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Public Disclosure Authorized

Document of

The World Bank


Public Disclosure Authorized


Public Disclosure Authorized


November 29, 2004

Public Disclosure Authorized

Energy and Infrastructure Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS (Exchange Rate Effective November 23, 2004) Currency Unit = Rupee INR.1.0 = US$ 0.0221 US$ 1.0 = INR 45.095 FISCAL YEAR April 1 March 31 ABBREVIATIONS AND ACRONYMS
APSH BOQ BOT CAS CMG CSCs GIS GOAP GOA GOI EMP ERR ICR IDS IPC JV LA MDR NPV PAP PCC PIU PMS QAG RAP RBD RDC RIS ROB RUB SH TTL Andhra Pradesh State Highway Project Bill of Quantity Build, Operate and Transfer Country Assistance Strategy Corporate Management Group Construction Supervision Consultants Geographical Information System Government of Andhra Pradesh Government of Australia Government of India Environment Management Plan Economic Rate of Return Implementation Completion Report Institutional Development Study Interim Payment Certificate Joint Venture Land Aquisition Major District Road Net Present Value Project Affected People Project Coordinating Consultant Project Implementation Unit Pavement Management System Quality Assessment Group Resettlement Action Plan Roads and Buildings Department Road Development Corporation Road Information System Railways Over Bridge Roads Under Bridge State Highway Task Team Leader

Vice President: Country Director: Sector Manager: Task Team Leader:

Praful C. Patel Michael F. Carter Guang Z. Chen Stein Lundebye



1. Project Data 2. Principal Performance Ratings 3. Assessment of Development Objective and Design, and of Quality at Entry 4. Achievement of Objective and Outputs 5. Major Factors Affecting Implementation and Outcome 6. Sustainability 7. Bank and Borrower Performance 8. Lessons Learned 9. Partner Comments 10. Additional Information Annex 1. Key Performance Indicators/Log Frame Matrix Annex 2. Project Costs and Financing Annex 3. Economic Costs and Benefits Annex 4. Bank Inputs Annex 5. Ratings for Achievement of Objectives/Outputs of Components Annex 6. Ratings of Bank and Borrower Performance Annex 7. List of Supporting Documents Annex 8. Borrower's Evaluation Annex 9. Stakeholder's Workshop Annex 10. Implementation Progress of Institutional Development Action Plan (IDAP)

Page No. 1 1 2 4 9 12 13 14 17 17 18 19 21 25 28 29 30 31 38 44

Project ID: P009995 Team Leader: Stein Lundebye ICR Type: Core ICR

Project Name: ANDHRA PRADESH STATE HIGHWAY PROJECT TL Unit: SASEI Report Date: November 30, 2004

1. Project Data
Name: ANDHRA PRADESH STATE HIGHWAY PROJECT Country/Department: INDIA L/C/TF Number: SCL-41920; PPFB-P2490 Region: South Asia Regional Office

Sector/subsector: Roads and highways (97%); Central government administration (3%) Theme: Municipal governance and institution building (P); Other urban development (S) KEY DATES PCD: 06/15/1995 Appraisal: 03/10/1997 Approval: 06/17/1997 Original Effective: 10/02/1997 MTR: 10/02/1999 Closing: 01/31/2003 Revised/Actual 10/02/1997 10/29/1999 06/30/2004

Borrower/Implementing Agency: Other Partners: STAFF Vice President: Country Director: Sector Manager: Team Leader at ICR: ICR Primary Author:

GOI/Roads and Buildings Department (RBD); GOI/GOAP

Current Praful C. Patel Michael F. Carter Guang Z. Chen Stein Lundebye Ashok Kumar

At Appraisal Mieko Nishimizu Robert S. Drysdale Jean-Francois Bauer Chris Hoban

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: Sustainability: Institutional Development Impact: Bank Performance: Borrower Performance:


QAG (if available) Quality at Entry: Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

3.1.1 The original project objectives were: (i) to reduce transport costs and transport constraints on economic activity; and (ii) to improve the States institutional capabilities to manage road programs and assets. These objectives were clear, realistic, measurable, directly linked to economic growth of the state, and fully consistent with the Bank's Country Assistance Strategy (CAS) for India (1995) as well as with the Bank report: "The India Transport Sector - Long Term Issues", which recognized improved infrastructure as critical to the growth of India's economy. The CAS placed emphasis on investments in high return projects, strengthened public sector planning and project management, increased use of private sector engineering capacity, and modern road design and construction technologies for the road sector. All these were fully integrated and covered in the project design. The project objectives were also supportive of the current CAS objectives including investments in state highways carrying high traffic volumes and resulting in high returns on the investments. 3.1.2 Before the project start, the state road network had a low carrying capacity (53% of the state highways and 90% of the major district roads were single lane with inadequate pavements) and poor riding quality, and was unable to cope with the traffic growth. The first development objective aimed at removing these constraints to promote economic growth. The Roads and Buildings Department (RBD) also had limited implementation capacity, little exposure to international practices, and required a series of reforms/institutional development initiatives (identified through an Institutional Development Study - IDS) to improve its business efficiency and core procedures. The second development objective was focused on building up the capacity of RBD in core business processes and to implement the proposed IDS initiatives. The project components were limited in number and fully consistent with the project objectives. The project design has integrated most of the Bank experiences from previous infrastructure projects including: (i) more comprehensive project preparation prior to project appraisal; (ii) adopting international 'good practice' engineering services; and (iii) introducing modern highway construction technology for high traffic corridors. Overall, the project design was sound, clear, realistic, and directly supportive of the Government of Andhra Pradesh (GOAP) needs. The project design included several good practice examples available at that time for the road sector including innovative pavement designs, performance based maintenance, pavement management system, and quality assurance.
3.2 Revised Objective:


The project development objectives were not revised.

3.3 Original Components:


The project consisted of the following three major components: Component 1 - Road Widening and Strengthening (US$400.6 million): Civil works for widening and strengthening of about 1,400 km of high-traffic volume State Highways (SHs) and Major District Roads (MDRs) of the State primary core network; consultancy services for engineering designs and supervision of works; and rehabilitation assistance to the project affected people.


Component 2 - Road Maintenance (US$73.7 million): Heavy periodic maintenance of 1,750 km of primary core network roads to reduce the periodic maintenance backlog for SHs and MDRs networks; pilot performance based road maintenance contracts on 1,200 km of roads to demonstrate more effective routine maintenance practices; and consulting services. Component 3 - Institutional Reform and Strengthening (US$8.8 million): This component included consultancy services for development and implementation of an institutional strengthening program for RBD, development and implementation of RBD staff capacity building and training program, equipment support, and other services.

3.3.2 All the three components were clearly linked to the development objectives. The project focused on removing transport constraints through road improvement and heavy periodic maintenance works on the primary core road network (Components 1 and 2). The road improvement works included priority projects having high returns on the investments, selected on the basis of a detailed feasibility study and economic analysis. Component 2 focused on reducing the maintenance backlog, and introducing performance based maintenance contracts incorporating best international practices. The institutional development component was directly linked to the second development objective and included many fundamental reforms such as restructuring the existing RBD; establishing a Road Fund and dedicating selected road user charges to it; and to operationalize the Road Development Corporation (RDC). While these concepts were sound, the complexities involved to introduce these in terms of hard political decisions seem to have been underestimated in the project design. It would have also been preferable to prepare and implement an overall road sector policy, including various good practices introduced under the project to ensure their use in the entire state and sustainability after project closure.
3.4 Revised Components:


The project components were not revised.

3.5 Quality at Entry:

3.5.1 No formal Quality at Entry Assessment (QEA) was carried out by QAG. The quality at entry is rated as satisfactory for the following reasons: (i) clarity, relevance, and importance of the project development objectives; (ii) sound project design incorporating previous Bank experience in the highway sector and good practice examples; (iii) project preparation placed adequate emphasis on feasibility studies, road designs, procurement planning, and various assessments (including social and environmental) to ensure readiness for implementation; (iv) adequate risk analysis carried out and mitigation measures identified; (v) the primary core network from which all the project roads were selected, was identified during project preparation; (vi) draft bid documents for 30% of the road improvement works were received by the Bank before the project appraisal; and (vii) various outputs related to the project development objectives were well identified and an institutional development action plan prepared before the start of project implementation. The project developed a set of well-defined and measurable performance indicators.


4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

4.1.1 Summary: The overall outcome of the project is rated satisfactory as the project objectives were achieved. The road users and stakeholders perceived significant economic benefits from the project (Annex 9). The main achievements of the project are given below: Reduce transport costs and transport constraints: The achievement of this objective is rated satisfactory. Out of a total primary core network of 10,266 km, about 7,330 km of roads were improved during the project period (of which 3,150 km under APSH). The concept of establishing a core network of primary roads before the project start was found very effective to prioritize the investments and focus them on priority needs. The core network roads in poor condition have been reduced from 70% to 28% during the project implementation. The following were achieved on the roads improved under the project: (i) overall travel time reduced by 30 to 50%; (ii) average travel speed has gone up to 60-70 km per hour from the 30-35 km per hour; (iii) average roughness reduced to about 2,200 mm per km compared to the pre-project level of more than 4,000 mm per km; (iv) traffic increased by 150 to 250% - the average traffic growth is about 20% per annum much above the appraisal estimates of 7-8%. The road users and stakeholders perceived substantial improvement in riding quality and road geometry; reduction in congestion level, travel time, and fuel consumption; lower freight charges; better connectivity of the minor roads with the state road network due to the project; improved availability of modern vehicles; and enhanced road safety especially during night driving on the project roads. The stakeholders have rated the overall benefits of the project as high (Annex 9). 4.1.2 The project has significantly contributed to poverty reduction by promoting agriculture development, employment generation (direct and indirect), and various economic activities in the corridor of impact of the project roads. Due to the improved road network, spoilage of perishable agricultural products during carriage is substantially reduced, access to major agricultural markets/business centers is improved, and the farmers receive better prices for their agriculture produce. The stakeholders also perceived significant increase in economic activities due to the project. 4.1.3 Improve the States institutional capabilities to manage road programs and assets: The achievement of this objective is rated satisfactory. The key performance indicator for this objective was implementation of the Institutional Development Action Plan and out of the 12 major items listed under the Plan, the outcome is highly significant for 2, significant for 5, modest for 3, and insignificant for 2 (Table 4.1 and Annex 10). The project has facilitated many improvements in several core business processes of RBD, including procurement, maintenance management, database planning, and quality assurance. The RBD have undertaken the following: (i) introduced e-procurement for all civil works more than Rs. 500,000 in value; (ii) established and put to use a computerized road management system in GIS environment for its entire network (65,000 km); (iii) decided to scale-up the performance based maintenance contracts, introduced under the project as a pilot, in all districts from FY04/05; (iv) implemented road safety engineering measures on RBD roads; (vi) established a Pavement Management System (PMS); (vii) introduced private sector participation through (BOT) projects; and (viii) prepared a draft road sector policy. The GOAP is also preparing a Road Act to introduce performance based maintenance, improved corridor management practices, and other good practices. The GOAP has increased the overall maintenance funding, during the project implementation, by about 76% from the pre-project level. The RBD staff has improved their skills and business procedures through overseas and local training, study tours, and through counterpart training with international consultants.


The stakeholders have also perceived (Annex 9) significant improvements in the overall capacity and business procedures of the RBD, general level of road maintenance, procurement procedures, private sector participation, and in the capacity of local construction and consulting industry. 4.1.4 However, more fundamental reforms such as reorganization of the RBD and operationalization of the Road Fund anticipated at the time of appraisal under the project have not been fully implemented. Nevertheless, the project has made significant contribution to improve institutional capacities of RBD and has laid a solid foundation for such reforms in future.
4.2 Outputs by components:


Road widening and strengthening (Road Improvement)component: The outcome of this component is satisfactory. All civil works on 1,400 km roads and one major bridge on Krishna River have been completed and opened to traffic. One small road improvement package (30 km in length) was dropped from the project due to land acquisition and other problems. The level of service of the roads is very good and well appreciated by the general public according to the road user satisfaction surveys and stakeholders workshop (Annex 9). Some short isolated road sections faced quality problems like potholes and cracks, which were rectified by the contractors and now all the project roads are reported to be in good condition. The riding quality of the project roads is good (roughness level 2,200 mm per km) and the rate of roughness propagation is relatively low when compared to the roads constructed with traditional specifications. The RBD used innovative road pavement designs (unbound crushed stone as a main base layer covered with a thin bitumen surfacing of 30 40 mm) which provided substantial savings (about 30%) over the conventional road design specifications. These designs were used for the first time in India on this scale and the RBD could improve about 1,400 km roads compared to only 900 km, if they had followed the conventional designs. The RBD adopted a total pavement width of 10 m to effectively segregate the non-motorized traffic from the motorized traffic. The RBD conducted safety audits on all 1,400 km of roads and implemented road safety engineering measures such as improved lane marking, crash barriers, and reflective studs, which significantly improved the road safety and driving comfort during night driving. These measures have significantly reduced the head-on collisions during night driving and other types of road accidents. The RBD has now started to use these measures on non-project roads also. Environmental aspects: At the project start, the general awareness about transport related environmental concerns was low. Consequently, implementation of the Environmental Management Plans (EMPs) was also weak in some areas, which improved considerably during project implementation phase through the training of contractors and tighter control of the contract conditions by the supervision consultants. The excavated bituminous material from the old pavements was reused for the improvement of rural roads in the project area. The afforestation was implemented successfully. However, in some cases difficulties were faced to implement the tree plantation work through major civil contractors due to their reluctance to undertake such works and due to inadequate time available under the contract for plantation of trees and their subsequent care. Land acquisition and Resettlement: The Resettlement Action Plan (RAP), despite delays in land acquisition and payment of compensation, has been implemented satisfactorily. The project acquired 521 Hectares (Ha) land for which the acquisition process has been fully completed and all the persons losing land received their compensation. Even though the overall compensation norms were found acceptable, some landowners have gone to the court for enhancement of their compensation. Out of a total of 3,329 Project Affected Persons (PAPs), 1,902 moved out of their places before the start of works and the


remaining 1,427 PAPs were provided the agreed support by the GOAP. By and large, the quality of housing of the PAPs and their income level have significantly improved through the assistance provided and the employment opportunities created by the project (including direct wage employment). The project has successfully dovetailed government schemes, particularly in providing house sites and housing, to help PAPs in their resettlement. 4.2.2 Maintenance Component Heavy periodic maintenance: The outcome of this component is rated satisfactory. About 1,750 km of the core network roads received heavy periodic maintenance under the project which substantially cleared the maintenance backlog and reduced the vehicle operating costs by about 20% on these roads. The RBD in-house staff supervised the works. The investments in these works were found to be good value for money. The level of service of some of these roads is comparable to the improved roads under component 1 but the costs involved are only 30%. Pilot performance-based road maintenance contracts: The RBD has successfully implemented pilot performance-based road maintenance contracts for about 1,200 km of roads, involving both lump-sum and BOQ payments, respectively, for the routine and periodic/special maintenance works. These contracts introduced: (i) quality/performance assured contract documents and administration; and (ii) new/improved material specifications (Chip seal), equipment, maintenance works methods, and surveillance and monitoring system for the maintenance. Unit costs for these contacts are comparable with that of traditional maintenance practices. However, for the same cost, about 25 well-defined maintenance tasks were implemented under these contracts, compared to only five in the traditional system. These contracts were found to be very effective, especially for routine maintenance works. The GOAP sees these contracts as a potential substitute to the traditional labor gang system. The GOAP has now decided to scale-up this pilot project to all districts in the State. These contracts were used for the first time in India under the project and the experiences gained are now also being used in other States, including Uttar Pradesh and Kerala. 4.2.3 Institutional Development Component This component included implementation of an Institutional Development Action Plan (prepared during project preparation), which covered a series of institutional development initiatives to improve the business efficiency of the RBD. Annex 10 shows the detailed progress made on implementation of the Action Plan and the Table 4.1 below shows a summary of the outcomes. While most of the initiatives for the existing RBD were more or less implemented, the initiatives requiring organizational restructuring and complex decisions could not be implemented. Table 4.1 Outcome of Various Institutional Development Initiatives Planned at the Appraisal
Initiative Restructuring of RBD Procurement and Contract Management Maintenance Management Road Safety Outcome Insignificant Initiative Outcome Dedicating Road User Insignificant Charges to the Road Fund Increased Significant Maintenance Funding Business Efficiency Human Resources Development Significant Modest Initiative Establishing Corporate Management Group Road Act Outcome Modest

Highly Significant Significant Significant


Project Management Planning and Design

Significant Highly Significant

-6- The RBD has achieved the following: (see Annex 10 for details).

Procurement and contract management: The GOAP has introduced e-procurement throughout the state for all civil works more than Rs.500,000 in value. This has improved transparency, efficiency, and competition. The RBD has also improved their procurement procedures based on the experiences gained through the project. The GOAP has also established a National Academy for Construction (mostly using funding from contractors) to develop the technical capacity of the construction industry. Increased Maintenance Funding: The GOAP has increased the overall maintenance funding for the state roads by about 76% during the project implementation period, from Rs.2,700 million for FY95/96 to Rs.4,755 million for FY04/05 as well as started toll collection on major bridges on the improved roads. The total maintenance funding for FY04/05 is about 84% of the maintenance requirements projected by the 11th Finance Commission. Road Information System (RIS): The RBD has established and put into use a comprehensive road information system in GIS environment for the entire road network under its jurisdiction (about 65,000 km), using remote sensing imagery. Private sector consultants are used for data collection and updating of data. The GIS is web enabled, operational in all the districts, and updated every 15 days. The RBD has also conducted video photography for the core network roads.The RBD has started to use this database for overall road planning, budgeting, and preparation of annual maintenance plans. The RBD also plans to link the database with the Highway Development and Management Model (HDM-4) and to undertake a road reclassification exercise for the entire RBD network. Pavement Management System (PMS): The RBD has established a simple computerized PMS for the core road network and started to use it for preparation of annual plans for road rehabilitation. Private sector participation: The GOAP introduced private sector participation for road project on BOT basis. So far, 13 projects costing Rs.1,360 million have been completed, and 12 projects are under preparation. The GOAP engaged international consultants (funded by the Government of Australia (GOA) through AUS-AID grant funds), to assist the RBD to plan and implement the institutional development initiatives mentioned above. The GOAP was required to establish a new organizational structure to implement the proposed initiatives but this did not happen. The GOAP could not appoint a Head of the Department (HOD) of the RBD to function as its Executive Director since there was major resistance from within the RBD. However, the GOAP established a Corporate Management Group (CMG) which identified and implemented the following initiatives using existing structure of the RBD: (i) quality management; (ii) maintenance management; (iii) strategic project planning; (iv) procurement and contract management; and (v) financial management and cost accounting. The consultants demobilized in July 1999 due to the sanctions imposed by the GOA on the grant funds and the institutional development initiatives suffered a setback. However, the RBD continued with implementation of many initiatives (See Table 4.1 and Annex 10 for the outcomes). The consultants again remobilized in early 2001. The GOAP decided then to use the remaining consultancy inputs to operationalize the RDC, established through an Assembly Act in 1998 and to build on the earlier initiatives on maintenance and quality management. The operationalization of RDC was not anticipated during project appraisal but became feasible during project implementation after establishment of the RDC. The consultants developed policies, procedures, structures, staffing, performance indicators and business systems for the new organization but the GOAP neither made a final decision nor deputed the

required staff to operationalize the RDC. Before the completion of their services, the consultants delivered the following: (i) an implementation plan to operationalize/modernize the RDC together with a business management system, policies and procedure manuals, and data-bases; (ii) training of RBD staff in key business processes; and (iii) agreed outputs on road maintenance and quality management. The RBD has now started to adopt the business processes proposed by the consultants in its existing organization. The initiatives to reorganize the RBD and to establish a modern RDC were seen to be lacking ownership by majority of the RBD staff. The RDC was meant to be a lean organization with limited staff. Many of the RBD staff had no clear idea about their future role and functions, once the RDC was operationalized, and this created apprehensions and reluctance at various levels to operationalize the RDC. Rather than aiming at a new RDC-type organization from the beginning, it would have been more effective to first focus on modernization of the parent organization to give wider opportunity to the RBD staff to participate in the reform process and increase their awareness. The project relied rather heavily on operationalizing the RDC, consequently somewhat neglecting the parent organization (RBD) that, even after full operationalization of the RDC, would have been responsible for 56,000 km (85%) of the state road network. The RBD has prepared a draft Road Act, which includes road safety, mobilization of additional resources for maintenance, and corridor management practices. The RBD has also prepared an overall road sector policy which includes adequate and regular funding for road maintenance particularly for the primary core network; rational/economic criteria for investment decisions; use of GIS/PMS as a road planning and management tool; improved procedures for quality assurance and contract administration; road safety; and preparation and implementation of annual road maintenance plans. Other Aspects: The RBD has also: (i) computerized all its field divisions and established its own website (www.aproads.com); (ii) started to use staff performance as a criteria for transfers and postings providing incentives to performing staff; (iii) prepared a comprehensive quality plan as well as quality procedures for the RBD and used them for the project; (iv) prepared comprehensive manuals for pavement design, maintenance, quality assurance, road safety audits to document and mainstream the significant experiences gained through the project; (v) trained a large number of the RBD staff, including overseas training at the University of Birmingham, UK, study tours to USA and Australia, and counterpart training with the help of international consultants; and (vi) established and put to use quality control laboratories in each division, and established dedicated quality monitoring divisions directly that report to the Engineer-in-Chief. Thus, the outcome of this component is also rated satisfactory.
4.3 Net Present Value/Economic rate of return:

4.3.1 Upgrading component: Detailed data on traffic and other variables was collected on 8 of 13 packages for road upgrading, involving about 78 percent of the total expenditure under the component. The Economic Rate of Return (ERR) for the 8 project roads varied from 26% to 72% with a weighted ERR average of 39% as against the estimated 27% at the time of preparation. The economic rate of return for the project component improved due to lower discounted project costs and higher traffic on some of the project roads. The impact of reduced cost and increased traffic outweighed the reduction in benefits due to delay in completion of the project roads and the reduced duration of the benefit stream from 17 years to 15 years. Economic evaluation of the project component was also carried out without time benefits and the results showed an ERR of 27% and a Net Prevent Value of Rs.8,345 million (US$189.67 m). All the project roads had an ERR of above 12%, based on only the savings in vehicle operating costs.


4.3.2 Maintenance component: A total of 21 project roads were selected for detailed economic analysis using HDM. The data on traffic and roughness was collected before and after the completion of the project roads. The combined ERR of these project roads was estimated at 33% with timesavings and 19% without time benefits. The final ERR were lower than estimated (58%) at the project preparation stage when all the works were assumed to be undertaken and completed in the first year of the project. The NPV of costs, after the costs were adjusted to 1998 prices, for these roads was Rs.1,572 million and the net benefits Rs.3,742 million. All the project roads had an ERR of above 12%. The rate of return is lower at the completion stage because of delay in the completion of projects and long time for construction on some of the project roads, which resulted in loss of benefits in the starting period. Annex 3 provides further details of the results of the economic analysis.
4.4 Financial rate of return:

4.4.1 The project did not envisage direct charging for the use of roads and all the funding was by the public sector. Since no user fees accrued on the project, financial analysis was not carried out.
4.5 Institutional development impact:

4.5.1. Institutional development impact of the project is rated to be modest. Major outputs of the institutional development component have already been given under Section 4.2.3 above. The stakeholders perceived (see Annex 9) the following impacts due to the project: (i) improved capacity and several core business procedures of the RBD, (ii) increased capacity of the domestic construction industry and consultants, (iii) improved availability of the road network data and its use, and (iv) improved procurement procedures used by the RBD. The project has significantly contributed to improvements in road engineering practices, construction technologies and design standards, procurement, maintenance management, quality assurance, private sector participation, and road safety in the State. A large number of the RBD staff have been exposed to modern road engineering and contract management practices. They also developed the capacity to handle such large projects in future. The construction time for normal RBD works is now significantly reduced due to the increased capacity of contractors. The RBD has also started to use private sector engineering capacities. The RBD staff has started the preparation of a new project proposal for external funding, applying the expertise gained under this project.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

5.1.1 The road construction industry in India is still developing and has limited capacity to meet the current heavy demand. Most of the contractors found it hard to mobilize and retain professional/skilled staff, to mobilize needed equipment, and to get adequate supply of quality aggregates from local sources. In some cases even basic staff like surveyors and equipment operators had to be brought from abroad. Some of the foreign contractors had to establish their own crushing plants and hot mix plants, involving huge and unexpected capital expenditures, unlike other countries where such material could be procured easily from local sources. Lack of local experience, different procedures for taxation and audits, and different work environment were also found to be constraints by the foreign contractors. Many of the foreign contractors in JVs were found to be absent during implementation, leaving practically all the works to their local counterparts who lacked the required capacity and experience. The foreign contractors role, in most Joint Ventures (JVs), was apparently to make the local contractors qualify for the award of work, rather than to actually participate in execution of works. Some of the contractors appear to have not used the mobilization advance for the intended purpose and not pass it on to their sub-contractors. The capacity of many


contractors to handle big contracts was limited. They did not carry out proper cash flow analysis, and planning for use of equipment and manpower. Many of them ran into serious cash flow problems and made losses as manpower remained idle due to lack of equipment or vice-versa. Some of the contractors were awarded multiple packages but their capacity to execute them was found inadequate, despite meeting the qualification criteria. 5.1.2 The project suffered a lot due to frequent changes in the consultants staff. Many key positions remained vacant for long intervals due to inability of the consultants to provide suitable replacements. The supervision consultants seem to have not adequately enforced many of the contract conditions including those for Joint Venture arrangements; sub-contracting; and deployment of technical staff and equipment, and submission of as-built drawings by the contractors. The original Phase III supervision consultants could not fully mobilize for 10 months and their contract was ultimately terminated. The RBD also issued the Notice of Suspension to Phase I supervision consultants on account of poor performance but subsequently lifted it. The RBD received large numbers of claims from the contractors, and many of them seem to be due to poor performance of the consultants. Lack of experience of the RBD and other government departments with FIDIC conditions of contracts was found to be a major constraint during project implementation.
5.2 Factors generally subject to government control:

5.2.1 Delays in land acquisition, shifting of utilities, forest clearances, and permissions required from railway authorities at various stages caused serious delays and cost escalations during project implementation, which was also confirmed through the stakeholders surveys (Annex 9). The procedures involved for land acquisition, forest clearances, shifting of utilities, and railway clearances were very time consuming and complex. The problem was further compounded due to inadequate coordination amongst various government departments as well as their insensitive attitude to the requirements of the project. Many of the road designs were substantially changed during project execution to avoid land acquisition, shifting of utilities, and removal of trees. The land acquisition process went on almost until the end of the project. Most of the milestones were not achievable due to non-availability of work site. The loan period was extended twice (total duration 17 months) mainly to allow for the completion of 15 ROBs and some small road sections involving land acquisition. 5.2.2 The GOAP faced serious financial problems during 2001, which resulted in payment delays to the contractors. The implementation of maintenance works was put on hold during that period due to non-availability of funds. Subsequently, from May 2001 onwards, the Bank raised its financing share from 70% to 90% for funding of civil works at the request of the GOAP. Thereafter, the funding problem was resolved. Implementation of the institutional development component was affected due to the lack of key decisions by the GOAP, including restructuring of the RBD, and operationalization of the Road Fund and the RDC.
5.3 Factors generally subject to implementing agency control:

5.3.1 While there were no major issues for the implementation of heavy periodic maintenance works, the following factors have affected the implementation of the road improvement works: Design Changes during Execution: Initial designs of the road improvement works required substantial changes during execution, including changes in alignment and road formation levels, changes in bridge designs and additional bridges/structures to suit site conditions, changes in the material specifications and pavement design, use of gabion wall instead of concrete retaining wall as a protection

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work, and increase in pavement width from 2 lanes to 4 lanes in built-up areas. The local RBD engineers and other concerned departments were not effectively involved during the preparation of initial road designs (Even during the implementation phase, the RBD divisions were not fully clear about their role and responsibilities). There were also delays in communicating decisions about design changes and variations to the contractors as these were to be referred to the Project Coordinating Consultants (PCC) by the Construction Supervision Consultants (CSCs) through the Employer and routed back through the same route. Consequently, the contractors had to wait for unduly long times. The design changes were unexpectedly high and the PCC was not equipped to handle them. Due to the design changes during execution, it was difficult to hold the contractors responsible even for the delays on their part and liquidated damages could not be imposed on any contractor. Recovery of Advances: The recovery of advances caused serious cash flow problems to most contractors. The international practice is to start the recovery at 30% and complete it by 80% of the progress. However, the RBD added an additional condition to start the recovery after 9 months irrespective of the progress made (based on the PCC estimate to achieve 30% progress). The time schedule/program of construction was found unrealistic and in most cases the recovery started much before the achievement of 30% progress. In some cases the recovery started at 3% progress and finished at 53%. The cumulative rate of recoveries amounted to 53% in some cases, which was too high. Phase I packages were adversely affected as the notice to proceed was given just prior to monsoon period during which practically no progress could be made. Size of the Contracts: The road length covered under the road improvement contracts varied from 63 to 213 km and the bigger contracts were too difficult to implement by a single contractor. It was too difficult a task to mobilize the needed equipment and manpower, and to manage and supervise such big works under a single contact. The problem was further compounded due to the same supervision resources (man and transport) provided for each contract (irrespective of its length) - leading to inadequate resources for the supervision of large contracts. Other Factors: Many of the contract conditions on local taxation, price escalation, and discount offered by the contractors were not understood in the sameway by the contractors and the employer. The bid documents did not include the custom and excise duty exemptions (notified by the Government of India) for the equipment imported for civil works under the externally funded projects as the GOAP was not aware of these exemptions. These issues became a source of disputes between the RBD and the Contractors. The design consultants seem to have not appropriately defined the requirement of equipment and trained staff under the contracts and many contractors got awards of works without having the required equipment or staff. Duration of rainy seasons and site availability was not appropriately considered while deciding the construction program and fixing the progress milestones. 5.3.2 The Project was implemented through a dedicated Project Implementation Unit (PIU) headed by an Engineer-in-Chief. While this arrangement was found broadly acceptable for the civil works component, it was not suitable for the institutional development component which required wider involvement of the road agency staff. Consequently, implementation of the institutional development component suffered. The RBD could not second its staff to the team of international consultants as was initially planned. 5.3.3 The RBD also noticed large discrepancies in the earthwork quantities and in other items on some contracts (Contract Packages - APSH2, 4, and 10) during project implementation. The RBD found: (i) large increases in the earthwork quantities certified for payments compared to the original bill of quantities; (ii) treating of local earth as the borrowed earth (from distant borrow areas) having higher unit rates; and (iii) discrepancies in measurements in some of the IPCs. On the request of the RBD, the General
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Administration (Vigilance and Enforcement Department), GOAP conducted field investigations on these contracts. The investigations established excessive clearing and grubbing/stripping done by the contractor as the main cause of the excess in earthwork quantities. Even though the RBD has now recovered the excess payments made to the contractors, this issue remained a major source of dispute between the RBD, consultants, and the contractors for several months. The Institutional Integrity (INT) division of the Bank also reviewed the discrepancies under contract APSH 2.
5.4 Costs and financing:

5.4.1 The appraisal estimate of the total project cost was US$485.5 million, with an IBRD share of financing of US$350.0 million. The ICR estimate of the project cost is US$424.71 million. The reduction in cost is mainly due to appreciation of US$ against the Indian Rupee, cancellation of one road improvement package, and savings under the consultancies and goods categories. At the request of the GOAP, the Bank had cancelled US$17 million from the loan in June 2004. While the Bank share of US$333.0 million is fully utilized, the GOAP share is reduced from US$135.50 million at appraisal to US$91.72 million at the ICR mainly due to reduction in the GOAP share of counter part funding for civil works form 30 to 10% during project implementation. (See Annex 2 for further details of costs and financing).

6. Sustainability
6.1 Rationale for sustainability rating:

6.1.1 Sustainability of the project outcomes is rated likely as the project roads are part of the core network of the State, and the GOAP is committed to their further improvement and maintenance. Apart from the 3,174 km of core network roads improved under this project, another 4,156 km have also been improved under other projects. The GOAP has increased overall maintenance funding for road sector by about 76% from the pre-project level and the current maintenance funding is adequate to fully meet the needs of the core network as well as to substantially meet the needs of non-core roads. The GOAP has also started toll collection on the improved roads under the project. The maintenance backlog of the core network has been reduced by this project. The core network consists of important traffic corridors and there are high demands from the public and industry on the RBD to maintain these roads to high standards. The stakeholder's survey (Annex 9) also reveals significant improvement in the general level of road maintenance. The GOAP has shown ownership for several institutional development initiatives like preparation of the road policy, preparation of a Road Act, scaling-up of performance based maintenance contracts, establishing a computerized database in GIS environment and its use, E-procurement, ISO 9000 certification, road safety, and documenting the technical knowledge generated through the project into technical manuals for wider use by the RBD staff.
6.2 Transition arrangement to regular operations:

6.2.1 The supervision consultants have now handed over all the improved roads to the regular RBD divisions. These divisions will now regularly monitor the performance of these roads to ensure rectification of any defects during the defect liability period by contractors; deal with contractors' claims; release final payments; and issue necessary certificates after completion of defect liability period. The RBD divisions, who implemented the heavy periodic maintenance works, are now responsible for regular maintenance of these roads. The new road policy of the RBD provides for adequate funding as well as arrangements for planning, budgeting, and implementation of maintenance works required for the core road network. The roads under the widening and strengthening component will require regular inspection to identify various defects; and regular and timely routine, periodic, and special maintenance to avoid premature deterioration.
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7. Bank and Borrower Performance

Bank 7.1 Lending:

7.1.1 Satisfactory: The project was consistent with the Banks country strategy for India and the countrys transport sector strategy. It included international best practice examples and the Banks experience in the highway sector, and it focused on road sector needs of Andhra Pradesh. The Bank deputed an experienced team which provided valuable assistance to the Borrower and conducted detailed assessment of various institutional, technical, social, environment, procurement, financial management issues - resulting in good quality project preparation, and compliance to Bank policies. The project included adequate focus on the key issues of road maintenance and institutional development.
7.2 Supervision:

7.2.1 Satisfactory: The Borrower has appreciated the role of the Bank. The task team made considerable efforts to ensure effective project implementation, resolve implementation problems, and to keep the project on the track. Bank supervision missions were well organized, had a good skill mix, and were responsive to the implementation issues and client needs. There was effective back-up support from the World Bank New Delhi Office to maintain regular contact with the Borrower and to offset any adverse impact of the change in Task Team Leader (5 different TTLs during the project implementation). The project was implemented as per the Bank policies and procedures and all major legal covenants and project agreements were complied with. The Bank missions made several suggestions, including road safety enhancements, scaling-up of the road maintenance contracts, implementation of the EMP and the RAP, and skill enhancements of the RBD staff, which were well appreciated and implemented by the Borrower. The Bank raised the reimbursable financing amount from 70% to 90% during project implementation in response to a justifiable request from the GOAP, and extended the closing date of the loan by 17 months.
7.3 Overall Bank performance:

Borrower 7.4 Preparation:

7.4.1 Satisfactory: The Borrower developed a very well designed project focusing on main road sector issues and showed strong ownership and commitment throughout the project preparation. All major studies and project preparation activities were implemented effectively. The GOAP established a dedicated PIU headed by an Engineer-in-Chief, which ensured effective project preparation as well as subsequent implementation. The quality of project preparation, including economic analysis, institutional assessment, bid documents for the first year of works, social and environmental assessments, and implementation arrangements was satisfactory. The GOAP also established a high level Tender Committee to facilitate the procurement of major civil works and consultancies. The RBD was very receptive to new ideas and incorporated most of them in the project design, including innovative pavement designs and pilot performance based maintenance contracts. All the conditions of appraisal as well as negotiations were met.

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7.5 Government implementation performance:

7.5.1 The overall implementation performance of the GOAP is satisfactory. The GOAP has shown commitment to various activities during project preparation and implementation as well as delegated adequate powers to the Engineer-in-Chief in-charge of the PIU for project implementation. The counterpart funding was adequate except for a short spell in 2001 during which the GOAP faced financial problems. The GOAP also made considerable efforts to resolve the land acquisition problems and to pay compensation to all the project affected people. However, the GOAP could not make final decisions on some fundamental reforms - the most important of them was to operationalize the RDC. The GOAP has now shown renewed interest and started revision of the draft Road Act, including several good practice examples in road sector.
7.6 Implementing Agency:

7.6.1 The performance of the implementing agency is satisfactory. All the civil works, despite delays, were completed. The RBD has effectively handled the problems of land acquisition, shifting of utilities, forest clearances, and design changes during project execution, and contractual issues during implementation. Both the EMP and the RAP were implemented satisfactorily, all the project-affected people compensated, environmental mitigation measures implemented, and there were no significant issues. The RBD has successfully used private sector engineering capacities during project preparation and supervision. The RBD has significantly improved many of its business procedures during the project period. The RBD in-house staff successfully implemented the entire heavy periodic maintenance component.
7.7 Overall Borrower performance:

7.7.1 The overall Borrower's performance is rated as satisfactory. All the initially planned road improvement works and heavy periodic maintenance works are fully implemented, open to traffic, and providing substantial reduction in road user costs and travel time. The Borrower has complied with all loan and project agreement covenants, and Banks procedures and guidelines.

8. Lessons Learned
8.1 Performance of consultants: While private sector consultants have been successfully used for engineering design and supervision of works under the project, there are key issues to be resolved regarding frequent changes of key staff, inadequate enforcement of contract conditions, quality of designs, accountability, poor performance of some consulting firms/their staff, and inadequate manpower available with consultants. The lessons learnt include: (i) financial disincentives for change of key staff by the consultants; (ii) improved monitoring to ensure that consultants assign adequately trained and experienced staff at all the positions; (iii) the Borrower to expedite selection process of the consultants to ensure availability of the proposed staff by the consultants; (iv) any design changes during execution to be handled directly by the supervision consultants; (v) the supervision consultants to be provided independent laboratory and transport rather than getting these through contractors as was done under the project; (vi) the role and responsibility of Engineer and Employer to be clearly and consistently defined; (vii) introduce capacity assessment criteria for consultants (similar to bid capacity criteria for contractors); and (viii) a centralized system to share past performance (based on suitable rating criteria) of consultants and their staff amongst various road agencies.

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8.2 Performance of Contractors and FIDIC Conditions of Contracts: While FIDIC conditions of contracts and international contractors have been successfully used under the project, there are issues to be resolved about lack of familiarity of road agency/government departments (and also the staff of supervision consultants) about the FIDIC conditions of contract, lack of compatibility between the FIDIC conditions and local practices, unexpectedly large number of claims made by contractors especially after the completion of works, inadequate capacity of contractors, and poor performance of Joint Ventures between local and international contractors. 8.3 Qualification criteria, Joint Venture and sub-contracting arrangements: The role and responsibility of Joint Venture (JV) partners should be clearly defined under the contract and closely monitored during project implementation to ensure active participation of all the partners. The pre-qualification criteria should be reviewed to obtain a more realistic evaluation of the financial strength, general technical experience, equipment availability, and technical manpower of the contractors. The bid capacity criteria should also be reviewed especially for award of multiple contract packages to a single contractor. The issue of formal and informal sub-contracting should be studied in detail to avoid the main contractor merely functioning as an intermediary. The Government of India also needs to review its policies to make a conducive environment for the participation of reputed international contractors in the highway sector in India. 8.4 Upfront capacity building and involvement of Borrower's staff: The road agency should depute adequately qualified and motivated staff for project implementation from the early stages of project preparation; arrange their upfront training (especially in the FIDIC conditions of contract and contract management); and ensure their continuity until the project completion. Wider involvement of road agency staff should be ensured in the project especially for institutional development initiatives. Technical manuals on various subjects should be developed for wider use and sustainability of the new/improved road engineering practices introduced under a project. Secondment of road agency staff to international consultants should be encouraged for transfer of technical skills and sustainability of project outcomes. 8.5 Capacity Building of the Contractors: Training facilities for contractors staff, including construction workers and equipment operators should be established/strengthened in the country by the Ministry of Road Transport and Highways (MORTH). Training of contractors staff (preferably at the beginning of work) could be included as part of the contract. The construction supervision team could include a construction management specialist and field supervisors to train contractors staff in construction management and various work methods to be used under the project. 8.6 Recovery of advances, Time Period for Claims, Local Taxation, other Contract Conditions: The current contract conditions need a review (i) to bring the recovery of advances to a more affordable level by the contractors; (ii) to clearly and unambiguously define local taxation, custom and excise duty exemptions, statutory taxes, and tax deduction at source; (iii) to ensure deployment of the agreed technical staff and needed equipment, use of mobilization advance for the intended purpose, compliance of the work plan, and timely submission of as-built construction drawings by the contractors; and (iv) to check the tendency of contractors to withhold their claims to the end. The Conditions of Particular Application (COPA) also need a review. Dispute Resolution Board (DRB) recommendations should be implemented binding and immediately, subject to the final outcome of any future arbitration/legal proceedings. 8.7 Contract Package Size and Milestones: Maximum of 60 to 80 km of road length should be covered in a single contract for road improvement works in future projects. Progress milestones could be fixed as percent road length completed or percent physical progress, instead of completion of a full road section if the same is unlikely to be fully handed over to contractor due to land acquisition and other problems.
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8.8 Make Realistic Estimates for Work Completion and the Resources Required: The experience from the project implementation shows that it takes much longer to complete major road improvement works than originally anticipated. Future projects should ensure: (i) more realistic estimates of the project duration by duly accounting for monsoon season; (ii) clear definitions of the type and number of various equipment, technical manpower, and other resources required by the contractors to complete the work within the defined timeframe; (iii) realistic estimates of the technical manpower, support staff, and other resources required by consultants; and (iv) a realistic resource based construction program (as per clause 14.1) included with bid documents. The initial estimates of manpower and equipment could be used as a criteria to evaluate bids/proposal from contractors/consultants to identify major discrepancies or unrealistic proposals. 8.9 Ensure Adequate Quality of Road Designs: Future highway projects should emphasize adequate quality of road designs to avoid time and cost overruns during implementation. The lessons learnt include the following: (i) a detailed peer review of road designs by independent experts as well as by the supervision consultants before commencement of works; (ii) providing adequate time and resources for preparation of road designs; (iii) active involvement of road agency staff and other concerned government departments during design stage; and (iv) adequate field surveys and investigations to realistically identify the complexities involved due to land acquisition, tree cutting, forest land, shifting of utilities, water features, railway lines, and other topographical features. The Indian Roads Congress (IRC SP 19) manual for project preparation should be updated to clearly define the standards of field surveys and investigations, and the quality of designs to be met by the consultants for preparation of modern highway projects. 8.10 Site Readiness: The current practices of land acquisition, forest clearances, and shifting of utilities require a thorough review (including amendment of the LA Act) to avoid implementation delays. The lessons learnt include: (i) active involvement of the staff of the road agency, forest, revenue, and other departments while finalizing road alignment; (ii) more reliable surveys and investigations during preparation; (iii) more upfront actions during the pre-construction stage; (iv) improved mechanisms to protect road corridors from encroachers; (v) shifting of utilities and land acquisition to be a BOQ item under the contract; and (vi) establishing a high level project coordination and implementation committee having participation from the concerned government departments including revenue, forest, railways, finance, planning, auditor-general, law, transport, and traffic police. 8.11 Railway Over-Bridges (ROBs): The ROBs could be better executed through separate contracts as the main road contractors were generally found to neglect them. The procedures for design, construction and approvals for the ROBs should be streamlined/finalized by senior officials of the railways and the road agency before a project starts. 8.12 Ensure Client Ownership for Reform Agenda: Successful implementation of institutional reforms requires wider involvement of road agency staff and their acceptance of the reforms. The Borrower's commitment for the reforms should be carefully assessed and all crucial decisions should be ensured before a project starts. To ensure adequate focus on the reforms during project implementation, project funding could be divided into different phases, and each phase made contingent to progress on reforms/institutional development initiatives during project implementation, using measurable and agreed performance indicators.

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9. Partner Comments
(a) Borrower/implementing agency:

Please refer to Annex 8 for Borrower's evaluation.

(b) Cofinanciers: (c) Other partners (NGOs/private sector):

10. Additional Information

10.1 Overall Road Sector Development: Future road projects in India should emphasize the improvement of road engineering practices as there is considerable scope for improvement of current practices by introducing new and improved planning approaches, road and bridge designs, material specifications, construction technologies, methods of execution of maintenance works, and other business procedures. The technical knowledge and implementation experiences gained through Bank-funded projects could be incorporated in the Indian Roads Congress (IRC) documents for wider use and to avoid duplication of efforts. The Bank and GOI/IRC should jointly develop standard TOR for project preparation of highway projects and contract supervision through consultants, including standardization of various field surveys and investigations, and the resources to be deployed by consultants.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:
Indicator/Matrix 1. Reduced vehicle operating costs in real terms on project road sections. Projected in last PSR The travel time on improved core road network reduced by 30-50% and road roughness reduced from 4,500 to 2,200 mm/km. Actual/Latest Estimate The travel time on improved core road network reduced by 30-50% and road roughness reduced from 4,500 to 2,200 mm/km.The weighted Economic Rate of Return (ERR) for project roads estimated at about 39 % The proportion of core road network in poor The proportion of core road network in poor condition is about 28 % condition has been reduced to 28 percent at the end of project RBD has implemented action plan covering RBD has implemented the following the following institutional strengthening institutional strengthening activities: activities: road management, procurement, established GIS based Road Information FMS, road safety, road maintenance, private System (RIS) and Pavement Management sector involvement, and training courses for System (PMS), procurement reforms RBD staff. including e-procurment, established FMS, introduced performance based road maintenance operations, adopted safety audit procedures, introduced private sector participation in road sector through BOT project, developed road sector policy, and implemented capacity building and skill enhancement programs for staff.

2. Reduction of the proportion of the core network in poor condition from 70 to 30 percent. 3. Improve GOAP institutional capabilities in the road sector.

Output Indicators:
Indicator/Matrix Projected in last PSR

Actual/Latest Estimate Travel time reduced by 30-50%, and road roughness reduced from 4.5 RI to 2.2 RI on project roads.

Average journey times reduced by 20% and Travel time reduced by 30-50%, and road finished road roughness less than 3.5 IRI on roughness reduced from 4.5 RI to 2.2 RI on completed sections. project roads. Annual funding at least 80% of needs for Core Network.

The annual maintenance funding is adequate The current maintenance funding is adequate to fully meet the needs of the core network. to fully meet the needs of the core network The total maintenance funding for FY04/05 is about 84% of the maintenance needs projected by the 11th Finance Commission. About 76 % increase in road maintenance allocations since start of project. About 76% increase in road maintenance allocations since start of project. About 1,750 km of State Highways (SH) and Major District Roads (MDR) received heavy period maintenance work and performance-based road maintenance was carried out on about 1,160 km of RBD road under the project

Percent funding increase in total maintenance allocation in real terms relative to the average for the preceding five years.

Number of KM of periodic maintenance About 1,750 km of State Highways (SH) and completed: 600 km by March 2000, 1800 km Major District Roads (MDR) received heavy period maintenance work and by end of project. performance-based road maintenance was carried out on about 1,160 km of RBD road under the project

End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)
Appraisal Estimate US$ million Actual/Latest Estimate US$ million Percentage of Appraisal


1(a) Civil Works 1(b) Design & Supervision 1(c) Land acquisition, resettlement & rehabilitation 2(a) Works 2(b) Technical assistance for maintenance management. 3. Reform and strengthening of the State road agency Technical Assistance, training and equipment. 4. Repayment of Project Preparation Facility
Total Baseline Cost Total Project Costs Total Financing Required

373.90 25.30 1.40 72.50 1.20 8.80 2.40 485.50 485.50 485.50

319.05 18.34 6.88 77.51 0.00 0.58 2.35 424.71 424.71 424.71

85.33 72.49 491.4 106.9 0 6.59 97.9

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category


Procurement Method 2 NCB Other


Total Cost

1. Works 2. Goods 3. Services Consulting Services, NGOs and Training 4. Repayment of Project Preparation Facility Total

363.90 (254.70) 0.50 (0.50) 0.00 (0.00) 0.00 (0.00) 364.40 (255.20)

79.20 (55.50) 1.20 (1.10) 0.00 (0.00) 0.00 (0.00) 80.40 (56.60)

3.30 (2.30) 0.30 (0.20) 33.30 (33.30) 2.40 (2.40) 39.30 (38.20)

1.40 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 1.40 (0.00)

447.80 (312.50) 2.00 (1.80) 33.30 (33.30) 2.40 (2.40) 485.50 (350.00)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category


Procurement Method 2 NCB Other


Total Cost

1. Works 2. Goods 3. Services Consulting Services, NGOs

319.05 (253.00) 0.47 (0.41) 0.00 (0.00)

77.51 (63.10) 0.00 (0.00) 0.00 (0.00)

0.00 (0.00) 0.11 (0.05) 18.34 (14.08)

6.88 (0.00) 0.00 (0.00) 0.00 (0.00)

403.44 (316.10) 0.58 (0.46) 18.34 (14.08)

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and Training 4. Repayment of Project Preparation Facility Total



2.35 (2.35) 20.80 (16.48)

0.00 (0.00) 6.88 (0.00)

2.35 (2.35) 424.71 (332.99)

(0.00) (0.00) 319.52 77.51 (253.41) (63.10) NBF: Not Bank Financed - LA, R&R as per PAD page-2
1/ 2/

Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent) Percentage of Appraisal

1(a) Civil works for part (1) of the project widening and strengthening. 1(b) Civil works for part (2) of the project (maintenance, periodic and routine). 2. Goods 3. Services: Consulting Services, NGOs and training. 4. Repayment of PPF. Total

Appraisal Estimate
Bank Govt. CoF.

Actual/Latest Estimate
Bank Govt. CoF. Bank Govt. CoF.

261.70 50.80

113.60 21.70

253.00 63.10

72.93 14.41

96.7 124.2

64.2 66.4

1.80 33.30 2.40 350.00


0.46 14.08 2.35 332.99

0.12 4.26

25.6 42.3 97.9 95.1





Notes: The Government share under Item 1(a) Civil Works includes LA cost of US$ 6.88 Million. The Government share under Item (3) Services includes taxes on consultancies

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Annex 3. Economic Costs and Benefits

Andhra Pradesh State Roads Project Economic Analysis

Preface 1.
l l l

The economic analysis is carried out for the two components of the project viz., upgrading, widening and strengthening, of the 1,400 km of roads through 14 packages, including bridge over river Krishna; and maintenance of 1,747 km of roads in 94 packages. for the upgrading component, economic analysis was carried out for each corridor/section for which the traffic data was made available after the completion of the project while for the maintenance component only 21 packages were considered for detailed economic analysis.

2. It summarizes the economic evaluation methodology used in the Project Appraisal Document (PAD). The economic evaluation is based on re-evaluation of the traffic data, cost of construction and the year-wise distribution, and the cost and benefits of project components. Economic Evaluation Methodology - Project Appraisal Document 3. The methodology used for economic analysis for the upgrading component of the project is summarized below: (i) Net benefits were evaluated using the Highway Design and Maintenance Model (HDM-3) developed by the Bank. The model determines the vehicle operating costs and time costs for the with improvement and without improvement scenario for each project road. The operating costs for each vehicle type depends on the road condition, traffic volume, road capacity, deterioration progression of the pavement and the maintenance policy used for the project road. Safety benefits were not considered since safety impacts are uncertain due to offsetting effects of improved roads and higher expected speeds. The effect of non-motorized traffic was taken into account by using a friction factor (<1) affecting traffic speeds. The traffic growth rates used for the first three years were estimated based on growth of population and per capita income for the passenger vehicles, and growth rate for agriculture, mining and industrial activities for the freight traffic. The growth rates varied from 6 to 15 percent for different vehicle types. For rest of the period of 17 years, a growth rate of 5 percent was assumed for all traffic. The construction period for the upgrading projects was considered varying between 1 to 3 years starting 1997 and the benefits from the improved project roads were to flow after the completion of the project. The total period for the cost-benefit study was taken as 20 years including the period for construction.



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A factor of 0.9 was used to convert the financial construction costs to economic costs. While for vehicle operating costs, the economic cost of each component was computed by excluding the taxes and duties on them. A salvage value of 10 percent was considered at the end of the project. Value of time was taken at Rs.24.2 per passenger-hour for car users, and Rs.21.7 for bus passengers.

(v) (vi)

4. No detailed economic analysis was carried out for individual project roads considered under maintenance. The economic benefits for the maintenance component were estimated using HDM model for a matrix of 36 typical links having varying traffic volume and road condition using information on overall network lengths in each category. Alternative maintenance strategies were considered for each cell of the matrix to arrive at an overall priority maintenance program within the budget. Economic Evaluation Methodology ICR 5. The economic analysis for project roads taken up for upgrading followed the methodology adopted at the time of project appraisal. However, since the project was sanctioned at the end of 1997, the start date for economic analysis was taken as 1998 and the analysis was carried out for a 20 year period including the construction period. However, due to longer construction periods (five years) than assumed during appraisal (three years), the benefits streams were reduced to 15 years only. The economic analysis used the HDM model with input data on year-wise costs, traffic before and after the project completion and the road condition on completion of the project. 6. Cost of the project roads: For each of the project road data, actual annual expenditure was collected from the records. The annual cost was then converted to 1998 prices for each project using the CPI for construction industry. In this case the expenditure made on the project road in the year 2003 was multiplied by a factor of 0.81 to convert the cost at 1998 prices. 7. Traffic forecast: Traffic forecast was revised during the project completion period using the average growth rates derived from the traffic data available at the start of the project and completion of the project. The growth rates for future traffic were considered the same as used during appraisal since those were quite realistic and matched with the trends in actual growth rates in general. 8. The economic analysis was carried out for eight packages out of 13 packages for which all the data was available. The combined results of these eight packages were projected to reflect all the packages taken up for upgrading. 9. For project roads taken up for maintenance, a sample of about 25 percent of roads were selected and detailed data collected on year-wise cost, the type of improvement carried out, traffic before start of construction and in 2004, and the condition of the road before and after the maintenance The economic analysis for these project roads was carried out using HDM model. The cost was adjusted through the index for the year of expenditure as described above. The traffic growth rates were assumed similar to that of the roads taken up for upgrading. The benefit stream was considered for a period of 10 years after the completion of the works.

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Economic Benefits and Evaluation 10. Upgrading component: The detailed data on traffic and other variables was collected on eight of the packages out of 13 packages for road upgrading. The total expenditure on these packages was 77.5 percent of the total expenditure incurred on the upgrading component of roads at 1998 prices. Therefore, the economic analysis results for this component arrived from the detailed analysis of the 8 packages could be interpolated for this component. The ERR for the eight project roads varied from a low of 26.4% to high of 72.3% with an overall ERR of 39.2% for this component. The economic results of this component determined after the completion of the project and at the time of appraisal are compared below: Table 1: Comparison of Economic Costs and Benefits Values at Appraisal Parameter NPV of Benefits Rs, m 720.0 US$ m NPV of Costs Rs. m US$ m 257.0 Net Benefit, NPV Rs. m US$m 463.0 ERR, in % 27.0

Values at ICR* 25,573.0 581.2 6,947.0 157.9 18,626.0 423.3 39.2

* The values are for the eight project roads contributing about 77% of the cost for upgrading component.

11. The ERR for the project component improved due to reduced value of discounted cost of the project and higher traffic on some of the project roads. The discounted costs declined because the expenditure got spread over six years with the bulk of the expenditure in the last years, whereas during appraisal the construction was assumed to be completed in the first three years. The impact of reduced cost and increased traffic outweighed the reduction in benefits due to delay in completion of the projects roads and the reduced duration of the benefit stream from 17 years to 15 years. 12. Sensitivity Analysis: Economic evaluation of the project component was also carried out without time benefits and the results showed an ERR of 27.3% and an NPV of Rs.8,345.0 million (US$189.67 m). All the project roads had an ERR of above 12%, based on only the savings in vehicle operating costs. 13. Maintenance component: A total of 21 project roads were selected for detailed economic analysis using HDM. The data on traffic and roughness was collected before and after the completion of the project roads. The combined ERR of these project roads was estimated at 32.7% with time savings and 18.8% without time benefits. The NPV of costs, after the costs were adjusted to discount for the inflation and adjusted to 1998 prices, for these roads was Rs.1,572 million and the net benefits Rs.3,742 million. All the project roads had an ERR of above 12%. 14. The maintenance works were initiated in different years from 1998 onwards and were completed in 2004. Most of the project roads took two years for construction with some taking upto four years. The results of the economic analysis at the project completion are compared to the estimated benefits at the appraisal in Table 2 below:

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Table 2: Comparison of costs and benefits for maintenance roads Parameters Value at PAD NPV of net benefits $ m 321.0 Rs m NPV of costs $m 21.0 Rs m NPV of benefits $m 342.0 Rs m ERR (%) 58.0
* The values are for only 21 project roads including the NH.

Value at ICR* 85.0 3,742.0 35.7 1,572.0 120.7 5,314.0 32.7

15. The NPV of costs, US$21 million, stated in the appraisal document does not match with the estimated cost of maintenance works, which is US$64.2 million (as stated in the Annex 2). The ERR would have been lower for the maintenance works for the right value of NPV of costs. The rate of return is lower at the completion stage because of delay in the completion of projects and long time for construction on some of the project roads which resulted in loss of benefits in the starting period. 16. Sensitivity Analysis: The economic analysis was also subjected to the sensitivity analysis by reducing the benefits by 20% in the future due to lesser traffic growth than used in the analysis. The ERR for the upgrading component would decline to 34.6% with the NPV of net benefits declining to US$337.6 million (only for the eight selected project roads). While in the case of maintenance works, the ERR would decline to 28.4% and NPV (for the selected 21 works out of 92 project roads in total) would decline to US$60.8 million. The benefits have to decline by 70% for the maintenance component and by 80% for the upgrading works for the net NPV to become zero. Other Project Benefits 17. The road users have benefited from the project besides reduced vehicle operating costs and savings in time. Road safety interventions included safety audits of the project roads which led to implementation of physical road safety engineering improvement measures. The accident rates and the fatalities in almost all cases, except for one project road improved under the upgrading project, have declined between 1999 and 2004. The fatalities in the six packages declined from 52 in 1999 to 39 in 2003 while in one package it increased to 18 from 9.

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Annex 4. Bank Inputs


02/1995 07/17/1995

6 5




Appraisal/Negotiation 03/24/1997


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02/04/1998 07/23/1998

2 3








06/09/2001 12/15/2001

1 4





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ICR 06/05/2004 4*

07/17/2004 09/22/2004

2 1

* Some work on ICR preparation was also done during this mission
(b) Staff: Stage of Project Cycle Identification/Preparation Appraisal/Negotiation Supervision ICR Total Actual/Latest Estimate No. Staff weeks US$ ('000) 7.3 27.3 131.6 441.6 183.8 537.3 13 27.8 322.7 1,034

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

Macro policies Sector Policies Physical Financial Institutional Development Environmental Social Poverty Reduction Gender Other (Please specify) Private sector development Public sector management Other (Please specify)










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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Lending Supervision Overall 6.2 Borrower performance Preparation Government implementation performance Implementation agency performance Overall


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Annex 7. List of Supporting Documents

1. 2. Project Appraisal Documents, India Andhra Pradesh State Highway Project, May 12, 1997. Conformed copy of the Loan Agreement (Andhra Pradesh State Highway Project) between India and International Bank for Reconstruction and Development, dated July 30, 1997. Conformed copy of the Project Agreement (Andhra Pradesh State Highway Project) between India and International Bank for Reconstruction and Development, dated July 30, 1997. Identification mission reports. Preparation missions' reports. Supervision missions' reports. Project Status Reports. Mid-term review mission reports. Quarterly Progress Reports. Project audit reports. Reports on Environmental Management Plan. Reports on Social Development Plan. Consultant's reports. Borrower's Project Implementation Plan.


4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

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Additional Annex 8. Borrower's Evaluation

1. General: The Government of Andhra Pradesh (GOAP) received financial assistance from the World Bank through Government of India (GOI) for the "Andhra Pradesh State Highways Project (IBRD Loan No. 4192-IN) amounting to approximately US$ 350 million equivalent. The Project was originally scheduled for completion by 31.01.2003 but extended upto 30.06.2004.The objective of the projects were to (i) to reduce transport costs and transport constraints on economic activity by improving capacity and conditions of selected highly trafficked segments of the State Highways (SH) and Major District Roads (MDR); and (ii) to improve the States institutional capabilities of the Roads & Buildings Department (RBD) to manage road programs and assets. 2. Implementation Details: The objectives and benefits of the project have been substantially achieved through the following: 2.1 Road Widening and Strengthening: The Achievement of this component has been highly satisfactory. All the 1400 km of the high-traffic volume roads have been completed in three Phases and open to traffic. The GOAP has identified 10,266 Km of the high density roads comprising of State Highways and Major District Roads as the core network roads. The investments under the project were applied to the core network. A Road User Satisfaction Survey (RUSS) has been conducted on the roads improved under the project and the findings indicate that the overall travel time on the improved roads has been reduced by 30% to 50% and journey speeds have gone up by 50% . The percent core network roads in poor condition have been reduced from 70 % to 28 % during the project duration. The average roughness of the improved core network roads have been reduced from 3500 to 2200 mm/km. The traffic has been increased by 150-250% after the road improvements under the project. As compared with previous road condition and present traffic, the percentages of accidents have come down considerably. 2.2 Heavy Periodic Maintenance: The outcome of this component has been highly satisfactory. About 1734 km of state highways and major district roads pertaining to the primary core network received heavy periodic maintenance to clear the maintenance backlog. Works have been supervised entirely by the R&B department. No difficulty is faced in execution of these contracts. The Road User Satisfaction Surveys indicate that average speed on these roads increased to about 60 km per hour from the pre-project level of about 30-40 km per hour. The riding quality of the maintenance roads have been improved significantly average roughness after improvement is about 2200 mm/km compared to 3500 mm/km before the maintenance. The percentage of roads in poor condition in the core network reduced to 28% from the pre-project level of 70%. The average traffic growth on the maintenance roads has been about 20-30% per annum. The vehicle operating costs on these roads reduced by 20% and provided immense user satisfaction. The investments in the heavy periodic maintenance works were good value for money. 2.3 Development of Performance based Maintenance System: Pilot performance based maintenance contracts were successfully implemented by RBD for 1162 km of roads in 8 slices in 4 districts. These packages were new for the industry and the contractors were reluctant to take up these works initially but this issue was resolved by organizing several workshops for the contractors. After successfully implementing the pilot performance based maintenance contracts, the RBD is planning to implement these in all the districts. But the constraint now is that these contracts are viable for a contract period of more than 2 years but the non-plan budget to fund these contracts is available for a maximum period of one year. This issue is being addressed by the GOAP. Further the performance based contract system does not address the need to carry out periodic maintenance at the correct time in life cycle of the road pavement. RBD also prepared a new bid document for these contracts.

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2.4 Supervision Consultancy for civil works: International Supervision Consultants were engaged to supervise the widening and strengthening works to ensure stringent adherence to the quality of work specified in contract agreement. The work of Construction Supervision Consultants can be rated as satisfactory under the constraints in which the whole project has been implemented. The RBD officers were also associated in the monitoring and supervision of these works as Employers representatives and gained indirect experience of the duties of Engineer. RBD has also provided their staff to work as secondment to CSC staff and on their roles. 2.5 Institutional Strengthening: The achievement of this objective is satisfactory. The RBD has taken up major activities including (i) establishment of a computerized road management system in GIS environment for the entire RBD network (65,000 km); (ii) scaling-up of the performance based maintenance contracts in all the districts; (iii) enhancements in the Pavement Management System (PMS); (iv) road safety enhancements on the project roads; (v) documenting the significant experiences gained from the project in the form of manuals and guidelines for wide scale adaptation; (vi) development of a road sector policy; (vii) introduction of e-procurement; and (viii) capacity building of RBD engineers on modern contract management practices and other aspects. RBD has also started the following initiatives to improve business efficiency: i. ii. iii. Develop a road sector policy with special emphasis on the maintenance of the roads improved under the project; Introduction of the Information Strategy (including use of Lotus Notes) suggested by VIC Roads and Adopting the Implementation Plan, prepared by VIC Roads in the overall structure of RBD.

2.6 Equipment for monitoring and management of State Highways and Major District Roads: Computerization of all the RBD divisions has been done with a local area network in the Engineer-in-Chief Campus. This set up was used for monitoring the project. Mobile computers (laptop) are also provided for all inspecting officers up to the level of Superintending Engineers to record their observations while inspecting/and or at Head Quarters. 3. Main Conclusions and suggestions:

3.1 Reasons for Delays: Even though the project could be successfully completed but it was delayed for about one and half year: The main reasons for the delays were: i. ii. iii. iv. v. vi. Some stretches of road could not be handed over to the contractor in time due to delays in land acquisition. The works progress was hampered due to shifting of utilities and encountering underground cables and water pipe lines not envisaged during the initial investigations. The ROBs works were delayed on account of delay in approvals from the railways for the designs, drawings and commencement of work. Contractor's poor planning and mobilization of cash flow also contributed to the delays. Quality control problems have also erupted due to poor performance of the staff of the contractors and supervision consultants. The site conditions required modifications in the initial designs and thereby the scope has increased and the contractors scheduled program was altered. The modifications included: (i) changes in road alignment and formation levels in several road packages as per site conditions; (ii) modifications in the design of ROBs for adding viaduct spans in place of solid embankment to avoid land
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acquisition in urban portions; (iii) missing culverts and structures in the initial designs; (iv) modifications to provide 4 lane road in built-up/town areas. Design of road in built-up areas was not adequately addressed at DPR preparation stage; (v) changes in pavement design; (vi) change of road base specifications from Cement Treated Base (CTB) to Crusher Run Base (CRB); (vii) Change of aggregate size specifications for surface dressing; and (viii) change of specifications for granular sub-base to reduce PI value. 3.2 i. Suggestions for improving Project Preparation: Deficiencies in DPR: Several design changes had to be made during implementation. The quality of field surveyors and investigations should be improved. The TOR should clearly specify the type, frequency and details of soils, materials and geotechnical investigations required. Use of modern survey equipment and techniques should be insisted upon. Monitoring the performance of PCC: The capabilities of the design consultant for Survey & Investigation (S&I) should be evaluated. The TOR must clearly require consultants to furnish in their proposals the details of in-house capabilities/details of specialized agencies if proposed to be associated for the S&I work. Proposals regarding realignments, bypasses, new structures, final road levels should be based on detailed consultations with the PWD officers, concerned agencies and local people to incorporate their views and local requirements. Active involvement of R&B engineers in project preparation work will be useful. Performance of design consultants/PCC should be monitored. The TOR/Agreement should incorporate suitable clauses for: (i) Quality assurance for DPR; (ii) Responsibility for accuracy of design with economy/aesthetic; (iii) Disincentives and deterrent action for deficiency in designs and consultancy services; (iv) Performance appraisal report. This should be an open, transparent report which can be shared by current/previous clients. This should clearly indicate the changes occurred in designs in implementation stage, cost over runs on account of the modifications in design. A standard TOR should be prepared and followed uniformly. The TOR among other things should clearly specify design responsibility and performance monitoring mechanism. The DPR should be examined thoroughly. For this prior review of project by an independent expert before bidding is recommended. The responsibility for carrying out design changes during construction should be given to CSC to avoid delays. Interaction with RBD and other concerned departments and stakeholders while preparing detailed project reports and incorporating their views. Giving due consideration to local site conditions and needs. Engaging more than one design consultant (PCC) for project preparation for large size projects comprising several packages. Time gap between project design and project implementation should be minimum possible. Pre-construction activities - delays in LA, forest clearance and shifting of utilities: A high-level coordination committee of concerned departments should be constituted to expedite implementation of LA, shifting of services, social component and other project activities. Realignments, new alignments should be finalized in consultation with the concerned agencies, Forest department etc. in order to avoid land acquisition problems. Proposals for shifting of utilities coming in the right of way should be made based on proper surveys and consultations with the concerned departments.




v. vi. vii. viii. ix. x. xi. 3.3 i. ii. iii.

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iv. v. vi.

The work of land acquisition and shifting of utilities should be well planned and coordinated. All pre-construction activities should be completed before award of work. In exceptional cases, if any utility shifting is required to be done by main contractor, the provision should be included in the BOQ on the basis of detailed quantities instead of L.S. provision. Review of L.A. procedure including amendment of the Land Acquisition Act to expedite proceedings Construction of ROB/RUBs: A committee consisting of senior level officers from railways and R&B Department should be constituted. The work of ROB/RUBs should form a separate package in case designs, LA and other procedural requirements are not completed before inviting tenders. Streamlining the procedure for expeditious approvals by Railways for construction of ROB/RUBs. An agreed procedure for approvals of designs and construction aspects should be finalized at senior level officers of the Railways and the Roads & Building Department to ensure that the ROB/RUB designs and other related aspects are finalized at the DPR stage itself and no delays are caused during project implementation. Construction Supervision Related Issues: Performance of Supervision Consultant Frequent changes in personnel were made. Consultants were not able to provide timely substitution, thereby affecting the work. Most of the personnel are hired for the job and have no allegiance to the consultant or to the work. CSC should keep record of daily log of men and machinery of the contractor and analyse short falls and delays and ensure that the contractor deploys the requisite resources to complete the project on time. Inordinate delay in submission of Variation orders. Unsubstantiated excess and negative quantities in the IPCs certified by consultant. The CSC has certified some of the BOQ quantities more than the contractors entitlement as per contract conditions. For which the Employer has to get it verified by the third party of ascertaining the actual quantities and lot of efforts are to be made for recovering the excess payment from the contractor. The Employer has observed from the As-built drawings and the draft final statement that the CSC has made numerous misclassifications among the BOQs and also resulted in negative amounts ranging from to Rs 20.00 Lakh to 50.00 Lakh. From which it can be inferred that the CSC has not acted as per agreement conditions while measuring and certifying the quantities. Consultants active involvement in the work and timely action is required to avoid claims. There were large numbers of contractors claim at the time of substantial completion of the work stating that the work has been completed as per the instructions of the Engineer. CSC should not demobilize key personnel before completion. A clause in the agreement may be required to this effect. Consultants should be made accountable for their lapses. Employer is not aware of the correspondence made by the Engineer and facts of the case to defend before DRB & Arbitration.

3.4 i. ii. iii.

3.5 3.5.1 i. ii. iii.

iv. v. vi.



ix. x. xi.

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3.5.2 i.

Remedial measures: Frequent changes in CSC team: (i) Review the contract conditions; (ii) Restrictions on changes in personnel say not more than 25%; (iii) Disincentives in the form of reduction in fee for changes exceeding the limit; (iv) Deterrent action for deficiencies in services; (v) Performance Appraisal by Employer/ Employers representative. Inadequate supervising staff and experience of FIDIC: Specify in RPF the numbers, qualification and experience of supervising staff to be deployed. It should be linked to project size. Adequate exposure to FIDIC contracts should be essential. Key personnel qualification not reflective of performance: Ask for certificate of performance from previous clients along with CV of key personnel. Delay in decision making; variations orders, claims: The role of Engineer should be clearly defined in the contract. There should be no discrepancy between the Civil works contract and the Consultancy contract about the role of the Engineer. Lack of accountability: CSC should be accountable for his lapses. A suitable system for monitoring performance of the consultants and for deterrent action for deficiencies in services should be established and stipulated in the TOR/Contract. Role of CSC during defects liability period: CSC services required during defects liability period should be defined in the contract and requisite man months and other expenses included in the payment schedule. Defending claims after mobilization: Employer staff should be made fully acquainted with the records before demobilization for defending the claims. CSC agreement should address this aspect. Strengthening of in house capabilities of R&B Dept. to deal with EOT, variations, claims, etc. is required. Suggested Modifications to the Agreement Conditions ROBs should be delinked from road packages. Tree Plantation should be entrusted to the Forest Department as a separate work. Adequate conditions need to be incorporated in the agreement to effectively implement the Environment Mitigation Plan. The length of package should be 60-100 Kms. The taking over of completed work should be made more clear and defined. Completed stretched could be in lengths of at least 10 km multiples of. Local taxation aspect needs to be adequately addressed in the contract conditions. Clauses related to statutory taxes, deductions at source should be clearly defined so that there is no ambiguity. Any incentives and exemptions to the contractor such as custom duty exemption, excise duty mention should be clearly stipulated in the contract documents and the contractors should be asked to quote rates accordingly. Active participation by all partners of JV should be made mandatory by a suitable clause in the agreement. Sub-contracting clause should be made more specific. Limits for sub-contractors and number of subcontractors to be allowed to be defined. Methodology for working out rates for new items should be clearly defined in the agreement. Price escalation clause should be more specific in terms of its applicability to the portion of the work done. The procedure for recovery of advances should be made clear. Some more clauses need to be incorporated for addressing the Environmental issues.
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iii. iv.




3.6 i. ii. iii. iv. v. vi. vii. viii.

ix. x. xi. xii. xiii. xiv.


CSC is doing misclassification in respect of Items of work in the contract while preparing the IPCs. The employer could able to know this only after the as built drawings are submitted. This has taken much of employer time and such practice of recommending payment on prorate basis may be discouraged. Engagement of Consultants: Number, qualification and experience of supervising staff should be adequate. Consultants do not make realistic provision in their bids to keep the bid amount low. Inexperienced personnel at junior level affects quality and progress of work. The Consultant should name the Engineer in the Technical proposal. Fielding of personnel from the regular establishment of the Consultant should be insisted on. Along with CVs of key personnel, performance certificate from employers for the last two jobs should be furnished. Preferably, Employer interviews key personnel. Age limit should be specified. Procedure for monitoring the performance of CSC should be evolved and incorporated in the TOR. It may be desirable that the PCC is engaged as the Supervision Consultant. This will enable quick decision and ensure reduction in variations. Training: Training should be given R&B personnel in FIDIC conditions, quality procedures, and Project management. The RBD should have a Claims Specialist for defending the claims. Training to contractors personnel should be made compulsory.

3.7 i.

ii. iii. iv. v. vi. vii.

3.8 i. ii. iii.

3.9 Suggestions for World Bank: i. The clause 67.2 which has a scope for mutual settlement in between the contractor and Employer may be incorporated for the benefit of the Employer for avoiding the legal battle in settling the claims and paying huge interests at later date by which time the loan amount may not be available. World Bank is presently allowing 4 months for submission of Claims of expenditure for re-imburesement. This period is not adequate as the contractors is submitting the As-built drawings late and only after verification of it, the final payment can be processed. A minimum period of 6-8 month is essential. CSC is also getting demobilized along with loan closure itself. As many important close up issues normally will be there in large projects, a provision may be made to engage the CSC services beyond 4 months of loan closing date. Claims: The Fee for DRB members should be fixed uniformly in India. The panel of DRB members may be constituted along with their performance data for enabling the Borrower to choose from the list. No legal attorney may be allowed in the DRB meetings for arguing on behalf of Employer/Contractor. The persons involved in the project such as Project Manager of Contractor and Project Director of Employer may only be allowed to represent before DRB. The Recommendations of DRB must be made binding on both the parties and implemented in the first instance and then they may approach Arbitration if either of them desires.
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3.10 i. ii. iii.



The Contractors are giving claims as high as 60 % of the contract value itself. Hence the World Bank may investigate the genuineness of all such claims by invoking the clause under which the accounts of contractors can be checked (As per SBD). Also they may impose some penalties in approving such contractors in the next pre-qualification undertaken by Bank.

Engineer in Chief (R&B) Admn & NABARD & A/c Managing Director, APRDC

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Additional Annex 9. Stakeholders Workshop

9.1 Background: The Roads and Building Department (RBD) organized a stakeholders workshop on July 20, 2004 during which more than 50 participants comprising of the RBD staff, consultants, contractors, and other stakeholders participated. The workshops were organized to seek feed-back form the participants on (i) achievement of the project objectives; (ii) the factors affecting project implementation and problems encountered; and (iii) the lessons learnt towards improving the quality and effectiveness of the future Bank projects. A stakeholders opinion survey was also conducted for the major development impacts and constraints. The key issues and recommendations emerged from the workshops are given in Section 9.2 and the results of the opinion surveys are given under Section 9.3. 9.2 Key Issues and Recommendations

9.2.1 Too many design changes required during execution of road improvement works: Recommendations: (i) Ensure adequate quality of initial surveys and investigations; (ii) make a standard TOR for detailed engineering designs clearly defining the type, frequency and details of soils, materials and geotechnical investigations required; (iii) capabilities of design consultant for surveys and investigations to be a criteria for evaluation of their proposals; (iv) actively involve road agency, concerned government staff, and local people in project preparation especially regarding realignments, bypasses, new structures, and final road levels; independent review of the detail engineering designs before the construction; and (v) promote the use of modern equipment for surveying and field investigations. 9.2.2 Delays during execution

The design changes and variations during execution involved the following chain: Contractor - CSC Employer - PCC and back, which took long time in communicating the decision to the contractor. Recommendations: (i) The supervision consultants could directly handle the normal design changes during execution; (ii) regular review meeting of consultants, contractors and employer; (iii) ensure full mobilization of equipment and personnel by Contractor; (iv) regular updating of the work program which should be updated regularly and supported with details of required equipment, manpower and other inputs; (v) a construction management specialist to be included in the CSC team; (vi) the PCC and the CSC could be same; and (vii) regular interaction between Project Director and Team Leaders of the consultants. 9.2.3 Delays in pre-construction activities (Land Acquisition, forest clearance, and shifting of utilities): Recommendations: (i) advance action for pre-construction activities; (ii) ensure adequate surveys during the design stage; (iii) shifting of utilities and land acquisition should be made BOQ items; (iv) review of LA procedure including amendment of the Land Acquisition Act to expedite proceedings; (v) A high level coordination committee of concerned departments should be constituted to expedite implementation of LA, shifting of services, social component and other project activities. All pre-construction activities including land acquisition, environmental and forest clearances, shifting of utilities should be completed before award of work/scheduled date of commencement. 9.2.4 Delays in finalization of designs and construction of ROBs: (i) ROBs should be made a separate contract package; (ii) streamlining the procedure for expeditious approvals by Railways authorities; (iii) senior officials of the railways and the road agency to agree on design and construction issues and the procedures for various approvals before the project starts.

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9.2.5 i. ii.

Bid Documents and Contact Clauses Details of major plant and equipment and their mobilization schedule should be indicated in the contract. The recovery of advances caused serious cash flow problems to the contractors (It started after 9 months from the date of commencement of works irrespective of the progress made). It should be according to the spirit of FIDIC conditions. The contract clauses about local taxation, statutory taxes, deductions at source, custom duty and excise duty exemptions were not clearly defined. COPA as well as Clause 70 should be reviewed to make the price adjustment formula more rational. Contract Size and Mile- stones: A single contract size should cover 60 80 km of road length for effective supervision and administration. Milestones could better be fixed as percent physical progress as a full road section is unlikely to be available due to land acquisition or other problems. Monsoon Period: Adequately consider the impact of monsoon period while planning the construction program and issuing notice to proceed. Contract conditions and contract administration practices need a review as these are not effective to ensure: deployment of requisite professional staff and equipment; compliance to the sub-contracting provisions; compliance to the Contractors work plan; use of mobilization advance for the intended purpose; submission of claims expeditiously (the contractors has a tendency to hold the claims to the last); and submission of as built drawings by the Contractors. The contract conditions are also not effective to ensure participation of all the JV partners. Performance of Contractors Contractors deployed inadequate professional staff and equipment; Mobilization advance taken but not utilized for intended purpose (Payment of mobilization advance to be linked to actual mobilization); In Joint Ventures, international partners did not participate actively. In some cases they merely deployed a few personnel. Subletting to local contractors was a serious problem. It defeated the very purpose of pre-qualifying the contractors. Many contractors off-loaded the work to subcontractors at big margin of profit. Capacity of some contractors were not found matching to the contract packages for which they were pre-qualified. Project management and financial planning by some contractors was poor. They did not have adequate capacity in these areas resulting in poor management and cash flow problems. Suggestions for improvement: PQ criteria should be reviewed; improved monitoring of the performance of the contractors; contract should have stringent requirements for JV and subletting: failure to comply with those will be a default of Contractor for action under clause 63. CSC must report about the performance of JVs, unauthorized Sub-letting, deployment of needed professional staff and equipment in their monthly progress reports. Poor planning and Financial Capabilities: PQ criteria should be reviewed for a more realistic evaluation of financial strength, experience, equipment, personnel, and bid capacity. Delays in submissions of claims and as built drawings. Contractors work programme did not adhere to time and was not updated regularly. Inadequate exposure to FIDIC contracts: Training for contractors personnel at the start of the work should be made a contract requirement. Compliance of safety requirements during construction need to be insisted by the Engineer.



v. vi.

9.2.6 i. ii. iii. iv.

v. vi. vii.

viii. ix. x. xi. xii. xiii.

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9.2.7 i.

Performance of the consultants Frequent changes in consultants team: Restrict the changes in personnel say not more than 25%. A disincentive through reduction in fee for changes exceeding the limit; deterrent action for deficiencies in services; and performance appraisal by PD. Non availability of required trained and experienced personnel; and lack of familiarity of the consultants with local conditions. Personnel and other resources should be linked to the size of package for better construction supervision and contract administration. CSC should have its own transport arrangement and laboratory instead of depending on the contractors for these inputs. Inadequate supervising staff and experience of FIDIC: Specify in RPF the number, qualification and experience of supervising staff to be deployed. It should be linked to project size. Adequate exposure to FIDIC contracts should be essential. Key personnel qualification not reflective of performance: Ask for certificate of performance from previous clients along with CV of key personnel. Delay in decision making, variations orders, and claims: The role of the Engineer and the Employer should be clearly defined in the contract. Lack of accountability: CSC should be accountable for his lapses. A suitable system for monitoring performance of the consultants and for deterrent action for deficiencies in services should be established and stipulated in the TOR/Contract. Role of CSC during defects liability period: CSC services required during defects liability period should be defined in the contract and requisite man months and other expenses included in the payment schedule. Defending claims after mobilisation: Employer staff should be made fully acquainted with the records before demobilization for defending the claims. CSC agreement should address this aspect. Strengthening of in house capabilities of R&B Dept. to deal with EOT, variations, claims, etc. is required. Processing of bills was not according to specified time schedule due to delay in submission of bills. Thorough scrutiny of bills by CSC is suggested. Standardization and Updation of Documents A Standard TOR for Design Consultants/PCC and for Construction Supervision consultants should be prepared to ensure adequacy of services and quality of output. Standard Bidding Documents for procurement of Civil Works: The ITB and COPA should be thoroughly reviewed and redrafted as a Standard document, fully addressing in a equitable manner the issues and concerns of the Employer and the Contractor. Review of Quality Control Procedures and Tests: The frequency of quality control tests required under existing IRC/MORTH guidelines require a review as with increased level of mechanization and use of modern equipment, a much better control and uniformity in construction operations and quality of end product can now be achieved. The IRC should prepare a standard Quality Assurance Manual (QAM) to be followed uniformly for large projects. Similarly, QAP for contractors should also be standardized. Guidelines for Highway Project Preparation: IRC/MORTH should prepare a standard document for preparation of Detailed Project Report (DPR) for highway projects covering field investigation and surveys, traffic studies, economic analysis, detailed design, drawings and environmental and social management aspects. The existing IRC publication Manual for Survey and Investigation and Preparation of Road Projects IRC : SP 19 2001 could be updated or a new document brought out through IRC to meet this requirement.
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ii. iii.


v. vi. vii.




9.2.8 i. ii.




Pavement Design Manual: The current IRC guidelines for design/strengthening of flexible road pavements need a review as these cover only conventional pavement structures and have other limitations. With the increasing investment and thrust on quality and durability of road infrastructure, the immediate need is to update the pavement design guidelines to enlarge its scope to incorporate: (i) new materials; (ii) improved pavement compositions; (iii) regional climatic factors; (iv) drainage; and (v) assured performance and durability. Traffic Safety and Related Aspects Provide improved communication system and better infrastructure facilities to police traffic/road safety department adequate staff and vehicles, breath analyzer, radar speed measurement equipment, and other equipment. Need for active involvement of the departments like police, transport, forest and local bodies during project preparation and implementation. Install road safety devices like crash barriers, road markings, cat eyes, reflectors, signboards, traffic signs on state roads and ensure their regular maintenance. Provide yellow flashing lights at entrance of villages/towns. Provide service roads at roadside villages/towns. Provide other facilities and wayside amenities like truck lay-byes, dhabas, petrol pumps, first aid, telephone, resting place, and repair shops on highways. Establish effective mechanisms to regularly monitor and control/remove encroachments along the highway.

9.2.9 i.

ii. iii. iv. v. vi. vii.

9.2.10 Project Management: The Project Implementation Unit of RBD required strengthening to deal with road safety, contractual and legal issues, and project management. More attention was required on the training of RBD staff and their active involvement during the project preparation and implementation. Suitable incentives, and better transport and other facilities need to be provided to the project staff. Monitoring mechanism to be made more effective. 9.2.11 Role of the World Bank has been effective by carrying out periodic reviews, visits, and providing technical guidance to the Borrower from time to time. 9.2.12 Other Aspects i. A time bound program should be drawn up by R & B Dept. for effective implementation and utilization of studies carried out under the APSHP. Areas of priority include: (i) implementation of performance based road maintenance. Intervention levels on regional basis should be expedited for its further refinement and extension; (ii) fully operationalising PMS; (iii) calibration and use of HDM-4; (iv) safety auditing of projects; (v) use of rapid methods for data collection and augmenting road inventory; (vi) access to central database to district level, and (vii) organization for controlling and removal of encroachments. Performance based maintenance contracts: System has been implemented on pilot basis in four districts with good results. Intervention levels need to be set on regional basis for different climatic, traffic and terrain conditions for its further refinement and extension. A longer maintenance contract period, minimum 250-300 km length and review of data collection method are suggested. Modification in the PMS developed by VIC ROADS has been suggested. The modification incorporates assessment of the pavement condition using a weightage system instead of directly assessing the quality of road for deciding priority of roads.



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Results of the Stakeholders Opinion Surveys: Shown on the next pages.

Fig 9.1 - Stakeholders Perception of various impacts/ outcomes of the projects
Weighted average 0.5 Improved riding quality Increased travel speed Reduced travel time Reduced fuel consumption Increased mechanization of road construction O verall project benefits Increase in bid capacity of contractors Improved availability of road network data Reduced congestion level Improved construction quality Increased economic activities Improved procurement procedures Increased capacity of local const. industry Improved availability of modern vehicles Private sector participation O verall technology upgradation in the sector Improved way-side facilities Improved level of maintenance Increased employment opportunities Skill development of RBD Introduction of new policies Agriculture Development Reduced road accidents




Note: Total number of respondents = 51; The responses were obtained as high, low, medium & indifferent, and are converted to a common scale using the following weights: high = 4; medium = 2; low = 1; and indifferent = 0.

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Fig 9.2 - Stakeholders perception of various contraints/ factors which affected the project
Weighted average
0.5 1 1.5 2 2.5 3 3.5

Delays in land acquisition Permission from Railway authorities Delays in forest clearances Delays in shifting of utilities Low level of involvement of RBD staff Lack of local knowledge to consultants Frequent changes in team of consultants Inadequate surveys and investigations Inadequate staff deployed by RBD Poor performance ofJoint venture arrangements Inadequate involvement of Stake-holders Lack of inter-agency coordination Familiarity with FIDIC Lack of compatibility between FIDIC and local practices Inadequate technical staff deployed by contractor Design changes required during execution Inadequate capacity of the contractors Poor quality of initial designs Inadequate resources for supervision team Recovery of advances from the contractors Unexpected rains and floods

Note: Total number of respondents = 51; The responses were obtained as high, low, medium & indifferent, and are converted to a common scale using the following weights: high = 4; medium = 2; low = 1; and indifferent = 0.

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Additional Annex 10. Progress Made on Implementation of Institutional Development Action Plan
Initiative SN 1 Reorganize Roads and Building Department Planned Out-Put GOAP to agree on the new organizational structure proposed under Institutional Development Study Head of reorganized Roads and Building Department to function as its Executive Director Status/Progress made New structure was agreed by GOAP in 1997

Appoint Head of Roads and Building Department (HOD)

Establish new management New organization structure structure and consolidate effective department functions, staffing, and responsibilities under the new organization Many of the positions proposed in the new structure, more or less, already existed. The major change was appointment of HOD of RBD which did not materialize. All the Chief Engineers of RBD were directly reporting to the Secretary, RBD and they were apparently reluctant to report to the HOD under the new structure. This to some extent was also the reason that GOAP could not appoint the HOD for the new structure. GOAP finally decided that CMG jointly manage the entire reform program through the existing RBD structure. Each Chief Engineer/Engineer-in-Chief was assigned additional responsibility to implement one of the key reforms identified by CMG. 4 Take charge of and facilitate CMG established CMG was established by GOAP who regular review of the reform implemented Phase I reforms as process and enhance decision detailed below: making The CMG identified the following key initiatives (i) quality management; (ii) maintenance management; (iii) strategic project planning; (iv) contract procurement and management; and (v) financial management and cost accounting. The achievements made in many of these reforms are encouraging, as detailed under Sections 4.1.3 and 4.2.3, and in this Table. However, the reform progress suffered a set-back when the Institutional strengthening consultants demobilized due to sanctions imposed by the Government of Australia on India. The AUSAID grant funds, which were used to fund the consulting services, were stopped due to the sanctions. The CMG continued to function even after the demobilization of consultants for some time. CMG was not involved in Phase II reforms implemented after remobilization of the consultants. 5 Consulting Services guiding Institutional Strengthening Consultants mobilized on 05/98 facilitating the institutional Consultants appointed strengthening and reform process 6 Government Statutory powers to AP Roads Act RDC Act was prepared and passed by the Road Department the AP Legislature in 1998. GOAP has also prepared a draft Road Act by incorporating issues such as road safety, corridor management, collection of service charges from road users, and several other items.

HOD could not be appointed. RBD had two Engineer-in-Chiefs at that time, only one of them could have been appointed as HOD. Instead GOAP constituted a Corporate Management Group (CMG) to initiate and implement the reforms in existing RBD. The progress made is modest as detailed below:

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The road users charges could not be dedicated to the Road Fund but GOAP did enhance its maintenance allocations as detailed below: GOAP established a Road Fund in 1997 and decided to dedicate 50% of the incremental revenue of the following taxes to that fund: (i) Motor Vehicle Tax; (ii) Fees (License, Driving, Registration, Permits); and (iii) Commercial Tax on petroleum products, tyres, tubes, and spare parts. This decision was not implemented. However, GOAP raised the maintenance funding by 76% during project implementation from the pre-project level and the current level of funding is adequate to fully meet the demands of the primary core network and to significantly meet the demands of the non-core roads. 8 Business Efficiency Introduction of quality The RBD prepared a comprehensive management system (QMS); quality plan as well as quality improved financial management procedures for all aspects involved in system; and cost accounting RBD and used them for the project. A principles customized financial management system (FMS) developed, its manual prepared, and training of staff completed on the use of FMS. The FMS was applied on project activities. 9 Improved planning and Design GOAP transport and BOT Substantial progress made as detailed policies; and Plans for below: maintenance upgrading (i) RBD has successfully implemented innovative pavement designs using crushed stone as a main base layer providing substantial savings (about 30%) over the traditional designs. RBD also used improved geometry (10 m paved width with 7 m carriageway and 1.5 m hard shoulders on either side) which was found very effective to segregate non-motorized traffic from the motorized one. (ii) GOAP had enacted an Infrastructure Enabling Development Act in 2001 to invite private sector investment for road projects in Andhra Pradesh on Build -Operate-and Transfer basis. The GOAP provides upto (i) 30% of the project costs as a subsidy on a case to case basis; (ii) land required for the project including assistance for shifting of utilities, tree cutting, and resettlement and rehabilitation of the affected people; (iii) assistance for environmental clearances; and (iv) risk coverage due to any future change in government policies. The private investor can collect toll upto a maximum period of 30 years, develop wayside facilities, and undertake certain land use changes along the corridor to recover his investment. (iii) RBD has also established a Pavement Management System and a comprehensive Management Information System in GIS environment as detailed under Section 4.2.3. 10 Human Resources Development Staff Development and Training Significant progress as mentioned program below: RBD with the assistance of consultants, has prepared comprehensive manuals for pavement design, maintenance, quality assurance, the road safety audits to document and mainstream the significant experiences gained through the project in the entire RBD. 20 RBD engineers attended the Road Management Courses organized by the University of Birmingham, UK. The RBD engineers have also undertaken study tours to USA and Australia to study good examples of road maintenance and management. The Project Coordinating Consultants, Institutional Development Consultants, and Supervision Consultants organized a number of training courses for the RBD staff on project organization and management, project preparation and design, procurement and contract administration, road safety audits, quality assurance, and other aspects. About 12 RBD divisions and PIU staff (more than 100 in no) has significantly improved their skills through counterpart training while working with international consultants and contractors. The staff of 3 RBD divisions have received extensive training from the consultants on performance based maintenance contracts. The trained staff is now expanding these contracts to other distracts.

Provide for assured funding

Establish Road Trust Fund and Dedicate Selected road user charges to this fund.

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11 Project Management

Project management guidelines and Training program for project managers

Improved documentation, specifications, pre/post qualification criteria, supervision procedures RBD has significantly improved its normal procurement of works by using many recommendations of the Country Procurement Assessment: India 2001. RBD has prepared a standard bidding document based on the Banks NCB document; modified the outdated PWD schedule of rates and the procedures for rate analysis by accounting for the modern construction machinery and equipment now being used; stopped price negotiations for works contracts; introduced standard guidelines for procurement procedures and tender evaluation; improved the qualification criteria for contractors; and modified contract clauses to introduce transparency, improve dispute resolution, and to introduce severe punishment for fraudulent contractors. GOAP has undertaken a major step to introduce e-procurement throughout the state for all civil works more than Rs. 500,000 in value as mentioned under Section 4.2.3. GOAP has also taken several steps to enhance the contractors capacity including establishing a National Academy of Construction for training of the contractors staff, and improved emphasis on quality of works. 13 Improve Quality Control Standard procedures for quality Significant progress as detailed below control of all civil works RBD has (i) established laboratories for quality control in each division, which are effectively being used for its regular road works; (ii) made it mandatory for contractors to establish a site laboratory for each contract and perform quality control tests; and (iii) strengthened quality monitoring mechanisms through dedicated quality monitoring divisions. RBD has prepared a quality assurance manual that defines all the quality procedures to be followed for road works. These efforts have significantly improved the general awareness about quality as well as the quality of road works of RBD, as also perceived through the stakeholders surveys. RBD also developed a project procedure manual containing 69 quality procedures for receiving ISO 9001 certification (yet to be received). 14 Maintenance Management Routine maintenance by area Progress made is significant. RBD contracts has successfully implemented the pilot performance based maintenance contracts and decided to expand them to all the districts from FY04/05. (See Section for details) 15 Traffic Management and Road Improve road safety operations, Significant progress made as detailed Safety reduce accidents, and road safety below: strategy and program RBD prepared a manual for conducting road safety audits, trained its staff, and conducted the audits on 1400 km of roads improved under the project. RBD implemented road safety engineering measures like improved road signs, lane markings, crash barriers, junction improvement, traffic claiming measures, and reflective studs on these roads. These measures have significantly improved road safety and driving comfort especially during night driving, and received lot of appreciation from road users. Head-on collisions during night driving are substantially reduced. GOAP has also established a road safety council and passed a Road Safety Act.

12 Contract Administration and Supervision

Project management guidelines were prepared and used for the project. Training to RBD staff on project management delivered. RBD also effectively used the Software such as PERT, MS Project for project management. Substantial progress as detailed below:

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