation of workshopsand lack of effective management. The average age of the fleet is high:7.2 years for vehicles and 8.6 years for equipment. Based on these and otherindicators, as well as taking into consideration the anticipated workprograms, the Study consultant recommended the reduction of the fleet toabout 500 working units over the next five years. This reduction could beaccomplished through the writing off of older units in conjunction with afleet replenishment program over the same period, which would be aimed atreducing the average age of the fleet to about four years. Under theproposed replenishment program, about 470 units of vehicles, major equipmentand spare parts would be purchased during FYs 1983/84-1987/88 at an estimatedcost of about J$ 18.5 million (US$10.5 million). The Government includedabout four-fifths of the equipment replenishment program in its RMP, and aportion covering vehicles required for maintenance operations and miscella-neous maintenance equipment would be financed under the proposed project(para 4.07).

F. Training

3.20 A training program, largely for DM personnel, was implemented underthe Fourth Highway Project with the support of MOC's Training Unit and thetechnical assistance consultant. The program, which was limited in scope andbudget, included formal training sessions for superintendents and work over-seers and seminars for DM personnel on road maintenance technology and roadmaintenance management systems. Under the equipment-related element of theprogram, in addition to the formal mechanical apprenticeship training

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courses, short courses were conducted for equipment operators and mechanicsby manufacturers' representatives. Overseas training was also financed underthe project for three senior workshop staff in the UK and for 11 engineeringstaff and plant operators and six accountants in the US.

3.21 MOC's training activities are presently organized by the TrainingUnit in the Personnel Directorate under the supervision of a Training andStaff Development Committee which was formed in February 1982. Formaltraining is being carried out through a number of established traininginstitutions which operate under the supervision of the Ministry of Labor andPublic Service. Specialized staff training which would meet the needs of MOCstaff more directly, however, has been hampered by a shortage of funds,qualified instructors and training equipment. The Training Unit itself lacksexperienced staff to develop and supervise training programs required atdifferent staff levels in the Ministry. The project provides for thestrengthening of MOC's Training Unit and the expansion of training activitiesthroughout the Ministry. The main thrust of the training program would bedirected to areas closely related to road maintenance (para 4.12 andAnnex 4).

G. Financial Management, Accounting and Auditing

3.22 The Permanent Secretary of MOC is responsible for the Ministry'sfinancial management and delegates these duties to the Financial Controllerwho supervises the Budget Section, the Main Account Branch, and the Systemsand Management Control Unit. The latter is responsible for systems develop-ment, operation and proper coding of transactions for processing under thecomputer-based Financial Management System (FMS). Although FMS is wellplanned, only about 20% of it is operational at present. It provides thebare minimum of the financial reporting requirements, but important manage-ment information is not being processed because of a lack of staff suffi-ciently conversant with FMS. In order to gain greater benefit from FMS andaltogether improve the standard of accounting and financial reporting, train-ing specifically designed for the needs of the accounting and internal audit-ing staff of MOC would be provided under the proposed project. Independentauditing for Government agencies is performed by the Auditor General ofJamaica, whose office meets the Bank's requirements for impartiality andindependence.

IV. THE ROAD MAINTENANCE PROGRAM AND THE PROJECT

A. Road Maintenance Program FYs 1983/84-1986/87

4.01 The proposed project forms an integral part of the Government'sRoad Maintenance Program for FYs 1983/84-1986/87, which was formulated inlight of the findings of the Study and the country's financial and insti-tutional capabilities. The program comprises:

(a) Routine maintenance of the main road network covering roadsidebushing, cleaning of side drains and culverts, and routine mainte-nance of bridges and other structures;

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(b) Intensive pavement patching and rehabilitation of portions of themain road network;

(c) Periodic road maintenance consisting of:

(i) Asphaltic concrete overlay of existing pavement on about180 miles of roads;

(ii) Asphaltic resealing with double surface treatment of about420 miles of roads; and

(iii) Preparatory works including drainage, pavement repairs andsurface regulations for roads in (i) and (ii).

(d) Procurement of about 365 units of vehicles and equipment;

(e) Procurement of spare parts required for preventive maintenance andoverhaul of salvageable units of the present fleet; and

(f) Engagement of local staff and technical assistance by consultantsto strengthen MOC's institutional capability in planning, equipmentmanagement and implementation of road maintenance and staff train-ing programs.

The estimated cost of the program is US$94.42 million, as shown in thefollowing table, which also indicates the portion of Bank financing under theproposed loan and the amount for which financing would be sought by theGovernment from external sources.

(US$ Million) 1/

Financing by 1983/84 1984/85 1985/86 1986/87 Total

Bank 4.10 5.40 3.00 2.46 14.96Co-financing 2/ .70 3.70 2.20 1.90 8.50Other External Sources 3/ .16 2.64 2.84 5.94 11.58Government(i) Capital Budget 7.18 12.32 12.89 12.43 44.82

(ii) Recurrent Budget 4/ 3.14 3.44 3.80 4.18 14.56

15.28 27.50 24.73 26.91 94.42

1/ Current prices.2/ Discussions with multilateral and private sources for co-financing

arrangements are under way.3/ To be identified.4/ General routine maintenance (excluding administrative and overhead and

emergency maintenance expenses).

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4.02 During negotiations, the following specific assurances wereobtained from the Government regarding budgetary support for the RMP:

(a) that funding from the Recurrent Budget of general routinemaintenance operations -- exclusive of administration and overheadand emergency road repair expenses -- would be maintained at leastat J$ 5.1 million per annum (at 1982 prices) in real terms over theProgram period;

(b) that funding from the Capital Budget of an intensive pavementpatching and rehabilitation program would be maintained at least atJ$ 5.0 million per annum (at 1982 prices) in real terms over theProgram period;

(c) that, for the remaining elements of the Program, the Governmentwould provide funds through the annual budget, in preference toother highway capital expenditures;

(d) that the Government would actively seek external financing for theforeign cost components of the Program which are not covered by theproposed loan; and

(e) that the Ministry of Finance and MOC would consult with the Bankannually on the amounts required for recurrent maintenance expendi-tures and for the capital expenditure components of the RMP beforeMOC's annual budget is finalized.

B. Project Components

(i) Periodic Maintenance

4.03 The Study, based on the outcome of the road condition survey,assessment of available resources and economic evaluation, broadly definedthe target of periodic maintenance for FYs 1983/84 to 1986/87 at 600 miles.About 85% of this length, i.e., 520 miles, has been included in the proposedproject. Periodic maintenance works for this length of roads would bedivided into three phases, each corresponding to about a one-year worksprogram. The first phase package' was identified during appraisal (Tables 4.1and 4.2 and Map IBRD 16846), comprising about 60 miles of overlay and 100miles of seal and reseal works. Road sections for inclusion in thesubsequent phases would be selected by MOC following evaluation methodologydeveloped under the Study. Assurances were obtained from the Government atloan negotiations that a list of roads to be included in the remaining twophases, together with the economic justification for their selection, wouldbe submitted to the Bank by not later than March 31, 1984 and March 31, 1985respectively. Since a large number of short road sections are expected toqualify for periodic maintenance, it was considered appropriate to adopt thissectoral approach of subproject selection, which would provide greaterflexibility for the packaging of contracts and execution of works accordingto changing needs and resource availability.

4.04 About 160 miles of asphaltic overlays would be applied todeteriorated sections of the main road network carrying relatively hightraffic volumes. Overlays would provide added strength required for the roadstructure and would also improve riding qualities significantly, resulting insubstantial savings in vehicle operating costs.

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4.05 About 360 miles of roads carrying lower traffic volumes wouldreceive a double asphaltic surface treatment. Because of the generally highsubgrade strength of the country's road network, the roads earmarked forsurface treatment only occasionally show signs of structural failure; thedeterioration of surface is mainly the result of aging, accelerated by thelack of adequate maintenance.

4.06 Pavement overlay and reseal works would be preceded by thepreparatory works, which normally include improvement and addition todrainage facilities, pavement strengthening and patching to accommodate thenew surfacing, as well as minor realignments to improve traffic safety. Inorder to assure continuity of periodic maintenance operation, MOC would beginthe preparatory works under the project in April 1983. The estimated cost ofthese preparatory works up to the time of loan approval is about US$0.87million, with a foreign exchange component of about US$0.40 million.

(ii) Equipment Procurement

4.07 Based on the analysis of the condition, age, availability andutilization of the equipment fleet in the course of the Study, the consultantrecommended a vehicle and equipment fleet renewal program over a five-yearperiod (para 3.19). For the support of the routine maintenance operationsand the intensive pavement patching and rehabilitation program, theprocurement of dump trucks, four wheel drive utility vehicles, pickups andmiscellaneous maintenance equipment has been identified as a high priorityrequirement. In addition to the procurement of these units and related spareparts, the purchase of mechanical tools and facilities to enable basicrepairs and maintenance to be undertaken in the parishes, and maintenanceequipment for the training program has also been included in the proposedproject (Table 4.3).

(iii) Technical Assistance and Training

4.08 There is a well recognized need for institutional strengthening ofselected areas within MOC, and local staff would be recruited to fill newlyestablished positions. Since there is a shortage of sufficiently experiencedtechnical personnel in the country, the newly recruited local staff wouldinitially be assigned as counterparts to consultants to be engaged under thetechnical assistance. Specifically, the consultants would assist MOC with:

(a) the implementation of the periodic maintenance as well as othercomponents of RMP;

(b) the operation of the newly established Road Planning Unit;

(c) the reestablishment and operation of the Hire Funding Scheme; and

(d) the planning and implementation of the Training Program.

4.09 To assist MOC with the implementation of the periodic maintenancecomponent of the Program, the technical assistance would also provide for theservices of a Contracts Engineer in addition to the Program Coordinator. TheContracts Engineer would be responsible for drawing up prequalification andtender documents, evaluating tenders and making recommendations for tender

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awards, and would assist the County and Field Engineers in contractadministration. He would also be responsible for the quality control ofaggregate supply and would provide technical advice and assistance concerning?reparatory, resealing and asphaltic concrete works with the particularDbjective of achieving closer adherence to technical specifications. TheLength of service for the Program Coordinator and the Contracts Engineergould be 35 and 30 months respectively.

S.10 The project provides for about 60 man-months of technicalassistance to the Road Planning Unit. The services of a highway planningangineer, two transport economists and a systems analyst would be required(para 3.06).

i.11 The proposed organization and management changes for the HFS(para 3.18) would necessitate four key posts: Hire Fund, Fleet and Service'anagers and that of the Chief Accountant. The success of the operation ofthe HFS would depend, to a large extent, on the capabilities and dedication)f those selected to fill these positions. Although local personnel withaxperience in private enterprise would be recruited, initially they would beassigned as counterparts to foreign experts whose services are consideredassential for the period of takeover of the vehicle fleet from DEMS as wellas for the development and implementation of new operating procedures. FourEoreign experts would be engaged over a period of 18 months each.

S.12 The objective of the training program (Annex 4) is to strengthen4OC's Training Unit and, in particular, to improve the skills of road andaquipment maintenance personnel and accounting and auditing staff. Appro-priately designed seminars would also be conducted for middle- and high-levelDM staff, and training abroad would be arranged for training officers andtechnical personnel. The program would be assisted by the following tech-aical assistance consultants: a Training Specialist (24 months), a TrainingInstructor (Accounting and Auditing) (12 months), and a Superintendent(Roads) (12 months). Four local instructors would also be engaged for roadnaintenance and mechanical workshop training, for a total of 96 man-months.rhe project also provides for the improvement of physical training facilitiesand the purchase of training aids, equipment and vehicles for use in connec-tion with training.

W.13 The training program would be coordinated by MOC's Training Unitand undertaken in two phases. The training needs would be more closelyLdentified in Phase I, and the program would be implemented in Phase II.kssurances were obtained from the Government at loan negotiations that, based3n the recommendations of a Phase I report, MOC would, by not later thanFebruary 29, 1984, prepare an implementation plan, satisfactory to the Bank,Eor carrying out the training program.

1. Cost Estimates, Financing and Disbursement

4.14 The proposed project is estimated to cost about US$47.00 millionaquivalent based on October 1982 prices, as shown in the table on the next)age. The project cost represents about 50% of the cost of the RMP. The?roposed loan would finance US$15.00 million of the foreign exchange cost of:he project estimated at US$23.46 million. The foreign exchange cost isiquivalent to 50% of the total project cost. Arrangements for co-financing

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Project Cost Estimates

Foreign aslocal Foreign Total Local Foreign Total % of toal

(J$ million) (US$ million)A. Periodic RDad Maintenance

(i) Pavement Overlay 13.01 9.81 22.82 7.28 5.49 12.77 43(ii) Pavent Sealirg and

RPesealirg 8.32 7.10 15.42 4.65 3.97 8.62 46(iii) Prepartory -rks

for (i) ard (ii)(a) contract 2.84 2.72 5.56 1.58 1.52 3.11 49(b) force wxcunt 6.63 6.36 12.99 3.71 3.56 7.26 49

Subtotal (A) 30.80 25.99 56.79 17.22 14.54 31.76 46

B. PDRa Maintenance Equipznt,Tools and Spare Parts 0.60 4.36 4.96 0.34 2.44 2.78 88

C. Technical Assistance and Traiing

(i) PRad Plannirg Unit 0.29 1.18 1.47 0.16 0.66 0.82 80(ii) Maintenance Directorate 0.32 1.28 1.60 0.18 0.71 0.89 80

(iii) Hire Furdirg Schem 0.35 1.41 1.76 0.20 0.79 0.99 80(iv) Trainirg Progran 0.91 1.40 2.31 0.51 0.79 1.30 61

Subtotal (C) 1.87 5.27 7.14 1.05 2.95 4.00 73

Base Costs (October 1982 prices) 33.27 35.62 68.89 18.61 19.93 38.54 52

D. Price Cbntingencies 1/ 8.73 6.31 15.04 4.89 3.53 8.42 43

Total Project Cost 2/ 42.00 41.93 83.93 23.50 23.46 46.96 50Front End Fee on Bank Loan 3/ - 0.07 0.07 - 0.04 0.04 100

Total Financing Reuired 42.00 42.00 84.00 23.50 23.50 47.00 50

Bank Loan - 26.82 - - 15.00(D-financirg - 15.18 - - 8.50

1/ Local Foreign

1983 10% 8%1984 10%. 7.5%1985 10% 7%1986 10% 6%

2/ Identifiable local taces ard dutie are about J$ 8.60 million (US$4.80 million) ard the total project cast, net of taKesis J$ 75.80 million (US$42.40 million) equivalent.

3/ The precise aomt of the Front End Fee is US$37,406.

to finance the US$8.5 million balance of the foreign exchange cost of theproject are being discussed with multilateral and private sources.The Government would finance the local currency cost of the project(including taxes and transfers) estimated at US$23.50 million equivalent andany foreign exchange cost for which external financing has not beenidentified.

4.15 Cost estimates for asphaltic overlays and resealing are based onthe consultants' estimates, which were prepared using quantity estimates fromroad condition inventories and prevailing contract rates in Jamaica for thistype of work. Estimates for preparatory works are also based on the roadcondition inventories and on recent costs of similar work carried out bycontracts and by MOC force account. The estimated costs of vehicles andmiscellaneous maintenance equipment and workshop tools are based on TPOS andDEMS' assessment in accordance with manufacturers' quotations and recentpurchase prices. The average man-month cost for consultant services isexpected to be US$10,000 (including salary, firm's fees, overheads andprofit, international travel and subsistence). The estimated cost oftechnical assistance also includes provision for the foreign and local costof vehicles, local transport, office equipment and other minor items. Theestimated cost of the training programs, as detailed in Table 2 of Annex 4,is J$ 2.31 million (US$1.3 million). The cost of items is based on recentprices for similar services and supplies.

4.16 The foreign exchange components of surfacing, resealing andpreparatory works have been estimated from unit price analysis performedunder the study by the consultants at 43%, 46% and 49% of total cost, respec-tively. For replacement of equipment based on the analysis of recentpurchases, the foreign exchange cost component has been estimated at 88% oftotal cost on the basis of c.i.f. prices at the port of entry and on theassumption that all items would be obtained from foreign sources. Theforeign exchange component of consultant services under the technicalassistance is estimated at 80% and that of the training component at 61%.All estimates of local and foreign exchange cost were agreed during loannegotiations.

4.17 Disbursement of the loan would be made as follows:

(a) 46% of expenditures for overlay, resealing and preparatory worksand improvement of physical training facilities (Annex 4);

(b) 100% of foreign expenditures for direct imports of equipment andspare parts;

(c) 100% of foreign expenditures for technical assistance byconsultants and for training abroad; and

(d) Front-end fee -- the amount due.

Disbursement would be made against standard documentation for all itemsexcept preparatory works, which would be carried out through small-sizedcontracts and by MOC force account. In the latter case, disbursement wouldbe made against Statements of Expenditures (SOE) certified by technicalassistance consultants. The estimated schedule of disbursements shown inTable 4.4 is based on the disbursement profile for the Fourth HighwayProlect, which is about 12 months behind schedule.

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4.18 Retroactive financing is recommended for expenditures up to a total

of US$0.40 million equivalent for preparatory works (para 4.06) carried outafter April 1, 1983.

D. Implementation and Procurement

4.19 MOC would be responsible for project execution. DM, supported by

the Road Planning Unit, would implement the periodic maintenance component ofthe project. DEMS would administer the equipment procurement and also playan important role in the re-establishment of HFS. The Personnel Directorate,through the Training Unit, together with other Directorates, would beinvolved in the implementation of the Training Program.

4.20 The institutional strengthening of MOC through technical assistance

is a key element of the proposed project. In light of the difficultiesexperienced in the past in attracting professional staff and fillingcounterpart positions, assurances were obtained from the Government that:(i) it would implement its staffing strategy, presented at loan negotiations,according to which it wishes to attract suitable qualified technical stafffor principal positions; and that (ii) counterpart personnel, satisfactory tothe Bank, would be assigned to the following technical assistance consultantsas a condition for effectiveness of the proposed loan: Program Coordinator,Highway Planning Engineer and Training Specialist. It was also agreedbetween the Government and the Bank that no disbursement would be made forroad maintenance equipment, tools and spare parts from the proceeds of theloan, unless a counterpart for the Hire Funding Manager, with qualificationsand experience satisfactory to the Bank, has been appointed.

4.21 The project would be implemented between April 1983 and August 1986(Table 4.5). Periodic maintenance works and technical assistance, includingthe Training Program, would extend over this period, while the procurement ofequipment is expected to be completed by end of 1984. The implementationschedule was agreed between the Government and the Bank at loan negotiations.

4.22 The responsibility for the implementation of the periodic mainte-nance component of the project would be through the County Engineers underthe guidance of the Chief Engineer with the support of the Field Engineers,Senior Superintendents and Superintendents. The components of the RMPrelated to routine operations such as general routine maintenance and pave-ment patching and rehabilitation would be largely the responsibility of theChief Superintendents assisted, on parish level, by the Senior Super-intendents, Superintendents and Work Overseers.

4.23 The three-phased periodic maintenance program, except for a portionof preparatory works (para 4.24), would be carried out by contract. Contractpackages for overlay works would cover about 30-50 miles each. Seal andreseal works, representing a total contract value of about US$9.0 million,would be grouped into batches covering about 120 miles but broken down tosix contract packages of 15-25 miles each, not exceeding US$0.7 million incontract price per package. Because of these relatively small contractsizes, the scattered location and the short sections of the roads involved,it is considered that periodic maintenance works, with the possible exceptionof asphaltic overlay, might not be of interest to foreign contractors. In

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the past, some of the overlay works have been delayed, or altogether deletedfrom the overlay program, because of poor response from local firms. Theparticipation of foreign firms in tendering for overlay works is expected tolead to lower prices through increased competition. Overlay works, having acontract value of about US$13.0 million, would be open to foreign firmsthrough international competitive bidding (ICB) procedures in accordance withthe Bank's Guidelines for Procurement (July 1980), while contracts for sealand reseal works would be awarded following domestic procurement proceduresacceptable to the Bank, with foreign firms permitted to bid.

4.24 A portion of the preparatory works covering drainage and structuralworks and amounting in value to about US$3.5 million is expected to becarried out by local contractors selected under local procedures which aresatisfactory to the Bank. However, the remaining portion of the preparatoryworks, amounting to about US$7.5 million, and covering pavement repair worksfor which the quantities cannot be estimated in advance to required accuracy,would be carried out under force account by MOC and supervised by thetechnical assistance consultant who would also certify the quantity andquality of work performed. Since local contractors have neither experiencenor equipment, these latter types of works have traditionally been carriedout by MOC's DM, which is considered to be the most effective means ofundertaking them. The extension works of the Tarrants Training Center andthe Kingston Mechanical Apprentice School included in the training componentwould be carried out by contract following local competitive bidding.

4.25 The procurement program for vehicles, miscellaneous maintenanceequipment and tools, indicating lot sizes and estimated cost, would besubject to prior approval by the Bank. Contracts with an estimated cost ofmore than US$50,000 each, amounting to US$2.2 million, would be procuredthrough ICB, following the Bank's Guidelines for Procurement; other contractsfor miscellaneous maintenance equipment, tools and vehicles for the trainingprogram, with an estimated cost below US$50,000 but not exceeding an aggre-gate of US$500,000, would be procured in accordance with local competitivetendering procedures which are acceptable to the Bank.

4.26 Technical assistance consultants would be selected and engagedfollowing the Bank's Guidelines for the Use of Consultants (August 1981).The Bank has agreed that the services of TPOS, the technical assistanceconsultants under the ongoing Fourth Highway Project, would be continuedunder a new contract for the road-maintenance-related component of the tech-nical assistance (para 4.09). About 65 man-months would be involved, cover-ing the services of the Program Coordinator and the Contracts Engineer. Inaddition, the services of the Highway Planning Engineer, to be engaged forsix months under the Fourth Highway Loan (para 3.06), would be extended by 24months under the new contract with TPOS. Timetables and terms of referencefor these as well as other consultant services under the technical assistance(HFS, Training Program) were agreed between the Government and the Bank atloan negotiations.

E. Financial Reporting, Auditing and Monitoring

4.27 MOC would establish and maintain separate project-related accountsat the parish offices, with responsibilities for consolidation at the projectoffice under the supervision of the Financial Controller. Such accounts

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would be maintained in accordance with sound and generally recognizedaccounting principles and practices satisfactory to the Bank to enable MOC toprovide interim and annual financial statements to reflect the progress andfinancial performance of the project. The opinion and report, satisfactoryto the Bank, on such statements would be provided by the Auditor General ofJamaica within seven months of the close of the fiscal year, as from FY1983/84. The audit report would include a statement on the adequacy of theaccounting system and internal control, on the reliability of SOEs as a basisfor loan disbursement, and on compliance with loan covenants. The foregoingproject accounting, financial reporting and auditing arrangements were agreedduring loan negotiations.

4.28 The execution of the project would be reviewed through normalsupervision. In particular, the following key indicators would be monitoredto assess the advances made toward the project objectives:

(a) progress of project implementation as compared to implementationand disbursement schedules (Table 4.5 and Table 4.4);

(b) appointment of foreign consultants, assignment of counterpart staffand engagement of local staff according to the timetable agreedbetween the Bank and the Government at loan negotiations(paras 4.20 and 4.26);

(c) formulation and implementation of programs by the Road PlanningUnit as outlined in the terms of reference for that Unit (Annex 3);

(d) meeting targets for the re-establishment of HFS as outlined inparagraph 3.18; and

(e) implementation of the Training Program which would be agreedbetween the Government and the Bank after the completion of thePhase I report (para 4.13).

F. Summary of Economic Evaluation

4.29 The proposed periodic maintenance works were economically justifiedon the basis of lower vehicle operating costs and time savings of road usersresulting from improved surfaces and higher average speeds. Savings fromreductions in accidents were not included in the analysis, and, to the extentthat improved surface conditions improve traffic safety, the estimatedeconomic rates of return are conservative. The 520 miles of periodic mainte-nance included in the project have an estimated rate of return well in excessof 50%. The Phase I periodic maintenance program, which is fully defined(Tables 4.1 and 4.2), yields a total net present value (NPV) of J$ 118.0 mil-lion for overlay works and J$ 5.0 million for seal and reseal works at a dis-count rate of 12%. Benefits resulting from the equipment component of theproposed project, which represent about 7% of total project cost, have notbeen quantified, but the reduction in the average age of the equipment fleetis expected to increase the efficiency of maintenance operations through ahigher rate of equipment availability and utilization.

4.30 A high proportion of the roads expected to receive surface improve-ments under the project belong to the tertiary road network which servicesrural dwellers. It is expected that producers and consumers of agricultural

- 24 -

goods which are transported on the road system would benefit from theproject. A proportion of the transport cost savings resulting from theproject would also be passed on to bus passengers on the project roads, whobelong mostly to low income groups. It is estimated that the directincremental employment generation of the project would entail about 2,000jobs, of which 1,750 would be filled by unskilled laborers. Details of themethodology used for the economic evaluation of the project are presented inAnnex 5.

G. Project Risks

4.31 The problems encountered during the execution of the previousBank-financed highway projects shed some light on the risks attached to theimplementation of the proposed project. The highway-maintenance-relatedSecond and Fourth Highway Projects, in particular, achieved, in physicalterms, considerably less than intended, largely because of the unforeseenconstraints on Jamaica's financial resources during the 1970s. Also, how-ever, in retrospect, those projects set overly ambitious objectives in rela-tion to MOC's institutional capabilities and the capacity of the localcontracting industry. In formulating the proposed project, this factor hasbeen taken into account. The noticeable strengthening of the contractingindustry in recent years (para 3.14), the possible participation of foreignfirms in overlay works (para 4.23), the planned strengthening of the contractadministration of MOC's Directorate of Maintenance (para 3.08), and theproposed measures for the support of the quarrying and construction indus-tries (paras 3.12 and 3.14) were considered sufficient assurances for meetingthe periodic maintenance target of the proposed project. Furthermore, theannual reviews of the subsequent year program under the sectoral concept ofimplementation would provide adequate opportunity to identify specificconstraints and to apply corrective measures as necessary.

4.32 In order to reduce the risk of inadequate equipment support, theprocurement of essential maintenance equipment has been included in theproposed project (para 4.07). Based on past experience, such equipment couldbe purchased without undue delay. The risk of not being able to recruitsuitable local staff for newly established posts has been recognized, and MOChas prepared a recruitment strategy in order to minimize such risk.Moreover, the Bank would require the assignment of key counterpart staff as acondition for loan effectiveness (para 4.20). In the light of the abovemeasures, it is believed that the principal risks would be sufficientlyreduced to allow the project to achieve its set objectives.

V. AGREEMENTS REACHED AND RECOMMENDATION

5.01 During negotiations, agreement was reached with the Government onthe following:

(a) the implementation of the 1978 Axle Load Control Program,satisfactory to the Bank, to be continued (para 2.13);

(b) the current road safetv practices to be reviewed and programs aimedat improving present road safety operations to be implemented(para 2.17);

- 25 -

(c) a work program, as set forth in the outline terms of reference forthe Road Planning Unit (para 3.06);

(d) new positions for a Contracts Engineer and three Field Engineers tobe established in DM (para 3.08);

(e) measures to be taken to secure the timely supply of aggregate insufficient quality and quantity (para 3.12);

(f) procedures to be established according to which foreign exchangewould be made available to contractors participating in the RMP forthe purchase of new equipment and spare parts (para 3.14);

(g) a plan to be implemented for the re-establishment of HFSin a manner satisfactory to the Bank (para 3.18);

(h) funding for the Road Maintenance Program to be provided inpreference to other highway capital expenditures (para 4.02 (c));

(i) external financing to be sought for the components of the RMP whichare not covered by the proposed loan (para 4.02 (d));

(j) the Bank to be consulted annually concerning budget requirementsfor the RMP (para 4.02 (e));

(k) the list of roads to be included in the second and third phases ofthe period road maintenance program, together with the economicjustification for their selection, to be submitted to the Bank bynot later than March 31, 1984 and March 31, 1985 respectively(para 4.03);

(1) an implementation plan, satisfactory to the Bank, to be prepared byMOC, by not later than February 29, 1984, for carrying out thetraining program (para 4.13);

(m) all estimates of local and foreign exchange cost (para 4.16);

(n) a plan, outlining the measures that the Government would take toattract suitably qualified staff for agreed expansion of MOC andfor counterpart positions (para 4.20);

(o) the implementation schedule for the project (para 4.21);

(p) procurement procedures for equipment (para 4.25);

(q) timetable and terms of reference for the consultant services(para 4.26); and

(r) annual financial statements on the financial performance of theproject, and opinion and report to be provided by the AuditorGeneral of Jamaica within seven months of the close of fiscalyear, as from FY 1983184 (para 4.27).

5.02. The nomination of key counterpart staff would be a condition foreffectiveness of the proposed loan (para 4.20).

5.03 No disbursement would be made for road maintenance equipment,tools, and spare parts from the proceeds of the loan unless a counterpart forthe Hire Funding Manager, with qualifications and experience satisfactory tothe Bank, has been appointed (para 4.20).

5.04 Retroactive financing is recommended for expenditures up to a totalof US$0.4 million equivalent for preparatory works (para 4.18).

5.05. Subject to the above, the project provides a suitable basis for aBank loan of US$15.00 million. The terms would be 17 years, including afour-year grace period.

April 28, 1983

- 27 -TABLE 2.1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Transport Infrastructure Investment, by Mode

In Comparison with the Gross Domestic

Product, 1977/78 - 1981/82(millions of J$)

Transport Sector 1977/78 1978/79 1979/80 1980/81 1981/82

Roads 1/ 38.6 39.1 45.2 60.3 71.5

Railways 2/ 1.3 11.7 2.4 2.7 7.2

Airport Authority 2/ 3/ 3.0 5.0 15.4 12.3 9.7

Air Jamaica 3/ 1.1 2.0 1.4 1.6 0.4

Port Authority 3/ 2.3 7.0 17.1 18.1 10.5

Jamaica Omnibus Service 3/ 0.2 17.1 6.3 3.0 -

Total 46.2 81.9 87.8 98.6 99.3

Gross Domestic Product 2994.0 3764.0 4301.0 4757.0 5159.0 /

1/ Includes expenditures by MOW, MLG, Ministry of Agriculture, KSAC.2/ Adjusted for fiscal year.3/ Public enterprises.

4/ Figures for calendar year.

Source: Ministry of Finance, Jamaica Railways Corporation, Port Authorityof Jamaica, Airports Authority of Jamaica.

October 1982

- 28 -TABLE 2.2

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Gasoline and Diesel Consumption (1970-1981)('000 barrels)

Year Gasoline Diesel

1970 1492 1450

1971 1659 1590

1972 1824 1222

1973 1963 1432

1974 1726 1353

1975 1887 1658

1976 1951 1559

1977 1818 1720

1978 1755 1479

1979 1637 1636

1980 1445 1372

1981 1537 1447

Source: Petroleum Company of Jamaica - Shell Oil Company

October 1982

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Highway Expendituxes and Road User Contributions to Government Revenues(1973/74 - 1981/82)(millions of J$)

1973/74 1974/75 1975/76 1976/77 1977/78 1/ 1978/79 1979/80 1980/81 1981/824/

A. Expenditures on Roads

Recurrent 9.5 14.0 12.6 16.8 11.4 16.8 11.5 6.0 7.9Capital 12.9 28.3 37.8 43.6 38.6 39.1 45.2 60.3 71.5

Total 22.4 42.3 50.4 60.4 50.0 55.9 56.7 66.3 79.4

Total USS equivalent 1978 prices 52.0 81.9 87.0 92.5 59.6 33.5 31.2 23.9 27.8

B. Motor Vehicle Contributions to Govt. Revenues

Excise Duty on tubes and tirea2/ - - - - - 2.6 3.1 4.0 4.7Import Duty on road motor vehicles!/ 13.9 12.4 13.7 21.0 14.1 14.8 13.5 23.0 27.8Import Duty on tubes and tiresZ/ 0.4 0.3 0.3 0.7 n/a 0.7 0.6 0.8 0.8License Duty on motor vehicles 6.6 6.8 9.4 10.0 12.4 13.9 14.3 12.3 15.7Excise Duty on motor fuel./ 8.7 10.7 38.1 37.6 37.4 105.3 87.0 82.0 78.3Driver's License Duty 0.7 0.8 0.9 1.2 1.5 1.3 1.2 1.0 1.3

Total 30.3 31.0 62.4 70.5 n/a 138.6 119.7 123.1 128.6

Total US$ equivalent 1978 prices 82.1 71.9 120.8 121.7 n/a 83.2 56.3 44.3 45.0

1/ For expenditures, budget figures; for contributions, actual figures.

2/ The contributions of import duty on Road Motor Vehicles and import duty on tubes and tires for the fiscal years 1978/79, 1979/80and 1980/81 are, in fact, those duties collected for the years 1979, 1980 and 1981 respectively. The aggregate of License Duty onMotor Vehicles and of Drivers License duty for the year 1982 is J$17m. The breakdowns given above are estimates.

3/ After 1974/75 includes consumption tax.

4/ All contribution data for 1981/82 are preliminary figures.

Source: Expenditures: Ministry of FinanceContributions:Ministry of Public Utilities and Transport

October 1982

- 30 - TABLE 2.4

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Ministry of Construction (Works) Expenditures on Roads (1978/79-1982/83)(Millions of J$)

Item 1978/79 1979/80 1980/81 1981/82 1982/83

Recurrent Expenditures

Road Maintenance 3.7 3.0 3.9 4.3 4.2Walls, Bridges & Culverts Maintenance 0.7 0.6 0.9 0.9 0.9Flood Damage Repairs 2.4 0.3 0.1 1.0 1.2

Sub-Total 6.8 3.9 4.9 6.2 6.3

Capital Expenditures

Main Road Construction and MajorImprovements 3.3 2.4 1.4 2.7 4.3

Minor Improvements of Main Roads 3.3 - - 3.0 2.5Asphalting and Resurfacing!/ 1.2 - - - -

Farm Roads 0.6 0.9 1.0 0.8 1.0Special Roads2/ 1.4 0.3 0.2 - -Secondary Main and Parish CouncilRoads (IDB) 7.7 6.9 11.7 3.6 1.3Bridges (CIDA) + Local 2.1 1.0 1.8 1.2 4.1Flood Damage Preventive Measures 0.5 0.03 - 0.5 0.5Main Roads Preventive Measures3/ - - - 3.0 3.0Flood Damage Restoration andReconstruction (KfW) + Local - 3.5 12.5 3.1 1.5

Hurricane Damage Restoration andReconstruction - - - - 1.0

Rural Roads Improvement Program - - - - 17.0

IBRD Pro ects- Secondoilghway Project (Loan 899-JM) 2.9 1.1 - - -- Third Highway Project (Loan 1032-JM) 7.2 9.8 11.4 5.8 2.4- Fourth Highway Project (Loan 1740-JM) - 2.9 7.3 17.2 14.0

Sub-Total 30.2 28.8 47.3 40.9 52.6

Total Expenditures 37.0 32.7 52.2 47.1 58.9

Total, US$ equivalent 1978 prices 22.2 13.8 18.8 16.5 19.0

1/ Reported as Recurrent Expenditure in Ministry of Construction (Works) accounts.2/ Allocations made under a Government employment program.:2 Government of Jamaica parallel program to the IBRD-financed Fourth Highway Project.

Source: MOC

April 1983

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Expenditure on Routine Maintenance 1979/80-1982/831/(J$ million)

Total

1979/80 1980/81 1981/82 1982(83 - 1979180-1982/83Schedule Actual Schedule Actual Schedule Actual Schddul#/AlIcdAt1on Schedule Actual/Allocation

Administration andOverhead 2.6 2.9 3.5 4.1 4.4 4.0 5.0 5.1 15.5 16.1

Labor 3.3 2.2 4.8 2.5 6.0 3.0 6.8 2.9 20.9 10.6

Materials 1.2 0.9 1.7 1.0 2.1 1.0 2.2 1.0 7.2 3.9

Equipment Operationand Spares 1.9 1.2 2.2 1.4 2.6 1.3 2.9 1.2 9.6 5.1

Emergency Repairs 1.8 0.4 2.2 0.1 2.7 1.1 3.0 1.2 9.7 2.8

Total 10.8 7.6 14.4 9.1 17.8 10.4 19.9 11.4 62.9 38.5

1/ The indicated schedule of funds was expected to be provided by the Government for the purpose of carrying out routine andemergency maintenance of the road network. (Supplemental Letter July 10, 1979, Loan 1740-JM.) The June 1979 constantprices were inflated by factors of 1.04, 1.35, 1.66 and 1.86 for FYs 1979/80, 1980/81, 1981/82 and 1982/83, respectively,to current prices.

Source: MOC

October 1982

tT

M-

- 32 - TABLE 4.1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Phase I Overlay Program

Road Name AADT Length (Miles) Net Present Value(J$ million)

St. Catherine Parish

Bamboo to Spanish Town 2500 1.20 7.12

Twickenham to Angels 8000 2.70 9.99

Spanish Town to Port Henderson 940 2.10 3.72

St. Andrew Parish

Turn Bridge to Santa Maria 2770 1.40 7.77

Stony Hill to Tom's River 2290 1.10 5.06

Constant Spr. to Stony Hill 4185 3.10 4.92

Rockfort to Harbour View 7500 3.10 1.35

Westmoreland Parish

Ferris Cross-Mackfield 1290 2.40 6.60

Scotts Cove-Smithfield Br. 2100 2.30 5.48

Bartletts-Little London 500 6.30 8.01

St. Elizabeth Parish

Pedro Cross-Junction-Lititz 830 8.40 17.00

Luana-Black River-Scotts Cove 1140 5.80 4.41

St. James Parish

Great River to Montego Bay 4800 1.00

Barnett to Adelphi 1490 5.40 10.66

Montego Bay to Pillars 8245 1.30 12.041.00

Trelawny Parish

Falmouth to Springvale 1666 5.90 8.95

Hanover Parish

Mackfield to Shettlewood 1080 5.90 3.70

Total 59.40 117.78

Source: TPOS Study

April 1983

- 33 - TABLE 4.2

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Phase I Reseal and Seal Program

Roads Name AADT Reseal (Hiles) Seal (Miles) Net Present ValueJ$('000)

St. Catherine ParishWorthy Park to Bamboo 500 12.70 803

St. Thomas ParishPotosi to Morant River Br. 200 7.50 86Style Hut to Centre Cut 340 0.20 - 4Morant Bay to Wilmington 190 1.70 1.60 26

Portland ParishBreastworks to Windsor 415 4.60 - 46Buff Bay to Whitehall 150 - 0.70 4

St. Mary ParishClaremont to Chovey 700 4.70 - 496Port Maria to Islington 1050 0.20 - 38Port Maria to Islington 660 3.50 - 403Union Hill to Oracabessa 470 5.80 - 37

St. Ann ParishBrown's Town to Endeavour 300 1.00 - 202Claremont to Harmony Vale 510 1.10 - 173Claremont to Harmony Vale 630 0.50 - 76White River to Newstead Br. 500 1.00 - 103Bamboo to Priory 430 6.10 - 633Davis Town to Golden Grove 450 2.40 - 232Stewart Town-Discovery Bay 400 1.40 - 133Alexandria to Ballentoy 500 2.20 - 194

St. Elizabeth ParishMid. Quarters-N. Market-J. Gat 475 7.60 - 504

Westmoreland ParishNegril to Negril Lighthouse 420 1.80 - 98

Clarendon ParishDanks to Sour Sop Turn 975 1.30 - 183Chesterfield to Rocky Point 350 5.10 - 201Jacob Hut to Fogah 500 1.30 - 9

Trelawny ParishTroy to Albert Town 300 9.90 101

St. Andrew ParishRedligh To Harwar Gap 200 6.20 126Mount Airy to Golden Spring 200 5.20 - 39

Hanover ParishHopewell to Haughton Grove 330 - 0.40 24Hopewell to Haughton Grove 440 5.90 - 37

Totals 100.00 2.70 5011

Source: TPOS StudyOctober 1982

-. 34 -TABLE 4.3

JAMAICA

HIGHWAY MAINTENANCE PROJECT

List and Cost of Maintenance EquipmentTools and Spare Parts1 /

(J$ at October 1982 Prices)

No. of Cost perItem Units Unit Total

Back hoe 5 75,000 375,000

Dump trucks 40 60,000 2,400,000

Utility vehicles (four-wheel drive) 22 28,000 616,000

Pickups 25 17,000 425,000

Pedestrian Vibrating rollers 25 10,000 250,000

Vibrating Plate Compactors 20 2,700 54,000

Tailgate Chipping Spreaders 10 7,650 76,500

Bitumen Emulsion Sprayers 25 1,800 45,000

Workshop Toolsi/ 200,000

Spare parts (about 12% ofequipment cost) 518,500

4,960,000

1/ Includes the following units for training purposes:

1 back hoe, 2 dump trucks, 2 pedestrian vibrating rollers,3 vibrating plate rollers, 1 tailgate chipping spreader,3 bitumen emulsion sprayers.

2/ For 12 parish workshops, including items such as com-pressors, battery chargers, greasing units, jacks, tirerepair equipment, drills and grinding machines.

Source: TPOS Study and MOC

April 1983

- 35 - TABLE 4.4

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Schedule of Estimated Disbursements(US$ million)

Quarterly Cumulative

IBRD Fiscal Year Disbursements Amount Cumulative asBank Loan Cofinancer Bank Loan Cofinancer Total % of Total

1984

September 1983 0.7 _ 0.7 - 0.7 3

December 1983 1.1 - 1.8 - 1.8 8

March 1984 1.3 - 3.1 - 3.1 13

June 1984 1.0 0.7 4.1 0.7 4.8 20

1985

September 1984 1.2 0.8 5.3 1.5 6.8 29December 1984 1.8 1.2 7.1 2.7 9.3 41March 1985 1.3 0.9 8.4 3.6 12.0 51June 1985 1.1 0.8 9.5 4.4 13.9 59

1986

September 1985 0.8 0.6 10.3 5.0 15.3 64December 1985 0.8 0.6 11.1 5.6 16.7 70March 1986 0.7 0.5 11.8 6.1 17.9 75June 1986 0.7 0.5 12.5 6.6 19.1 80

1987

September 1986 0.7 0.5 13.2 7.1 20.3 85December 1986 0.7 0.5 13.9 7.6 21.5 90March 1987 0.6 0.5 14.5 8.1 22.6 95June 1987 0.5 0.4 15.0 8.5 23.5 100

Assumptions:Cofinancing commences in fourth quarter 1984.Loan Signature : June 1983Loan Effectiveness: September 1983Loan Closing Date : June 30, 1987Time overrun on periodic maintenance: 9 monthsDisbursement lag expenditures : 3 months

Source: Mission estimates

April 1983.

JAMAICAHIGHWAY MAINTENANCE PROJECT

Implementatlon Schedule

1983 1984 1985 4986

PROJECT ITEM- - - -

FFMAMJI JASM _ JJFMAM JAS OND JFM AMJJAS OND JFM AMJ JAS ONt

A LOAN EFFECTlY_

B. OVERLAY WORIkS

1 Prect,uolinotion Bidding& Controct, Awards

2ConstiuctionI

3 Preparatory Work

C SEAUNG & RES%A1NG

1 Prequalfication Bidding& Con1trct A-words

2 Constn,ctionr_ ttttt _ __ _ttt

3 Preparctir Works

D E4OUIPMENT PROCUREMENT _

E TECHNICAL ASSISTANCE &%NNINCO

SoUrce' MCC & Misson EstimatesOctober 1982

Wortd Ennk-24?73

- 37 -

ANNEX 1Page 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Past Bank Assistance in The Highway Subsector

1. The Bank, so far, has financed four highway projects in Jamaica.The First Highway Project (Loan 408-JM, US$5.5 million, April 1965) was fordetailed engineering and construction of main arterial roads. The SecondHighway Project (Loan 899-JM, US$9.3 million, May 1973) was for roadmaintenance. The Third Highway Project (Loan 1032-JM, US$13.5 million, June1974) was for construction of about 20 miles of arterial roads. The FourthHighway Project (Loan 1740-JM, US$16.0 million, June 1979) provided supportfor the Five-Year Road Maintenance Program 1979/80-1983/84.

2. The Bank's First Highway Project was for detailed engineering andconstruction, including supervision of 23 miles of four-lane and four milesof two-lane roads. Eight miles of the four-lane road section, however, weresubsequently deleted from the project as a result of increased costs, causedmainly by an under-estimation of costs at appraisal because of thepreliminary nature of the engineering on which the costs were based.Execution of the project was delayed because of difficulties in right-of-wayacquisition, unsatisfactory performance of subcontractors, problems inrelocation of public utilities and inter-union labor disputes, resulting inthe contractor claiming frustration of contract and abandoning work after 90%completion. The contractor's claims were settled through arbitration, andthe work was satisfactorily completed by force account. The ProjectCompletion Report was issued in January 1975 and the Project PerformanceAudit Report in July 1975; both stress the importance of detailed engineeringbefore project appraisal (now a standard practice in the Region).

3. The Second Highway Project comprised: (a) resurfacing of 440 milesof road with asphaltic overlay and resealing of 250 miles of roads with adouble surface treatment; (b) procurement of maintenance equipment; and(c) technical assistance by consultants to supervise the overlay andresealing, assist in the procurement of maintenance equipment, introducecosting and better planning of maintenance operations, and provide trainingto DM staff. The bituminous overlay works proved far more costly thanestimated at appraisal, and only 210 of the planned 440 miles werecompleted. Of the 250 miles scheduled for reseal, 240 miles were completed.MOW's capacity as a road maintenance organization was improved, a MaintenanceManual was prepared, and budgeting and costing procedures were introduced.Some US$2.6 million worth of maintenance equipment was purchased, and anequipment Hire Funding Scheme was introduced under the Loan. However,because of an inadequate accounting system and lack of Government support,the Scheme did not evolve, as anticipated, into a self-financing fund forpurchase of equipment and spare parts. Despite the fact that only about halfof the overlay works were completed, the project was successful in improving

- 38 -

ANNEX 1Page 2

maintenance standards by eliminating part of the backlog of periodicmaintenance work. The Project Completion Report, issued in September 1979,states that the project highlights two important factors: (a) that anyfuture Bank-financed project should be part of an agreed long-term roadmaintenance program; and (b) that followup projects should be planned withsome degree of overlapping so that Bank participation in the country's roadmaintenance effort and, more important, in its institutional developmentwould be continuous. These considerations were taken into account in thepreparation of the Fourth Highway Project as well as the proposed project.

4. The Third Highway Project comprised: (a) construction of about20 miles of new two-lane arterial road; (b) construction of five secondaryaccess roads totaling about 3.2 miles; (c) procurement and installation offour weigh bridges; and (d) consulting services for supervision of worksunder (a) and (b) and for assistance in transport planning. The project alsoincluded technical assistance to aid the local contracting industry financedby UNDP and technical assistance for pavement design and performance evalua-tion financed by the British Government. The project encountered substantialtime delays and, mainly because of them, some cost increases. These problemsstemmed mostly from unresponsive bids on one road section and a contractorfailure on another, mostly due to unexpected major inflation and seriouslabor problems. As a result, MOW undertook to carry out a substantialportion of the works by force account. However, equipment and staffingshortages, combined with continuous labor problems, allowed only very slowprogress, and construction was completed more than three years later thanscheduled at appraisal. The Project Completion Report, issued onDecember 31, 1981, concludes that MOW was able to produce a good qualityoutput under extremely difficult financial circumstances and with itsresources overtaxed by the unplanned construction, by force account teams, ofmost of the civil works elements of the project.

5. The Fourth Highway Project consists of: (a) asphaltic overlay,resealing and rehabilitation of about 470 miles of roads; (b) acquisition ofabout 194 units of road maintenance equipment; (c) spare parts for equipmentrehabilitation and tools for workshops; (d) technical assistance for projectexecution; and (e) consulting services for the non-urban traffic study. Theoverlay, resealing and rehabilitation works were intended to cover the majorportion of the periodic maintenance works during the first three years of theFive-Year Road Improvement and Maintenance Program (1979/80-1983/84). Theremaining periodic maintenance and routine maintenance works of the Programwere planned for implementation under Government finance. However, bymid-1980, it became clear that, because of severe Government budgetconstraints, the scope of works was too ambitious. As a result, the projectwas reassessed, and only 50% of the overlay program and 85% of the resealprogram are being achieved. More seriously, however, there has been a largeshortfall in routine maintenance operations, and, also, the overlay of 20miles and resealing of 220 miles of roads scheduled for financing by theGovernment under the overall program has been deferred. These shortfalls aresomewhat compensated for by the originally unscheduled rehabilitation of

- 39 -

ANNEX 1Page 3

about 440 miles of roads, 260 miles under the Project and 180 miles fromGovernment funds. Reseal and rehabilitation works are substantiallycompleted, and still outstanding overlay works on about eight miles areexpected to be completed by the end of August 1983. Other components of theproject such as procurement of equipment and spares, rehabilitation ofequipment and training of DM staff have also been completed, although boththe equipment rehabilitation and training programs fell somewhat short of theoriginal objectives. There has also been less-than-expected progress onmaintenance management and operation of the Hire Funding Scheme. Thesematters would receive increased attention under the proposed HighwayMaintenance Project. Although the project would be completed with one yeardelay in August 1983, after the initial setback, it has proceeded reasonablywell and helped to maintain the focus on maintenance of the country's mainroad network.

April 1983

- 40 -

ANNEX 2Page 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Transport Sector: Background

A. The Transport System

(i) Roads

1. The roads subsector is treated in detail in Chapters II and III ofthe Appraisal Report.

(ii) Railways

2. The public railway system is operated by the Jamaican RailwayCorporation (JRC). It consists of a main line running diagonally across theisland from Kingston to Montego Bay (112 miles) and a branch line fromSpanish Town northward to Annotto Bay and then eastward along the coast toPort Antonio. The bauxite mining companies own and operate their own railwaylines, but they also utilize the public system. Bauxite, alumina andmaterials associated with that industry represented about 95% of JRC's totalfreight in 1978. This freight traffic reached a peak of about 5 million tonsin 1974, then fell to a low of 3.1 million tons in 1976 as bauxite exportsdeclined because of soft world markets, reduced competitiveness due to aGovernment levy introduced in 1974, and labor problems. In 1977, thistraffic started to recover somewhat, and, in 1981, 3.3 million tons weretransported. Total freight traffic declined by 33% from 1974 to 88.5ton-miles in 1981, while journeys by passengers declined from a peak of2 million in 1977 to about 0.9 million in 1981.

3. In general, JRC passenger fares and freight rates have not been setupon the basis of the cost of services or upon the actual willingness to payfor those services. In many cases, fares and rates are significantly lowerthan cost or demand considerations would dictate. Prior to 1975, passengerfares had not changed significantly for nearly 40 years. From 1977 to theend of 1980, passenger fares doubled (while overall transportation costsincreased by 150% over the same period). Cabinet approval is necessary forchanging passenger fares and less-than-carload freight rates. The JRC Boardof Directors' proposals concerning rate changes are generally approved withsome delay, which, under inflationary conditions, is equivalent to a ratereduction. JRC has more flexibility in establishing carload rates, as wellas the rates it charges the aluminum companies.

4. Throughout its history, JRC has operated with working deficits.Although, in the early 1970s, these deficits were not serious enough to be

- 41 -

ANNEX 2Page 2

considered a major financial burden to the Government, the situation hasdeteriorated dramatically. In 1981 JRC's operating deficit reachedJ$ 4.8 million, and the Corporation appears today to be totally insolvent,with a current ratio of 0.4:1. Losses are mainly incurred on the linesserving passenger and general merchandise traffic.

5. A recently completed study of the Modal Distribution of Non-Urban

Traffic (Delcanda Int., Canada, March 1982), financed under Loan 1740-JM,recommends a "core" network consisting of those sections serving bauxite andalumina traffic, and an "extension" service between Kingston and Montego Bayfor passengers and freight which, if rehabilitated, could become financiallyviable. To this end, the consultants proposed a minimum investment programamounting to J$ 14.0 million. A railway financial expert has been recruitedunder the Bank's Technical Assistance Loan (Loan 2106-JM) to draw up anaction plan for rationalizing rail services, including the restructuring ofJRC's finances, determination of cost, appropriate tariff adjustments andclosure of uneconomic lines.

(iii) Ports and Shipping

6. Jamaica currently has 13 ports in operation, which handled 13.4million tons of cargo in 1981. Kingston, situated on the world's seventhlargest natural harbor, is Jamaica's most important port. It offers a large

area of navigable water and has a channel and berth depth of 40 feet. Theconstruction of a container transshipment terminal, nine break-bulk wharves,roll-on/roll-off facilities and cruise ship piers, completed in 1978, has

transformed the port into a modern, efficient and profitable operation. Ithas become a major transshipment point for the Europe-Orient trade throughthe Panama Canal. In 1980, the port handled about 67% of the cargo vesselsusing the Jamaican ports. Traffic in these ports was substantially reducedin 1976 because of import restrictions, and total tonnage handled in 1981 wasat the same level as in 1977. However, the container/transshipment movementat the port of Kingston increased by almost 100% in 1977 and remained at highlevels in subsequent years. The creation of a Kingston Freeport Zone in1980, which offers exemption from duty on materials imported for processingand reexport, has also attracted new traffic.

7. The Port Authority of Jamaica (PAJ) has total control only over the

port of Kingston. While it sets port tariffs for all Jamaican ports, itcannot control investment in other public and private ports. The existingcapacity for the main country exports is adequate, and no future capacityconstraints are foreseen for the next five years at least.

8. The Jamaican Merchant Marine (JMM) was established in 1976 asJamaica's national shipping company. Until very recently, the JMM fleetconsisted totally of chartered vessels; in 1981, with a view to reducing itsdependence on foreign ships, JMM developed a vessel acquisition program. Abulk carrier and a roll-on/roll-off vessel have already been delivered.

- 42 -

ANNEX 2Page 3

(iv) Air Transport

9. Air transport is served by two international airports as well as byseveral small domestic airports and airstrips. The two internationalairports are at Montego Bay, which serves the north coast and specializes intourist traffic, and at Kingston, which serves Jamaica's southern coast andcaters mainly to business and other non-tourist travel. The rapid increasein air traffic in the early 1970s exerted considerable pressure on thesefacilities. A Bank project (Loan 1043-JM) financed the improvement of theoperational capacity and levels of service at the two international airports,as well as technical assistance to improve management systems and planning.The project was completed in late 1980, and, as a result, the airports areadequate to handle expected traffic growth. Except for the possibleextension of the Montego Bay runway and the purchase of navigational aids forboth airports, no major investments will be necessary to handle the trafficexpected in the foreseeable future.

10. Traffic flows in both airports started to decline in 1975 becauseof the stagnation of the Jamaican economy and the reduction in tourism. Thissituation was reversed in 1978, and, in 1980, traffic reached the 1974levels. The sluggish traffic seriously affected the Airport Authority ofJamaica's (AAJ) financial performance; in 1981, AAJ had an operating deficitof J$ 1.1 million. Although the airport departure tax was recently increasedfrom J$ 8 to J$ 10 per passenger, AAJ's financial situation has not beenaffected, since its share remains at J$ 1 while the balance goes to theGovernment's general revenue. Landing fees were increased in January 1983 by12%, but throughput fuel was reduced from 4t to 3¢ a gallon. A determinedeffort by the Tourist Board, together with AAJ's aggressive management, isexpected to help improve the company's financial position.

11. Air Jamaica, Jamaica's international airline, was created with theparticipation of Air Canada in 1968 and is now wholly owned by the JamaicanGovernment. Its financial performance since the mid-1970s, as measured byoperating profits before depreciation and interest expense, weakened in 1979,deteriorated badly in 1980, and continued to be depressed through 1981.Operating losses in 1980 and 1981, before depreciation, were J$ 21.5 andJ$ 13.8 million respectively, as compared with an operating profit ofJ$ 15.7 million in 1978.

12. The poor financial results have been caused by a number ofproblems, including large fuel price increases, slow tourist traffic growth,low aircraft utilization, and increased competition from scheduled andchartered aircraft, which contributed to low yields and poor load factors.Since 1981, Air Jamaica has followed an action plan with the primaryobjective of restoring its financial viability through the rationalization ofits route structure, the discontinuation of unprofitable routes and attendantcost reduction measures, including staff reductions. The company is alsoattempting to sell its D-8 aircraft and phase out the use of DC-9 aircraft,

- 43 -

ANNEX 2Page 4

and plans to acquire two used A-300 airbus aircrafts in a move to increasethe efficiency of its fleet. Despite these moves, Air Jamaica's financialsituation continues to be difficult, mainly because of increased competitionfrom North American carriers, which has caused the airline to offerpromotional fares, thereby increasing break-even load factors. Air Jamaicashould continue its cost control program and its review of routes in order toeliminate the unprofitable ones. Additional efforts toward improvingcooperation between Air Jamaica and the Government's tourist promotionagencies should also be made.

April 1983

- 44 -

ANNEX 3Page 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Outline Terms of Reference for the

Road Planning Unit

Objectives

1. The main objectives of the Road Planning Unit (RPU) will be:

(a) to develop criteria for the selection of roads on technicaland economic grounds, for all road construction, improvementand maintenance programs to be executed by the Ministry ofConstruction (Works) (MOC);

(b) to develop a systematic approach to investment planning forthe road subsector in accordance with appropriate technicaland economic criteria;

(c) to develop a national road classification system embracingall roads on the island;

(d) to prepare detailed proposals for the establishment ofa single Island Road Authority; and

(e) to develop new systems and/or upgrade existing systemsin order to plan, monitor and report effectively on theprogress of all MOC road programs.

Main Tasks

2. In connection with the ongoing and planned projects, the main tasksof the RPU will include, but will not necessarily be limited to:

(a) annual updating of data relevant to the calculation ofeconomic costs such as price indices, taxes, etc.;

(b) annual updating of unit costs of construction,including the foreign and local cost component;

(c) collection and analysis of data relating to traffic flows;road user costs including vehicle operating costs, time costsand accident costs; road user charges; traffic loading;deflection measurements; skid resistance properties; recurrentaccident locations; and the axle load control program;

- 45 -

ANNEX 3Page 2

(d) annual updating of road condition survey data forRMP and RRIP and training of field staff in this work;

(e) a review of existing road classification systems employedby the various agencies to which the maintenance of roadsis entrusted and the development of a National ClassificationSystem to embrace all roads;

(f) preparation of an inventory of all roads in the country;

(g) preparation of proposals for the establishment of a SingleRoad Authority in light of the findings of a review of theexisting operational, organizational and budgetaryarrangements, and the division of responsibility for roadmaintenance between MOC and other public entities such asMLG and MA;

(h) in the context of the findings and proposals arising from(a) through (g) preceding, development of investment planningcriteria for the road subsector in accordance withappropriate technical and economic criteria andconsistent with the macro-economic plan and national roadpolicies;

(i) the further development and refinement of the planningsystem and computer programs used for the selectionof roads for periodic maintenance under RMP, including:

(i) rationalization of the existing road control sectionsand the establishment of permanent subsections;

(ii) determination of the relationship between "patchingrequired" and "surface roughness"; and

(iii) expanding the capability of the system to enableoptimization of the recommended periodic maintenanceprogram.

(j) based on (i), the development of the subsequent phases ofthe periodic maintenance program, including road selection andeconomic justification;

(k) providing assistance for the establishment of a system for theselection of roads to be included in the RRIP second year(1983/84) work program;

- 46 -

ANNEX 3Page 3

(1) providing assistance for the design of a planning system forRRIP, including the computer applications which are envisagedand the preparation of an appropriate economic methodology;the Unit will also be responsible for the implementation,continuing operation and refinement of the system;

(m) based on (1) preceding, the development of the third andfourth year programs for RRIP, including road selection andeconomic justification;

(n) the planning, coordination and monitoring of the mainroad reconstruction and major improvements and the intensivepatching and rehabilitation programs;

(o) the further development and refinement of the existingroad construction and maintenance management systems,e.g., the Construction Management Information-System(CMIS), the Routine Maintenance Allocation system,RMCS, and ROMGRAM;

(p) the design and introduction of new or modified planning,monitoring, management information and reporting systemsas necessary;

(q) with the support of ITA and TAA, the review of current roadsafety practices and the formulation of specific programs forimproving present road safety operations; and

(r) the preparation of such future highway work programs asthe Government may deem necessary.

3. Staffing

Initially, the RPU will be staffed by the following professionals:

MOC Personnel (Permanent)

1 Unit Chief, Highway Planning Engineer1 Transportation Economist1 Systems Analyst

Support staff including data processing, secretarial and clericalstaff

- 47 -

ANNEX 3Page 4

Internationally Recruited

1 Highway Planning Engineer (30 months)1 Transportation Economist (24 months)1 Transportation Economist for RRIP (18 months)I Systems Analyst (24 months)

4. Schedule for Establishment

The Unit commenced operation in April 1983 and is expected to befully established by September 1, 1983.

5. Time Targets

RPU will prepare and submit reports on each of the followingsubject areas by the dates indicated:

Annual RMP Work Program October 1, 1983, 1984 and 1985

Annual RRIP Work Program October 1, 1983, 1984 and 1985

Annual Patching andRehabilitation Program October 1, 1983, 1984 and 1985

National Road ClassificationSystem March 1, 1984

All Island Road Inventory June 1, 1984

Refinement of Construction andMaintenance Management Systems January 1, 1984

Proposals for Establishment ofa Single Road Authority March 1, 1984

Road Safety Improvement Program July 1, 1984

6. Progress Reporting

RPU will prepare quarterly reports outlining the progress of theworks being undertaken with respect to each of the above and other relatedmatters. The first of such reports will cover the period April 1 to June 30,1983 and will become due on July 31, 1983; subsequent reports will besubmitted no later than the last day of the month following the end of eachsucceeding quarter.

7. Such reports will give a brief status report on each of the activi-ties of the Unit and indicate any areas of particular difficulties that mayhave been identified. Further, the reports will highlight any delaysenvisaged and proposed remedial action as well as recommendations, and detailthe Unit's proposed work program for the ensuing three months.

April 1983

- 48 -

ANNEX 4Page 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Training Program

1. Over the next four years, MOC intends to broaden its trainingactivities, for which assistance would be provided under the proposedproject. According to recent estimates, about 1,700 MOC staff would need toundergo either formal or in-service training; about 770 of them would be roadand equipment maintenance personnel (Table 1 of this annex).

2. The Training Program would be divided into two phases. In Phase I,the training needs would be more closely identified, staff to be trainedwould be selected and training programs would be planned while, underPhase II, the program would be implemented in accordance with a schedule tobe recommended under Phase I and agreed between the Government and the Bank.

3. The Program would be coordinated by the Training Unit and wouldbroadly include:

(a) expansion of MOC's Training Unit through the engagement/assignment of three additional training officers andsupporting staff;

(b) engaging, under the technical assistance, of:

(i) a foreign training specialist for 24 months;

(ii) a foreign instructor (accounting/auditing) for 12 months;

(iii) a foreign road superintendent for 12 months; and

(iv) local instructors (road maintenance, mechanicalworkshops) for 96 man-months.

(c) extension of physical training facilities at the TarrantsTraining Center and the Kingston mechanical apprentice school;

(d) improving courses for work overseers by:

(i) revising the syllabi presently used; and

(ii) establishing a mobile Road Training Production Unit(RTPU) for the combined practical training of overseers,equipment operators and mechanics.

- 49 -

ANNEX 4Page 2

(e) training of workshop mechanics;

(f) purchase of training equipment, including audio-visualtraining aids;

(g) organization of seminars for middle and high-levelmaintenance staff;

(h) conducting of training courses for accounting and auditingstaff; and

(i) training abroad of training officers and technical personnel.

4. Although MOC's Training Unit would be assisted by the trainingspecialist in expanding training activities throughout the Ministry, theproposed project would primarily support the road-maintenance-relatedtraining needs. Upon completion of theoretical training at the TarrantsTraining Center, work overseers, equipment operators and drivers would beassigned to RTPU and would be trained under actual working conditions.Mechanics would be trained at the main regional workshops and would work onthe repair of road maintenance equipment. Seminars on different topicsrelated to maintenance management would be conducted periodically for middle-and high-level staff.

5. The estimated cost of the Training Program is J$ 2.31 million(US$1.25 million), with a foreign exchange component of US$0.77 million(Table 2 of this annex).

April 1983

ANNEX 4- 50- Table 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Estimated Road and Equipment MaintenancePersonnel to be Trained

Category No.

Headquarters/AdministrationSenior Staff 6

Areas & Counties

Senior Executive Engineers 3Accountant III 6Senior Superintendents 6

Parish Offices

Accountants II & III 15Senior Superintendents and

Superintendents 16

Divisions

Works Overseers (Sr. II, I) 200

Skilled Personnel

Drivers I, II 120Equipment Operators 100

Subtotal 472

DEMS

Accountants 30Storekeepers 23Equipment Operators 18Mechanic Inspectors 9Mechanics 200

Subtotal 300

TOTAL 772

Source: MOC and mission estimate

- 51 -ANNEX 4Table 2

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Estimated Cost of Training Program(J$'000)

Foreign asLocal Foreign Total % of Total

1. Improvement of Physical TrainingFacilities at Tarrants TrainingCenter and Mechanical ApprenticeSchool 56.0 48.0 104.0 46%

2. Purchase of Training Equipmentand Materialsl/ 21.0 157.0 178.0 88%

3. Training Personnel:

a. Foreign

Training Specialist 24 months 118.0 470.0 588.0 80%Instructor; Accounting/Auditing

12 months 59.0 235.0 294.0 80%Superintendent; Roads

12 months 44.0 178.0 222.0 80%

b. Local

4 Instructors (96 man-months) 192.0 - 192.0 -

4. Training Abroad:

10 Technical Personnel 10.0 254.0 264.0 96%4 Training Officers

(US$10,000/3 month andJ$ 1,000/Return Trip)

5. Local Transport (1 car, 2 mini buses) 8.5 62.5 71.0 88%

6. Per Diem While on Training 450.0 - 405.0 -(J$ 10 x 450 person x 90 days)

Total Base Costs (October 1982 913.5 1,404.5 2,318.0 61%prices)

1/ Includes audio-visual equipment, technical publications; spare parts and toolsfor training of mechanics. Road Maintenance equipment to be procured fortraining purposes is listed in Table 4.3.

Source: MOC and Mission Estimates

- 52 -

ANNEX 5Page 1

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Economic Evaluation

A. Formulation of the Road Improvement and Rehabilitation Program

1. Consultants T.P.O'Sullivan (UK), who prepared and assisted in theimplementation of the 1979/80-1983/84 Road Improvement and MaintenanceProgram, were commissioned by MOC to develop a follow-on program for theperiod 1983/84-1986/87. The resulting studies, completed in November 1982,include the economic confirmation of the subprojects to be implemented inPhase I, and the preliminary evaluation of the subsequent phases of theperiodic road maintenance component of the program. The overall programshows an estimated economic rate of return above 50%.

(i) Methodology for the Formulation of the Program

2. The three-phased periodic road maintenance program was developed ina recursive manner. The first step was a preliminary selection of roadsbased on a road condition survey carried out by the consultants on about2,900 miles of roads maintained by MOC. During the survey, the consultantsassessed the road surface roughness (verified at random with the help of avehicle-mounted bump-integrator) and, based on traffic levels, identified theroutine, periodic and rehabilitative maintenance work required for each roadsection. The actions recommended by the consultants were subject tocost-benefit analysis and were reviewed by MOC's Chief Superintendents,Senior Superintendents and, in most cases, the Superintendents of each parishconcerned; when necessary, they were revised to take local factors intoconsideration. The resulting program was then economically evaluated andranked according to its net present value (NPV) and further changes made inthe light of perceived physical constraints. Where appropriate, the effectsof delaying or bringing forward an action were considered.

3. The economic evaluation of the periodic maintenance works (overlayand reseal) was based on the assumption that, if the project works wereimplemented, the roads would be restored to a higher level of serviceabilityand a lower rate of deterioration (para 4). This "with" project case iscompared to a "without" project case, in which the roads receive only thecurrent low levels of routine maintenance and continue to deteriorate at ahigher rate during the lifetime of the project, considered in this case to beten years. Quantifiable benefits to be derived from the overlay and resealworks are:

(a) vehicle operating cost savings through the improvement of roadcondition (para 7); and

- 53 -

ANNEX 5Page 2

(b) passenger time savings through the reduction of travel time(para 9).

(ii) Road Deterioration Model

4. The data gathered during the road condition survey (para 2)provided the basic information from which the consultants developed theirroad deterioration model:

(a) the road condition measured as its degree of "patchingness,"i.e., the percentage of the road requiring patching in orderto achieve a certain level of serviceability;

(b) the pavement surface roughness; and

(c) the age of the pavement.

Using this information, the consultants developed relationships amongpavement patching requirements, surface roughness, and age. Since it wasevident from these relationships that age only partially explained the degreeof "patchingness" or the roughness of a road, the consultants divided theroads under study into five categories, according to observed variations indeterioration rates (category 1 roads being those with the slowest rate ofdeterioration). Age versus roughness relationships for each of the five roadcategories were developed. The rates of deterioration given by these modelsare very conservative, the underlying assumption being that if a pavement haddeteriorated up to the time it was inspected at a particular average annualrate, that pavement would deteriorate at the same rate after the inspection.In practice, the rate of deterioration tends to increase with the age of thepavement. The above-mentioned relationships were utilized to determineroughness and deterioration rates with and without the proposed maintenanceactions. For a "with" project case, it was assumed that the effect ofresealing or overlaying a pavement would be to improve its category by one.This results in:

(a) a reduction in roughness which is dependent upon the age ofthe pavement; and

(b) a reduction in the rate at which the pavement deteriorates androughness increases in the future.

(iii) Traffic Volumes and Vehicle Operating Costs

5. The principal benefits from the proposed periodic maintenance workwould be derived from vehicle operating cost savings. The consultants,during the road condition survey, carried out "moving-observer" trafficcounts on every road control section. In addition, between May and

- 54 -

ANNEX 5Page 3

September of 1982, MOC undertook a comprehensive program of 12-hour counts atmost of the junctions of the main roads network. Cars accounted for about50% of the traffic, pickups and minibuses for 25%, buses 2% and .rucks 23%.

6. Although the yearly traffic counts carried out by MOC give a fairlyclear indication of how the traffic flowed throughout the island, it is notpossible to discern from the figures any regular pattern of traffic growthover the last decade. Up to 1974, traffic was growing at a steady rate ofabout 8% per annum. Between 1974 and 1978, traffic fluctuated withoutfollowing any clear pattern. There was an erratic rise to a peak in 1976,but this was soon followed by a sharp fall. By 1978, predictions of zerogrowth were being made for the following five years. Then, conditions inJamaica worsened, and the figures for 1979 showed that traffic had actuallydecreased by 16% between 1978 and 1979. Since 1979, as a result of theGovernment's relaxation of vehicle import controls, there has been a largeinflux of vehicles, so that the decrease, which continued for some time into1980, now appears to have been halted and is at present being reversed. Theoil companies' recent forecasts of fuel consumption, usually a reliable proxyfor traffic growth, indicate a slight decrease of 1% per annum in their salesof petrol over the next five years and an increase of about 4% per annum intheir sales of diesel. For the purpose of the economic analysis of theproposed project, the consultants, taking into consideration a projected rateof GNP growth of about 2% per annum (which is compatible with the projectedfuel sales), assumed that traffic would grow at 3% per year during thelifetime of the project. Sensitivity analysis shows that the economicviability of the project is not affected by a more pessimistic assumption ofzero traffic growth (para 13).

7. Table 1 of this annex provides summary information on operatingcosts for six vehicle types: cars, pickups, minibuses, medium trucks, heavytrucks and buses. The consultants based their calculation of vehicleoperating costs on the TRRL study carried out in St. Lucia 1/, an easternCaribbean island with topography and road characteristics similar to those ofJamaica. The particular relationships studied in St. Lucia were thoserelating vehicle speeds and fuel consumption to the geometric characteristicsand surface condition of the roads.

8. Some of the components of vehicle operating costs have risensubstantially in recent years, particularly labor. This is the result of thesevere limitation of imports of new cars since 1976 and the poor availabilityof spare parts due to the tight foreign exchange situation, which requiressubstantial additional labor to be devoted to more intensive maintenanceoperations.

1/ Vehicle Operating Costs in the Caribbean: An Experimental Study ofVehicle Performance by G. Morosins and S.W. Abaynayaka - TRRL LaboratoryReport 1056.

- 55 -

ANNEX 5Page 4

9. The benefits from reduction in the accident rate that would resultfrom improved surface conditions have not been quantified and are notreflected in the estimated economic return of the project. Allowance wasmade in the calculation of vehicle operating costs for savings of leisure andcommuting time, but these were insignificant (less than 5% of benefits) incomparison to direct operating costs savings. The values allotted to timesavings were 100% of the wage rate in the case of work trips, 40% if the tripwas considered personal business, and 10% in the case of leisure timeavings. The average hourly wage rate in Jamaica is J$ 3.75, and the times

of drivers, assistants, and passengers of vehicles other than cars wereassumed to have an average economic cost of J$ 4.00, J$ 1.25 and J$ 2.00respectively. In the case of private cars, the opportunity cost of theworking time of the driver and passengers was considered to be J$ 6.5 andJ$ 3.5 per hour respectively.

B. Benefits from the Project

10. As mentioned above, the main benefit calculated for the project issavings in vehicle operating costs brought about by improved road surfaceconditions. It was estimated that a change of one inch of road surfaceroughness per mile caused, on the average, a change of J$ 0.0056/mile invehicle operating costs on a fairly flat terrain and of J$ 0.0061/mile in thecase of mountainous roads. Savings in maintenance activities were notincluded in the analysis since they are of relatively minor magnitudecompared with vehicle operating cost savings. The NPV of the estimatedthree-phased program, using a discount rate of 12%, is J$ 296 million, andthe estimated economic rate of return is on the order of 100%. Tables 4.1and 4.2 show the roads to be overlaid and resealed during the first phase ofthe program, with their NPV and average annual daily traffic (AADT). The NPVof the subprojects to be included in Phase I of the periodic maintenanceprogram varies between J$ 4,000 and J$ 630,000 for the reseal works andbetween J$ 1.0 million and J$ 17.0 million for the overlay works.

11. In terms of traffic, it can be seen that most of the roads forwhich an overlay is planned have an AADT above 1,000, while those to beresealed have, in general, an AADT below 1,000 vehicles.

12. For the purpose of the economic analysis, tradeable goods werecosted at border prices, while the opportunity cost of labor was consideredto be 50% of its financial cost. The consultants used an exchange rate ofUS$1.00 = J$ 2.40, which reflects the price that the relevant economic agentsare expected to pay for foreign currency in the recently officializedparallel market. The opportunity cost of capital in Jamaica was estimatedat 12%.

C. Sensitivity Analysis and Risks

13. Sensitivity tests for the various inputs of the economic evaluationwere carried out in the parish of St. Elizabeth. This parish was chosen

- 56 -

ANNEX 5Page 5

because, given its wide variety of road types and traffic levels, it wasconsidered a good surrogate of the country as a whole. The tests werecarried out to show the effect of different vehicle operating costs, trafficgrowth and cost assumptions on the optimal size of the maintenance programand the economic viability of the project (Table 2 of this annex).Decreasing vehicle operating cost savings by 20% affected the size of thereseal works program only. Even then, the size of the optimal programdecreased by only 10%. The effect of changing traffic growth rates was alsoconcentrated on the reseal program, and the difference between zero growthand 3% per annum was quite small. Finally, the effect of increasingconstruction costs by 15% was tested, and the changes in the physical programwere again concentrated on reseal works and are similar to the effect of zerotraffic growth. In all three cases, the economic viability was not sensitiveto pessimistic assumptions.

April 1983

- 57 -

ANNEX 5

JAMAICA Table 1

HIGHWAY MAINTENANCE PROJECT

Summary of Vehicle Operating Costs(J$/miles)

Class 1 Roacs"/ Class Z Roa4s!/ Class 3 Roads-/ Class 4 Roads-/Flat Mount. Flat Moun. Flat Mount. Flat Mount.

Terrain Terrain Terrain Terrain Terrain Terrain Terrain Terraini

Cars 0.48 0.57 0.95 1.06 1.12 1.23 1.19 1.31

Pick-ups 0.67 0.85 1.22 1.41 1.41 1.60 1.49 1.69

Minibuses 1.48 1.76 3.14 3.44 3.71 4.03 3.96 4.29

Med-Trucks 1.62 2.27 2.78 3.53 2.99 3.78 3.07 3.94

Heavy Trucks 2.47 3.48 4.61 5.73 4.98 6.16 5.10 6.40

Buses 3.99 5.95 5.11 7.56 5.35 8.04 5.59 8.71

I/ A road with asphaltic overlay in good condition.

2/ A road with resealed surface in good condition.

3/ A road with resealed surface in fair to poor condition.

4/ A road in very poor condition with surface reverting to gravel.

Source: TPOS Study

October 1982

- 58 -

ANNEX 5Table 2

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Sensitivity Analysis

Variation in Vehicle Operating CostsViable Projects, St. Elizabeth Parish

Vehicle EstimatedOperating Single Reseal Double Reseal Overlay NPV ERR

Cost ('000 sq.yd.) ('000 sq.yd.) ('000 sq.yd.) (J$million) %

VOC-20% 38.0 474.4 139.4 7.1 42.6VOC 38.0 542.9 139.4 10.2 50.5VOC+20% 38.0 639.9 139.4 13.5 56.1

Variation in Traffic GrowthViable Projects, St. Elizabeth Parish

Annual EstimatedTraffic Single Reseal Double Reseal Overlay NPV ERRGrowth ('000 sq.yd.) ('000 sq.yd.) ('000 sq.yd.) (J$million) %

0% 38.0 494.5 139.4 8.2 48.13% 38.0 542.9 139.4 10.2 50.5

Variation in Construction CostsViable Projects, St. Elizabeth Parish

EstimatedConstruction Single Reseal Double Reseal Overlay NPV ERR

Costs ('000 sq.yd.) ('000 sq.yd.) ('000 sq.yd.) (J$million) %

Estimated Costs 38.0 542.9 139.4 10.2 50.5Costs + 15% 38.0 494.4 139.4 9.4 45.7

Source: TPOS Study

October 1982

- 59 -

ANNEX 6

JAMAICA

HIGHWAY MAINTENANCE PROJECT

Selected Documents and Data Available in the Project File

1. "Road Improvement and Maintenance Study, Stage III.Draft Final Report" Volumes I and II.T.P. O'Sullivan and Partners, October 1982.

2. "Road Improvement and Maintenance Study" Stage III.Road Condition Report, 13 volumes, (one for each parish).T.P. O'Sullivan and Partners, October 1982.

3. Calculation of Estimated Project Cost.

4. Calculation of Local Taxes.

5. Vehicle Operating Costs. Computer Printout. October 1982.

6. Terms of Reference for Consulting Services under the TechnicalAssistance Component of the Project:

(a) Road Planning Unit

(b) Maintenance Directorate

(c) Hire Funding Scheme

(d) Training Program

April 1983

JAMAICAHIGHWAY MAINTENANCE PROJECTMinistry of Construction (Works)

P|ermnentSecretary

Rural Rood VInagement Personnel Administration Finonce InternalImprovement fIntormoton Directorate Directorate Drvision Audit

Program Section

RrnancialController

ChetSystems Systems Training Technical

Director

Controller ofEudg,ets Accounts

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Monitonng & Enginweerng & Sreiguvys Engineening Brnh Spntcit nReviewUntDesign Branch B hBranch

October 1982 Worid Bank-24781

JAMIV¶CAHIGHWAY MAINTENANCE PROJECT

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