IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-78720) ON A LOAN IN THE AMOUNT OF US$ MILLION TO THE STATE OF MATO GROSSO DO SUL, BRAZIL

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-78720) ON A LOAN IN THE AMOUNT OF US$ MILLION TO THE STATE OF MATO GROSSO DO SUL, BRAZIL FOR A MATO GROSSO DO SUL STATE ROAD TRANSPORT PROJECT Public Disclosure Authorized Transport and ICT Global Practice Brazil Country Management Unit Latin America and Caribbean Region December 21, 2016

2 CURRENCY EQUIVALENTS (Exchange Rate Effective December 1, 2016) Currency Unit = Brazilian real (R$) R$3.41 = US$1 US$0.29 = R$1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AGESUL CPS CREMA EIRR HDM ICR IMASUL IRI ISR NPV PAD PELT PDO PMS PMU PPP SEGOV SEMAC SEOP SIL TA TOR Agencia Estadual de Gestão de Empreendimentos (State Public Works Agency) Country Partnership Strategy Contrato de Reabilitação e Manutenção (Performance-based Road Rehabilitation and Maintenance Contract) Economic Internal Rate of Return Highway Development and Management Model Implementation Completion and Results Report Instituto de Meio Ambiente de Mato Grosso do Sul (State Environmental Institute) International Roughness Index Implementation Status and Results Report Net Present Value Project Appraisal Document State Plan for Logistics and Transport Project Development Objective Pavement Management System Project Management Unit Public-Private Partnership Secretariat of Government and Strategic Management Environment, Science, Technology and Planning Secretariat State Public Works and Transportation Secretariat Specific Investment Loan Technical Assistance Terms of Reference

3 Vice President: Jorge Familiar Senior Global Practice Director: Jose Luis Irigoyen Country Director: Martin Raiser Practice Manager: Gylfi Palsson Project Team Leader: Satoshi Ogita ICR Team Leader: Satoshi Ogita

4 BRAZIL MATO GROSSO DO SUL STATE ROAD TRANSPORT PROJECT Data Sheet CONTENTS A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP...44

5 DATA SHEET A. Basic Information Country: Brazil Project Name: Mato Grosso do Sul State Road Transport Project Project ID: P L/C/TF Number(s): IBRD ICR Date: 12/15/2016 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: Environmental Category: B STATE OF MATO GROSSO DO SUL US$ million Disbursed Amount: US$ million US$ million Implementing Agencies: State Public Works Agency (Agencia Estadual de Gestão de Empreendimentos, AGESUL) Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised/Actual Date(s) Concept Review: 10/29/2009 Effectiveness: 12/15/ /23/2010 Appraisal: 12/22/2009 Restructuring(s): 09/12/ /10/ /29/2015 Approval: 05/04/2010 Midterm Review: 10/15/ /24/2012 Closing: 06/30/ /30/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Highly Satisfactory Moderate Satisfactory Satisfactory C.2Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory

6 Quality of Supervision: Satisfactory Overall Bank Performance: Satisfactory Implementing Agency/Agencies: Overall Borrower Performance: Satisfactory Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No No D. Sector and Theme Codes Satisfactory Sector Code (as % of total Bank financing) Quality at Entry (QEA): Quality of Supervision (QSA): Original None None Actual General public administration sector 2 2 Public administration- Transportation 2 2 Rural and Inter-Urban Roads and Highways Theme Code (as % of total Bank financing) Rural Infrastructure and Service Delivery Public Assets and Investment Management 1 1 Public Private Partnerships 1 1 Renewal Natural Resources Asset Management 1 1 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Martin Raiser Makhtar Diop Practice Manager/Manager: Gylfi Palsson Aurelio Menendez Project Team Leader: Satoshi Ogita Eric R. Lancelot ICR Team Leader: ICR Primary Author: Satoshi Ogita Mirtha Susan S. De Pokorny

7 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective (PDO) is to improve the efficiency of the Borrower's road network in the project area. The PDO paragraph in the Project Appraisal Document (PAD) included an additional description to define the efficiency mentioned in the above PDO: Efficiency improvement is expected as a result of the project s financial support to selected investments of the state investment program in road infrastructure and to activities that seek to strengthen the state government s overall capacity to manage the road network, including planning preparation, execution and monitoring of work programs at the administrative, engineering and environment levels. Furthermore, the PAD also referred to a high-level outcome to which achievement of the efficiency would contribute to as follows: Efficiency gains are expected to result in inter alia improved accessibility and safety, and reduced logistic costs. Revised Project Development Objectives (as approved by original approving authority) Not applicable (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Reduction of operating costs to vehicle users, per average vehicles-km on state network (%) Value Quantitative or 0 5% 23.8% Qualitative) Date achieved 12/31/ /30/ /30/2016 Comments (including % achievement) 476% achieved. The rehabilitation and surfacing of the state roads under the project resulted in an estimated reduction of the costs to users by 23.8%, surpassing the target of 5%. Indicator 2 : Increase in use of road transport infrastructure on the project-surfaced roads (%) Value Quantitative or 0 15% 73% Qualitative) Date achieved 12/31/ /30/ /30/2015 Comments (including % achievement) 487% achieved. The increase in vehicle-km on the project-surfaced roads by January 2015 was 73%.

8 (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Increase in the paved roads in good condition (%) Value quantitative or 49% 66% 82% Qualitative) Date achieved 12/31/ /30/ /30/2016 Comments (incl. % achievement) 124% achieved. The proportion of the paved state roads in good conditions increased from 49% in 2008 to 82% in 2016 for a network of 4,400 km, including 1,253 km under the project. Indicator 2: Number of Km improved as part of the project Value 750 km 799 km 0 (quantitative rehabilitated, 450 rehabilitated or Qualitative) km surfaced 454 km surfaced Date achieved 12/31/ /30/ /30/2016 Comments (incl. % achievement) Indicator 3: Value (Quantitative or Qualitative) Targets met (106% rehabilitated; 101% surfaced). The project rehabilitated and surfaced with the project s and borrower s resources 799km and 454km of state roads, respectively. Integrated road management system operational in AGESUL Integrated road N Operational management system operational Date achieved 12/31/ /30/ /30/2016 Comments Target met. The project successfully installed and operationalized the integrated (including % road management system (also called the pavement management system) achievement) Integrated monitoring and evaluation system of state investments and/or spending Indicator 4: in SEMAC Integrated system operational including Value No integration between Y investment (Quantitative systems monitoring system, or Qualitative) results based practices, private sector participation Date achieved 12/31/ /30/ /30/2016 Comments (including % achievement) Indicator 5: Target met. An integrated financial and project management system was developed and is in operation, which monitors the results of statewide investment programs, including PPP projects. Consolidated environmental management tools in IMASUL

9 Y (a consolidated Value (Quantitative N Y environmental management tool or Qualitative) developed and operational) Date achieved 12/31/ /30/ /30/2016 Comments (including % achievement) Target met. With assistance of the project, IMASUL developed a geo-referenced environmental management system consolidating various information on the use of natural resources and environmental issue. Indicator 6: Modern management tools in AGESUL Value (Quantitative or Qualitative) Lack of sufficient management tools At least 2 new management systems in operations/studies executed 2 new management systems in operation Date achieved 12/31/ /30/ /30/2016 Comments (including % achievement) Target met. Two modern management tools were developed by AGESUL: the pavement management system (PMS) and the integrated financial management system (KRONOS). Indicator 7: Pilot of a result-based maintenance and rehabilitation contract (CREMA)implemented in AGESUL Value (quantitative or Qualitative) N Results based contract operational Results based contract operational Date achieved 12/31/ /30/ /30/2016 Comments Target met. The CREMA five-year contract of the pilot road section with an (incl. % extension of 79 km was signed in 2012and will be completed in achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (US$, millions) 1 06/27/2010 Satisfactory Satisfactory /11/2011 Satisfactory Satisfactory /29/2011 Satisfactory Satisfactory /22/2012 Satisfactory Satisfactory /21/2012 Satisfactory Satisfactory /15/2013 Satisfactory Satisfactory /22/2013 Satisfactory Satisfactory /05/2014 Satisfactory Satisfactory /27/2014 Satisfactory Satisfactory /18/2015 Satisfactory Satisfactory /15/2016 Satisfactory Satisfactory /27/2016 Satisfactory Satisfactory

10 H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in US$, millions 09/12/2012 N S S /10/2014 N S S Reason for Restructuring and Key Changes Made First restructuring was approved to reallocate the unallocated funds (US$16.5 million) to the works category for state roads rehabilitation and surfacing, bringing the total allocation of funds to that category to US$ million. The reallocation of funds was necessary to cover part of the financial gap resulting from an unfavorable exchange rate during the project first two years of execution, when a substantial portion of the loan was disbursed to finance activities fully financed by the proceeds of the loan under the work component. The reallocation was expected to support a more substantial achievement of the project objective. The second restructuring took place to revise the responsibilities with respect to the implementation of modern management tools. Under the institutional strengthening component, the preliminary results of the technical assistance for the reform of the state bodies in charge of the transport sector in Mato Grosso do Sul, State Public Works and Transportation Secretariat (SEOP) on one side, and AGESUL on the other side, provided guidance for separating policy design

11 Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in US$, millions 06/29/2015 N S S I. Disbursement Profile Reason for Restructuring and Key Changes Made functions, that were to be exerted by SEOP, from program execution functions, that were to be exerted by AGESUL. In this context, the indicator on the introduction of modern management tools in SEOP would make less sense than if it was for AGESUL, and accordingly it was agreed that AGESUL be the beneficiary of this indicator instead of SEOP. The target value stayed the same. The third restructuring took place to extend the project closing date by one more year to allow completion of several key institutional strengthening activities that had been delayed.

12 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. General characteristics. Created in 1979 from the scission of the former State of Mato Grosso, the State of Mato Grosso do Sul is a relatively new state located in the southern portion of Brazil s fast growing Central-West region. The state is characterized by a low-density population. Population is mostly concentrated in urban areas in the central and southern regions of the state. It enjoys an overall good socioeconomic standing, ranking within the 10 most advanced states on income per capita, health, education, competitiveness, and qualification of the workforce. 2. The state is endowed with good economic potential, most notably in the agroindustry and tourism sectors, which requires conciliation with a relatively unique and fragile social and environmental context. The state possesses exceptional environmental assets: 25 percent of the state territory is covered by areas of environmental interest, mostly located in the northwestern region (including the Pantanal, one of the world s largest tropical wetlands). The state is also home to the second largest indigenous population in Brazil after the State of Amazonas, with between 32,500 and 71,200 persons, mostly Guaranys and Terenas, located in the west and south of the territory, respectively. 3. The state economy relies substantially on agriculture (grains and meat products) which generates 30 percent of the state gross domestic product, considerably higher than the sector s contribution at the federal level (10 percent). The agro-industry is a particularly dynamic sector, largely internationally focused (over 55 percent of exports), and already among the strongest in Brazil. Yet, it still has room for development, exemplified by the fact that only one-third of the 10.5 million hectares available for agriculture has been used at full potential so far, in part, because of poor accessibility. 4. Mato Grosso do Sul s long-standing development strategy has relied on employing its underutilized potential to support a sustainable and equitable growth while preserving its social and environmental assets, as well as regional identities. Successive regional plans have focused on fostering municipalities capacity to handle municipal services, supporting private participation and new business initiatives, improving logistics by progressively strengthening transport infrastructure, and preserving and improving quality of life for the local population. While progress toward achieving this long-term development objective has been attained, the state needs to continue addressing underlying challenges, such as relative exposure to external shocks given the economy s overall characteristics, regional inequality with wealth mainly concentrated within a limited number of cities, limited accessibility, and still inadequate logistics. 5. Sector context. At the time of appraisal, transport infrastructure was considered a major obstacle to sustainable and equitable growth. Transport still relies heavily on roads, and road density, notably the paved network, is low with regard to area and population. Several regions of production, which have already been developed with a residing population are either poorly served by transport means or even inaccessible part of the year. The condition of the state network was also responsible for losses in agro-industrial 1

13 production, especially in wet seasons. By the time of appraisal, the deterioration of the paved network had exacerbated the problem of accessibility. 6. When assuming office in 2007, the Government launched a series of immediate reforms aiming at improving the state fiscal standing through the implementation of a responsible budgetary and fiscal policy focused on controlling expenditures and increasing the tax base and collection efficiency. In parallel, the Government initiated a comprehensive development strategy defined in its State Regional Development Plan 2030 on the basis of four pillars: (a) environmental sustainability, including conservation and recovery of the state s natural resources and education of citizens on environmental assets; (b) improved quality of life, including poverty and social inequality reduction, business management, and strengthening of the state s cultural identity; (c) economic sustainability, with the expansion and modernization of the transport and energy infrastructure, economic strengthening, notably of the primary sector and diversification in the secondary sector; and (d) institutional strengthening, with the modernization of the administration. 7. In this context, the Government structured a transport strategy to foster its development agenda which continued to respect the environmental features of the state, foreseeing improved access to markets and services in the center, south, and northeast by improving conditions of the state paved road network, surfacing the state unpaved road network and better public sector efficiency in managing the transport sector. To support this strategy, the Government launched its investment programs consisting of the rehabilitation of up to 2,200 km of the state paved roads to restore their condition until 2014 at an evaluated cost of R$650 million and the surfacing of approximately 1,100 km of state unpaved roads to improve accessibility and link communities at an evaluated cost of R$1.1 billion. Supporting this program became the main objective of the subject project. 8. Rationale for World Bank involvement. The project supported the Country Partnership Strategy (CPS) on the public sector management element of the macro foundation (macro fundamentals, good governance, and public sector management) and three pillars (equity, sustainability, and competitiveness) 1. In addition, in a state led by a highly motivated governor, the project focused at the subnational level on a program which was of high priority, had political support, and which the CPS specifically recommended to target. 9. The project was seen as an opportunity for the World Bank to engage with a less developed yet fast growing state having large economic potential, in an environmentally and socially responsible context, on activities supporting improved competitiveness and sustainable development. Taking note of the CPS s principled opportunism, the project was prepared to respond to the Government s need for financing eligible investments under a well-structured Government program and building upon accumulated knowledge resulting from the World Bank s most recent experiences in Brazil and abroad in road management practices. Beyond the CPS, the project was to help counter the effects of the then ongoing 1 CPS Report BR discussed by the World Bank s Board of Directors on May 1,

14 global economic crisis and invest in transport infrastructure in a state that is heavily dependent on global trade. 10. Specifically, the project was designed to contribute to (a) guide the Government in ensuring economy and efficiency in the identification and execution of road investments; (b) allow the Government to jump-start the implementation of its own investment program, which was key to sustaining growth in the short to medium term; (c) finance rehabilitation and surfacing of existing selected roads which met the World Bank s eligibility criteria and which were not located in or near environmentally and socially sensitive areas; and (d) support the Government s institutional capacity to improve both public and socioenvironmental management in the sector. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 11. The PDO as stated in the Loan Agreement is to improve the efficiency of the Borrower s road network in the project area The PDO paragraph in the Project Appraisal Document (PAD) included an additional description to define the efficiency mentioned in the above PDO: Efficiency improvement is expected as a result of the project s financial support to selected investments of the state investment program in road infrastructure and to activities that seek to strengthen the state government s overall capacity to manage the road network, including planning preparation, execution and monitoring of work programs at the administrative, engineering and environment levels. Furthermore, the PAD also referred to a high-level outcome to which achievement of the efficiency would contribute to as follows: Efficiency gains are expected to result in, inter alia, improved accessibility and safety, and reduced logistic costs. 13. The key indicators were the following: (a) Reduction of operating costs to vehicle users on the state road network (b) Increase in use of road transport infrastructure on selected itineraries by the project end Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 14. Not revised. 1.4 Main Beneficiaries 15. Road users and road transport services on the state roads would directly benefit from the civil works component of the project through decreased transport costs. 2 Project Area mentioned here refers to the State of Mato Grosso do Sul. 3 In the PDO indicator, selected itineraries was defined as the project-surfaced roads in the PAD. 3

15 Furthermore, the entire Mato Grosso do Sul State and even the country as a whole was expected to see indirect benefits given the project s positive impact on the capillarity of the state road network and thus on competitiveness, employment, and economic growth. Finally, the technical assistance (TA) component, while initially benefitting the recipient entities, was also expected in the longer run to have a wide impact on the entire population through improved public sector management, reduced logistics costs, and a more efficient environmental management. 1.5 Original Components 16. The project consisted in supporting the Mato Grosso do Sul State sustainable development, which was part of the Government road transport program. Project components, as described in the Loan Agreement are detailed in the following paragraphs. Component 1: State Roads Rehabilitation and Surfacing (at an estimated cost of US$360 million, of which US$290 million was to be financed by the loan) 17. Component 1 was designed for carrying out of rehabilitation works for about 750 km of the borrower's paved roads and the surfacing of about 450 km of the borrower's existing unpaved roads and the introduction of Performance-based Road Rehabilitation and/or Maintenance Contract (Contrato de Reabilitação e Manutenção, CREMA) under a pilot, to be located in the same areas, which include, among others, the following: (a) For rehabilitation: (i) rehabilitation works on sections which have already reached or exceeded their lifetime, through appropriate techniques ranging from local repairs, eventual reshaping, and overlay with surface treatment or asphalt concrete, to complete reconstruction; (ii) resurfacing of sections which would otherwise soon reach a level of deterioration requiring extensive rehabilitation, through appropriate slurry seal, surface treatment, or asphalt concrete overlay techniques, depending upon traffic levels and material availability; (iii) bridge rehabilitation; (iv) rehabilitation and/or surfacing of shoulders to protect the shoulders' surface from erosion and improve the driving conditions; and (v) upgrading of drainage systems, signalization, and dangerous crossroads and accesses; (b) For surfacing: (i) localized earthworks and curve realignments, strengthening of base course and surfacing, using surface treatment or asphalt mix, depending on traffic; (ii) bridges replacement, strengthening, and/or widening as necessary; (iii) upgrading or implantation of drainage and signalization systems; and (iv) road safety improvements, including critical spots elimination or roads intersections improvements; and (c) Carrying out of pilot output-performance rehabilitation and maintenance contracts (CREMA) for rehabilitation works as detailed in (a) above, as well as for routine and periodic maintenance, including (i) pavement maintenance and repairs such as crack sealing, pothole patching, and edge break repairing; (ii) drainage cleaning; (iii) vegetation clearing; and (iv) signalization 4

16 maintenance. Component 2: Institutional Strengthening (at an estimated cost of US$15 million, of which US$10 million was to be financed by the loan) 18. Component 2 included the following subcomponents: (a) Strengthening of the institutional capacity of the Environment, Science, Technology and Planning Secretariat (SEMAC) to support improved efficient management of public resources, through the provision of TA, training, and goods for, among others, (i) the structuring and operation of a monitoring and evaluation system of the borrower's investments programs; (ii) the introduction of results-based practices in the borrower's administration; and (iii) development of the borrower's capacity to leverage private participation in the financing and operation of infrastructure and services. (b) Strengthening of the institutional capacity of the State Environmental Institute (Instituto de Meio Ambiente de Mato Grosso do Sul, IMASUL) for environmental management, through the provision of TA, training, and goods for improving and consolidating the borrower's capacity to evaluate, monitor, and mitigate environmental impacts of activities and investments, primarily in the road sector. (c) Strengthening of the institutional and planning capacity of the State Public Works and Transportation Secretariat (SEOP) to support the borrower's transport sector, through the provision of TA, training, and goods for, among others, (i) the definition of methodologies and systems to systematically and objectively evaluate and mitigate socioeconomic impacts of transport infrastructure; (ii) the carrying out of an evaluation of the potential for publicprivate partnership in the transport sector; and (iii) the modernization of SEOP's information management systems and the carrying out of a reform of the existing road management structure. (d) Strengthening of the institutional capacity of the State Public Works Agency (Agencia Estadual de Gestão de Empreendimentos, AGESUL) to support the borrower's road sector, through the provision of TA, training, and goods to, among others, (i) strengthen AGESUL's planning and monitoring capacity to undertake, notably, routine and organized data collection (traffic and road condition), and structure a pavement and bridge management system integrated with the agency's other management systems; (ii) increase AGESUL's capacity in the areas of procurement, contract management, engineering designs review, and works supervision; (iii) implement a modernized information management system; (iv) improve efficiency in the use of public resources through the introduction of results-based contracting and practices in the sector, including, but not limited to the structuring of a results-based long-term road rehabilitation and maintenance pilot contract (CREMA); (v) improve the supervision of social and environmental aspects 5

17 of road works and operations; and (vi) improve road safety. 1.6 Revised Components 19. The project components were not revised. 1.7 Other significant changes 20. The project was restructured three times. 21. The first restructuring took place in September 2012 and consisted in the reallocation of the unallocated funds (US$16.5 million) to the works category for state roads rehabilitation and surfacing, bringing the total allocation of funds to that category to US$ million. The reallocation of funds was considered necessary to cover part of the financial gap resulting from an unfavorable exchange rate during the project s first two years of execution, when a substantial portion of the loan was disbursed to finance activities fully financed by the proceeds of the loan under the work component. The reallocation was expected to support a more substantial achievement of the project objective. 22. The second restructuring took place in September 2014 to revise the responsibilities with respect to the implementation of modern management tools. (Intermediate Outcome Indicator No. 6). Under the institutional strengthening component, the preliminary results of the TA for the reform of the state bodies in charge of the transport sector in SEOP on one side, and AGESUL on the other side, provided guidance for separating policy design functions, that were to be exerted by the SEOP, from program execution functions, that were to be exerted by AGESUL. Thus, the funds and responsibilities for the pavement management system (PMS) and the integrated financial management system were transferred to AGESUL. The target value stayed the same. 23. The third restructuring was approved by the World Bank on June 29, It extended the project closing date from June 2015 to June 2016 to allow completion of several key institutional strengthening activities that had been delayed due to different reasons (see section 2.2) Other Changes 24. Due to the unfavorable exchange rate and the larger than expected increases in prices in the construction industry, the loan could not finance all roadworks that were originally planned to be covered by the loan. Therefore, the borrower increased the counterpart funding from the appraisal estimated at US$75 million to US$120 million to meet the original target of the road extension improved by the project. 6

18 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of the Background Analysis 25. The project was in line with the national context as delineated in the CPS for the period and was part of a number of projects providing World Bank support to Brazil and involving subnational governments. 4 These well-performing projects focused on state road infrastructure following a pattern based on a holistic view of the sector. They included issues of territorial management, logistics, private sector participation, and environmental management with levels of complexity adequate to the capabilities of the client state. 26. In the case of Mato Grosso do Sul, there was a simple, evidence-based, and realistic approach to project preparation and design, supported by the abovementioned experience and lessons of other projects in Brazil. The team s approach to project design was simple and fairly methodical. A set of core sector issues/challenges were identified based on the abovementioned holistic approach and the state government s priorities (as ascertained through discussions as well as review of various policies and other reform initiatives). Then, as was the case of the Brazil Road Transport Project (P092990) and the Sao Paulo State Feeder Roads Project (P106663), each of the identified core challenges in the areas of public sector management, road improvements, environmental management, logistics and private sector participation was addressed through a designated project component. The accumulated experience in preparing these road operations in Brazil, notably on best practices of how-to rather than what-to, allowed the team to rapidly customize the project design to the Government s needs, and given the client s lack of familiarity with World Bank projects, keeping it as simple as possible. Assessment of the Project Design 27. The project PDO was clear and reasonable and its expected outcomes were adequately attributable to the operation. While the PDO focused on the expected impact of the project to the project roads. In fact, the project further affected the whole state road network and other infrastructure sectors. Concretely, as spelled out in the PAD s additional description to define efficiency, presented in paragraph 1.2, the project addressed the main deficiencies and priorities of the sector by focusing on (a) improving the condition of a deteriorated state road network that had a negative impact on transport costs, accessibility, and safety of designs and (b) improving the state government s overall capacity to manage the whole state road network, including planning preparation, execution, and monitoring of work programs at the administrative, engineering, and environment levels through the 4 Including (a) Tocantins Sustainable Regional Development Project (P060573), ; (b) Bahia Integrated State Highway Management Project (P095460), , and; (c) Sao Paulo Feeder Roads Project (P106663),

19 (i) introduction of modern management tools for planning road investments (PMS), (ii) the emphasis on sound maintenance practices through the implementation of a CREMA pilot component, (iii) the preparation of a comprehensive transport logistic plan to identify bottlenecks in the transport sector and introduce the private sector participation in the financing and operation of infrastructure, and (iv) the incorporation of new methods of data integration in environmental management. 28. The scope of the institutional strengthening component was realistic and within the borrower s capabilities. Within the institutional/policy actions, instead of attempting some big bang reforms, the team focused on clearly defined activities with potential to address some tangible, proximate challenges being faced by the targeted users in their duties, for example, reducing logistic costs, speeding up the issue of environmental licenses, introducing performance-based contracts and PPPs, developing project financial and management systems to track physical and financial progress of projects (to help AGESUL in better management of contracts), and a PMS for mechanized collection of structural data to determine road conditions to help AGESUL in better planning and budgeting expenditures. This realistic approach was considered as one of the most important factors of the successful implementation of the institutional strengthening component with all of the relevant targets met. 29. Project design was highly vigilant and cautious of possible adverse environmental or social effects in a very sensitive area. Works to be financed under the project were located in the state s northeast, center, and southern regions, on road sections not located near protected areas or the Pantanal or near indigenous lands or lands used by indigenous peoples within their customary rights Project financing considered the borrower s short-term financial constraints, resulting in rapid implementation at the beginning of the project. Loan disbursements were structured so that the World Bank would finance 100 percent of both the civil works and institutional strengthening activities until the depletion of the loan so as to support the borrower during the initial periods of project execution when the state s finances were still under the effects of the economic crisis, while counterpart funding would kick in afterwards. Adequacy of Government Commitment 31. At the outset, it is important to note that the project was prepared very rapidly in only nine months. This achievement was possible because (a) the borrower had the project substantially prepared in advance, for example, road rehabilitation designs were fully prepared, and preparation of surfacing projects were under way at appraisal; (b) the project had a very strong political support and the Government was very receptive and eager to learn from the World Bank s best practices in Brazil and other countries; and (c) 5 Twenty-five percent of the state territory is covered by areas of environmental interest, mostly located in the North-West (including the Pantanal, one of the world s largest tropical wetlands). The state is also home to the second largest indigenous population in Brazil after the State of Amazonas, with between 32,500 and 71,200 persons, mostly Guaranys and Terenas, located in the west and south of its territory. 8

20 AGESUL agility and strong professional teams, notably rapidly adopting World Bank requirements on procurement and financial management, were other reasons contributing to the project s swift preparation. Assessment of Risks 32. Risks were properly identified and mitigation measures were developed. At the time of appraisal, the project was assigned a rating of Moderate. Risks referred to (a) the possibility that the new state government that would be elected shortly after project effectiveness would not be in line with the project objectives, (b) the possibility that public opinion might be sensitive to the social and environmental context due to the presence of the Pantanal and indigenous land tenure disputes within Mato Grosso do Sul, (c) lack of institutional capacity and/or experience with World Bank procedures affecting project implementation, and (d) lack of experience with World Bank social and environmental safeguards and failure to implement the policies adequately. None of those risks materialized during project implementation as proven by the mostly problem-free execution period. One project contextual risk identified at appraisal that by supporting this project the World Bank might be associated with works or other development activities undertaken by the Government in other parts of the state where there exist sensitive biomes and important protected areas (Pantanal) as well as indigenous land tenure disputes did partially materialize in relation to indigenous populations, although with almost negligible impact on the project. The issue is discussed in detail in paragraph Implementation 33. The implementation of the civil works component of the project was completed speedily in two years and mostly in a problem-free manner. For different reasons, the pace of implementation of the institutional strengthening component could not match that of the civil works, thus requiring the extension of the loan s closing date. The following paragraphs highlight the main issues/aspects of project implementation. 34. A particularly efficient and well-staffed Project Management Unit (PMU) that benefitted during project preparation of adequate training on the generally unfamiliar World Bank fiduciary requirements and was able to jump-start the implementation of the civil works component immediately after loan effectiveness. The client was particularly efficient at initiating the first set of surfacing and rehabilitation works under the physical component of the project by handling in an appropriate fashion a set of large ICBs for both subcomponents. When after six months into project execution it became evident that the focus on civil works was affecting the launching of the institutional strengthening component, the staff of the PMU was increased to support the TA beneficiaries to implement their respective subcomponents. 35. Continuity of the project teams. The teams from the implementing agency and the World Bank remained the same from project inception and throughout most of the extended implementation period. This promoted close cooperation between the World Bank and the client while building on the already strong ownership and commitment to the project among the AGESUL staff and the other recipients of the TA under the project. 9

21 36. Effective and cooperative approaches to solving problems. The right-of-way occupation of the project roads by the sem terra 6 was solved promptly and in line with World Bank policies through the active and joint participation of the state and municipal governments allowing for the move of the squatters and their infrastructure to nearby municipal roads. The same can be said of the more complex and difficult task of addressing land erosion problems in one road section (see the details in section 2.4), which mobilized experts from the Government and the World Bank, and to a certain extent a more reluctant contractor into different (and sometimes unsuccessful) attempts to solve an a typical problem. 37. Protracted launching of the institutional strengthening component. The TA activities under this component were completed in a satisfactory manner albeit with a delay of one year. Many factors contributed to their late start: (a) an initial strong focus on civil works deprived the participating agencies, all lacking familiarity with World Bank requirements, of the AGESUL s hand-holding that they needed to launch their component; (b) federal regulations that complicated the contracting of foreign consultants; and more importantly and (c) the underestimation of the time required to develop intricate terms of reference for rather complex assignments. 38. Increased counterpart funding. Project costs were affected mainly for two reasons: (a) an unfavorable exchange rate and (b) the larger than expected increases in prices in the construction industry. The former significantly affected the roadworks financed by the World Bank which were implemented in 2010 and 2011 when the Brazilian real was strong against the U.S. dollar. The latter influenced the works by the counterpart, which were done in 2013 and In spite of these factors, the target on the road extension improved by the project was achieved because the state government, eager to have a perfect record of fulfillment of the original targets, increased the counterpart funding from the appraisal estimated US$75 million to US$120 million to compensate for a decrease in roadworks financed by the loan. 39. Midterm Review. After one year of loan effectiveness, 95 percent of the loan was already committed and 92 percent disbursed. This represented close to 75 percent of the project amount (when considering the counterpart funds). Theoretically, such level of disbursement should have triggered the midterm review. However, in view of the short lapse since effectiveness and considering the then only incipient progress in the implementation of the institutional component of the project, the review was postponed until October The midterm review allowed for (a) a thorough review of project implementation progress; (b) discussions on the remaining activities, including the selection of the works under the project second phase; and (c) discussions on the project 6 The Movimiento dos Trabalhadores Sem Terra (Landless Workers Movement) is a social movement in Brazil active in most of the country s states aiming to fight for general access to the land for poor workers through land reform. 10

22 monitoring framework. One month before the mission, the World Bank had endorsed the reallocation of the nonallocated proceeds from the loan. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design 40. The result framework of the project was adequate. The outcome/output indicators listed at the time of appraisal were fairly comprehensive and relevant for monitoring and evaluating the overall PDO and outputs/outcomes related to civil works and institutional strengthening components. The indicators used to evaluate the contribution of the civil works component of the project to the improved efficiency of the sector (that is, reduction of vehicle operating costs, increased traffic and improvement in road conditions, and extension of roads improved) are fairly standard and appropriate for this type of projects. As defined in the PAD, the indicators concentrate on the improved efficiency on the demand side that is, gains accruing to users through a reduction of vehicle operating costs although these gains can have an impact on the supply chain and logistic costs. 7 In the case of increased traffic on the project roads, although it would be difficult to isolate the effect of the project on traffic growth from the effect of other factors, such as economic growth, in this particular case there were cases of evident traffic diversion because of road improvements under the project (see section 3.2 and annex 3). 41. The indicators related to the institutional development components were simple and clearly related to increased efficiency of sector management as they focused on necessary management and planning tools in any modern and efficient transport sector, reflecting the rather undemanding approach adopted for a first-time client. In fact, one of the most successful outcomes of the project, that is, the important advances in the use of PPPs for infrastructure development, did not have a related indicator. The adoption of the openended target of introducing two undefined management tools in AGESUL (originally in SEOP) is also particularly interesting in this project. This approach, probably the result of a project prepared in a short period, had the advantage of giving more time to the government to make their decision on the preferred management tools and thus securing their ownership of the final product. On the other hand, the number of basic modern management systems for a road agency are very limited so the final selection of the systems was fairly predictable. Implementation and Utilization 42. The responsibility for result monitoring was shared among the different beneficiaries in their respective areas of responsibility. The M&E was implemented as planned. Semiannual reports were regularly submitted to the World Bank on time and in 7 Research has shown that an investment in transportation infrastructure that reduces direct transportation costs by 10 percent will result in supply chain improvements that will help companies reduce their operating costs by 1 percent. David Jacoby and Daniel Hodge From the Quarter issue of Supply Chain. 11

23 acceptable form and in general, there were no difficulties with regard to measuring result indicators. With the introduction of the PMS as a key managerial tool, AGESUL acquired the capability of systematically collecting information to monitor and evaluate the level of serviceability of the state road network (for example, vehicle operating costs, traffic, levels, and road condition.) 2.4 Safeguard and Fiduciary Compliance 43. Environmental. OP/BP 4.01 (Environmental Assessment) and OP/BP 4.04 (Natural Habitats) were triggered at appraisal. No further Operational Policies were triggered during implementation and World Bank procedures were satisfactorily followed. At appraisal, the project was accorded Category B, given that rehabilitation and surfacing works were foreseen on existing roads and no significant negative impacts were expected. AGESUL hired an environmental specialist to ensure that procedures were closely followed and there were no major impacts or safeguard compliance issues arising during project implementation. 44. While the project was in general free from serious environment problems owing to the measures in place to avoid negative environmental effects and the significant attention given to environmental issues, the only exception was an erosion problem near the MS- 436 roads with an extension of 107 km though the erosions did not immediately affect the traffic on the roads. The erosions took place because the area s sandy and fragile soil requires specific procedures for drainage construction. Inadequate works compromised drainage at least in five locations, in turn affecting some streams and the riparian vegetation. AGESUL took actions to solve the problem but the initial solutions proved inadequate when subjected to also unusually heavy rains in After consultations with the World Bank, AGESUL decided to implement specific solutions to boost natural recovery of the slopes at the critical locations using seed blankets and some other techniques. However, the countermeasure was only partially implemented because of the reluctance of the contractor as the cost of activities was not included under their contract. While AGESUL managed to stabilize the slopes to some extent, it will take more time until the problem is fully resolved. 45. Social. OP/BP 4.11 (Physical Cultural Resources) and OP/BP 4.12 (Involuntary Resettlement) were triggered at appraisal. No further Operational Policies were triggered during implementation. The project investments took place mostly within the existing right-of-way and did not entail displacement of people nor involuntary resettlement. Three minor land acquisitions were carried out on a voluntary basis under monitoring of the World Bank. As mentioned in section 2.2, there was one substantial contract under the project with the sem-terra. 8 On MS-010, the government identified about 60 tents and about 100 people occupying a section of 0.5 km. The government engaged in a dialogue to 8 There was another instance in which sem-terra campers were near the right-of-way. They were advised of the risks involved in camping near the construction works. Since they decided to remain in the site, adequate signalization was put in place to ensure their physical safety. 12

24 advise them of the risks of remaining in the area and discussed the alternatives for their move. The final decision respected the preference of the sem-terra to remain in the area but to be moved to a nearby area municipal road. They were peacefully reallocated to their selected site with the collaboration of the local government and the National Institute of Colonization and Agrarian Reform. 46. OP/BP 4.10 (Indigenous Peoples) was not triggered. During project preparation, a prosecutor from the Federal Public Prosecutor s Office had expressed concerns on potential negative impacts of the project on indigenous communities. Accordingly, the World Bank, the borrower, and the prosecutor agreed to avoid aggravating any potential conflicts with indigenous people by restricting project activities to those areas of the state not subject to indigenous people land claims. As a result, the project selected only road sections known to be located in noncontroversial areas for indigenous people. However, in late July 2012, the same prosecutor sent a correspondence to the management of the World Bank expressing concerns of potential impact of the project on indigenous populations in the state. Early August 2012, the World Bank management confirmed to the prosecutor that the project had remained the same since preparation and that it had no impact on indigenous populations. Fiduciary 47. Procurement. Procurement of works, services, and goods were satisfactorily carried out according to World Bank guidelines. The project had three civil works packages for road rehabilitation and three for road surfacing procured through International Competitive Bidding. In addition, several packages were procured through goods as well as consultancies contracts related to supervision of the works and the institutional strengthening component. An Independent Procurement Review carried out in May 2014 based on a sample of 12 contracts concluded that the bidding of works, hiring of consultants, and acquisitions of goods under the project were carried out with care and due diligence. The review pointed out the less than satisfactory performance of the client because of the delays in one particular consultant contract. This specifically refers to Brazil s lengthy requirements for the registration of foreign consulting firm, an issue that delayed the initiation of the TAs to the PMS. The review clarified that all project-related activities carried out by the authorities of Mato Grosso do Sul and the World Bank were carried out according to agreed procedures, and the less than satisfactory performance was attributed to the Brazilian federal government and its cumbersome regulations. 48. Financial management. The financial management performance was rated as Satisfactory throughout the project implementation period. The interim financial reports were generally received on time or with 1 30 days delay and were considered acceptable. Most audit reports were received on time or with a small delay. All of the audit reports expressed an unmodified (that is, unqualified) opinion. No cases of ineligible expenditures were identified during the life of the project. The World Bank s financial management specialist stationed in Brasilia carried out formal supervisions periodically. Supervision missions also identified the need to strengthen internal controls and the internal auditing function of the agencies benefitting from the project and included the financing of training for auditors. As a result, staff auditors learned about the meaning, concept, role, and 13

25 purpose of internal audit (as opposed to financial inspection and transaction review) and acquired knowledge of the international standards of internal audit (International Professional Practices Framework from Institute of Internal Auditors). 2.5 Post-completion Operation/Next Phase 49. The state government continues focusing its efforts on the rehabilitation and surfacing of the state road network through investments identified in the State Plan for Logistics and Transport (PELT) financed under the project as key to reduce logistic costs. Going forward, the state could concentrate on mainstreaming the achievements under the project, that is, (a) capacity acquired to manage civil works contracts, including performance-based contracts (CREMA); (b) successful practices/approaches for better management of social and environmental aspects; (c) enhanced use of IT to improve operational efficiency with regard to planning, road asset management, project financial management, and environmental licensing; and (d) adoption of innovative contracts such as long-term performance-based contracts and PPPs. Also, the project-supported ITsystems have significantly added to the AGESUL ability to regularly monitor and evaluate data on many critical parameters related to road conditions. In addition, road condition data provided by the PMS developed under the project is being used as an important factor to determine priorities for the new road investment program that the government is currently preparing. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of Objective: High 50. The PDO of improving the efficiency of the Borrower s road network in the project area continues to be highly relevant to the priorities of the state of improving the transport infrastructure to ensure competitiveness and economic growth. The project objective remains aligned with the Government s current agenda as state roads form the crucial intermediate link bridging the primary network of national highways and the tertiary network of rural roads. The project was structured in line with the CPS at the time of approval, that is, a macro foundation (macro fundamentals, good governance, and public sector management) and three pillars (equity, sustainability, and competitiveness) and the State Regional Development Plan 2030.The Government continues committed to the implementation of its development plan with particular focus on its four pillars of environmental sustainability, improved quality of life, economic sustainability with the expansion and modernization of the transport and energy infrastructure, and institutional strengthening with the modernization of the administration. In particular, and again in line with the Regional Development Plan 2030, the project objective remains highly relevant for the Government s ongoing efforts to (a) promote lower logistic costs and regional development through improved policies and strategic infrastructure investments and (b) support the private sector in frontier areas and further improve sustainable natural resources management. Finally, the project objective remains highly relevant in the current CPS , notably under its third and fourth pillars, (a) to promote regional economic development through improved policies and strategic 14

26 infrastructure investments and (b) to support the private sector in frontier areas and further improve sustainable natural resources management and enhance climate resilience while contributing to local economic development and helping meet rising global food demand, both of which the road network plays an important role on. Relevance of Project Design/Implementation: High 51. The project design had a balanced mix of civil works and institutional strengthening components. The project was structured around two components targeting five fairly welldefined sub-objectives that together have the sufficient weight/potential to achieve the overall PDO. The main outputs and the intermediate outcomes were all consistent with the PDO. The outputs, including the rehabilitation of 799 km and the resurfacing of 454 km of roads contributed to the efficiency improvement of the state roads by reducing transport and logistic costs. In the case of the TAs of the institutional development component, they contributed to the efficiency of the whole state road network through the enhanced management capacities in planning, environmental management, and management of infrastructure in general. In general, project design focused on a set of necessary conditions for an efficient sector, well beyond the expected PDO impact on the conditions of the project roads: (a) pavement and financial management systems for planning, programming, and implementing works in an efficient manner; (b) the introduction of CREMAs and the concept of efficiency embedded in road maintenance and life cycle costs; (c) the development of PPPs to harness the efficiency of the private sector in project development and management; and (d) gathering basic information and establishing the priorities to address key bottlenecks in the logistic chain. The project s Results Framework is found to be logically consistent as the selected set of sector-level indicators provide a fair measure of achievement of the overall PDO. 3.2 Achievement of Project Development Objectives Rating: High 52. The efficiency of the State of Mato Grosso do Sul roads was highly improved as demonstrated by the following results: (a) Reduction of operating costs to vehicle users, per average vehicle-km on the state network. The rehabilitation and surfacing of the state roads under the project resulted in an estimated reduction of the costs to users by 23.8 percent, surpassing the original target of 5 percent. The vehicle operating costs were estimated by using the Highway Development and Management Model (HDM-4) and adjusted to a 2008 price based on the inflation index (IGP-M). Furthermore, though it is difficult to quantify, user costs associated with economic loss of road accidents are expected to decrease, owing to rigorous reviews of the road designs from the road safety aspect. (b) Increase in the use of road transport infrastructure on the projectsurfaced roads. The increase in vehicle-km on the project-surfaced roads by January 2015 was 73 percent, substantially above the 15 percent expected at 15

27 appraisal 9 (see the traffic count data on table 3.1 in annex 3).While on average, the increase in most of the project roads was in line with the original expectations, this result was markedly influenced by one of the projectsurfaced roads that, once improved, provided the best alternative to connect large agricultural areas in the other state, namely Mato Grosso to the Port of Santos, the biggest port in Brazil. Intermediate Outcomes/Outputs 53. The successful implementation of the project civil works contributed to improving the efficiency of the state road network in the project area, as shown below: (a) As Subcomponents 1(a) and 1(b), the project contributed to the rehabilitation of 799 km and the surfacing of 454 km of state roads, exceeding the original appraisal targets of 750 km and 450 km, respectively. The total cost of the rehabilitation and surfacing works was US$409 million, of which the World Bank loan financed US$ 289 million. At the network level, the condition of the state-paved roads was improved as well: the proportion of the state-paved roads in good conditions increased from 49 percent in 2008 with a network length of 3,500 km to 82 percent for a network that now has 4,400 km, including 1,253 km under the project. (b) As Subcomponent 1(c) of the project, the project introduced on a pilot basis the CREMA concept (result-based maintenance and rehabilitation contract) in Mato Grosso do Sul. The modality is already widely used in several Brazilian states successfully providing longer-term secure funding for road maintenance while creating incentives for cost-effectiveness and promptness in the execution of works. The CREMA five-year contract for the pilot road section of 79 km was signed in 2012 and will be completed in The state is currently conducting a study comparing the CREMA costs with the costs of conventional contracts to demonstrate the advantage of CREMA. 54. The contributions to the improvement of the efficiency of the institutional frameworks for the state road network (and for other infrastructure sectors) include the following three key areas: planning and execution, environmental management, and participation of the private sector, through the achievement of the targets of all the indicators monitoring the institutional strengthening component of the project, as discussed in the following paragraphs. 55. Planning and execution. Subcomponent 2(d) of the project contributed to enhance AGESUL s planning and execution capabilities through the full implementation of an integrated road management system (also called PMS). While developing the system, 9 While it was not included in this indicator, an increase of traffic volume by 66 percent was observed also on project-rehabilitated roads. 16

28 AGESUL successfully installed the road inventory and condition database of the state road network into the system. The project also conducted the statewide traffic volume survey, the results of which were incorporated into the system as essential input data. With the management module already in place, the system is fully operational, providing a comprehensive framework for the road rehabilitation and maintenance management decisions and guiding the Government in ensuring economy and efficiency in the identification and execution of road investments 56. As already noted, the intermediate indicator aiming at SEOP s adoption of two new management systems were transferred to AGESUL. The completion of the integrated road management system (PMS) was one of those systems as it provides a comprehensive framework for the road rehabilitation and maintenance management decisions. The other was the full implementation of an integrated financial management system (KRONOS) for roadworks though it was financed by the borrower s own resource and out of the scope of the project. Developed in 2008 for contract management, the previous system was weak and provided unreliable information. Accordingly, this new system was fully developed to integrate physical and financial contract information, as well as work schedules, payments, and budgeting of new works. The system is fully operational. 57. As Subcomponent 2(c), the project assisted AGESUL in preparing the agenda of the PELT. The PELT, through comprehensive origin-destination studies and demand projections, identified major bottlenecks and summarized recommendations to improve the state s transport system in the areas of roads, railways, and ports. The PELT is being mainstreamed to continue to provide efficient planning, implementation, and monitoring of the state road infrastructure. Concretely, a new road investment plan is being prepared based on the PELT s finding. The study findings also provide a valuable instrument for the state s dialogue with the central government on issues that are outside of the state s jurisdiction: for example, the need for increasing the role of the centrally managed railways in agriculture, now mostly used for the transport of iron ore. 58. In addition, the project provided the framework for an intense dialogue with SEOP on sector organization and reform. A consultant was hired to conduct an institutional analysis and suggested a number of measures that were partially implemented during the project period. Most notably, the normative and executing responsibilities were clearly defined and separated. SEOP became the Secretariat of Infrastructure while SEMAC was divided between the Secretariat of the Environment and Economic Development and the Secretariat of Government and Strategic Management (SEGOV) that included the creation of a Strategic Partnerships Unit devoted to the development of PPPs. Moreover, human resource problems identified under the project are being addressed. In particular, AGESUL is reducing what was identified as an aging staff through attrition and hired 33 new engineers in Related to Subcomponent 2(a) of the project for strengthening SEMAC s capacity (later transferred to SEGOV), an integrated state financial and project management system was developed with the borrower s own resources, and this became since January 2015 as the official system for financial planning, budgeting, and execution of the entire state government. The system is in operation and monitoring the indicators of progress of the 17

29 government s investment programs, including PPP projects. Furthermore, the project provided funding for developing a result-based management system for the state government s initiatives. 60. Environmental management. The project s Subcomponent 2(b) contributed to the improvement of efficiency in environmental management of IMASUL through the development of a georeference system consolidating various information related to land use that provides a useful platform for bringing together the use of land resources and environmental issue. Furthermore, the digitalization of more than 40 years allowed significant efficiency improvement in accessing information containing background information necessary for its day-to-day analysis works, mainly, assessing and processing environmental licenses requests. 61. Private sector participation. Under Subcomponent 2(a), the project was instrumental in encouraging the state government to harness the PPP approach for delivering improved infrastructure and services. The implementation of the CREMA pilot introduced the borrower to the concepts of client satisfaction, transfer of responsibilities and risks to the contractor, and the incentives for the latter to seek technological efficiencies. Study tours to Belo Horizonte (a state with experience in the use of PPPs) and a workshop carried out in December 2011 that brought together professionals from different disciplines and origin (federal government and representatives from many Brazilian states) were key to allow the state government to mature the concepts of its specific policy on the role of the private sector. In 2012, the State Legislature approved Law 4303/2012 for the establishment of PPPs. A team, now in the newly created Strategic Partnerships Unit under the SEGOV, worked on launching two different projects that could not materialize. Currently, the unit is well advanced in the preparation of a PPP to provide sewerage systems to 69 municipalities in the state. 3.3 Efficiency Rating: High 62. An ex post economic analysis was conducted following the same methodology as the one done at appraisal, which assessed rehabilitation and surfacing to be financed by the World Bank, representing 62 percent of the total project costs. Costs and benefit were computed over a 20-year period from 2010 to 2029 with HDM-4, based on data (works, traffic, and so forth) effectively observed on the paved state roads under the project, including (a) types of road works applied; (b) observed unit costs for road works, which took into consideration the cost increase from the original appraisal estimate due to the application of a more sustainable solution; and, (c) observed traffic volumes before and after the work. 63. Overall, the ex post evaluation confirmed that the efficiency of the investments under the project remains High. The resulting economic internal rate of return (EIRR) and net present value (NPV) of the project were, respectively, 34.8 percent and R$291.1 million at a 12 percent discount rate at a 2009 price, which are better than the ex ante evaluation results at appraisal with the EIRR of 21.2 percent and the NPV of R$161.7 million, mainly owing to the higher traffic growth than expected (full details are presented in annex 3). 18

30 64. Most of the activities under the institutional strengthening component also contributed to efficiency gains, though it is difficult to quantify these benefits in monetary terms. For example, the pilot project on performance-based rehabilitation and maintenance contract, the PMS and the PELT, increases efficiency of the state s investments on the state road network through improvements in public policy decision-making processes for the long term. Furthermore, the environmental management improvements benefit the infrastructure development, including roads, by ensuring the sustainable transport reducing transaction costs of environmental licensing processes. 3.4 Justification of Overall Outcome Rating Rating: Highly Satisfactory 65. Project objectives and designs are deemed highly relevant to the country s priorities, aiming at supporting regional development and equity, reducing logistic costs through among others, improving the state network, and enhancing the capacity of the state for planning, environmental management, and bringing the private sector as partner in the financing of infrastructure and services. 66. Efficacy was high. The PDO indicators were fully met. Transport costs have decreased, the use of road infrastructure in the project roads has increased, and the percentage of state paved roads in good conditions has also increased. Beyond the PDO indicator, two project intermediate result indicators closely related to the efficiency of the state road network and all four indicators related to the institutional strengthening component were fully met. Furthermore, because of the good quality of the works under the rehabilitation and surfacing subcomponents and under the CREMA pilot, the efficiency gains are likely to be sustained. 67. Efficiency was high as was confirmed by the economic appraisal carried out that showed that the project socioeconomic rate of return remained robust, yielding to significant benefits for the project beneficiaries as a whole. 68. The overall outcome rating is considered Highly Satisfactory based on the above ratings. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 69. As envisaged, the project delivered on its intention of better connectivity and improved access to markets to the main beneficiaries, by significantly improving the riding surface as well as reducing the travel time of over 1,250 km of the state s road network. Furthermore, the project, through its institutional development component, contributed to improve the planning, implementation, and the financial and environmental management of infrastructure on the state level. These improvements are expected to have a positive impact on poverty alleviation through the value chain of higher and more efficient economic activity in agriculture and tourism and the consequent increase in livelihoods and employment opportunities. The project did not specifically address social issues. 19

31 (b) Institutional Change/Strengthening 70. The project contributed to improve management capacity of the state government in the transport sector. For example, the state government prepared an investment program on the state road network and the data provided by the PMS was used as one of the important elements for prioritization in the program. 71. Furthermore, the project made considerable inroads in the modernization of the state of Mato Grosso do Sul public sector management through the introduction of efficient management systems for government investments, the establishment of the legal and operational groundwork for the implementation of PPPs, a more efficient environmental licensing process, and the integration of a large amount of rich and diverse data from different sources and its display in spatial format. (c) Other Unintended Outcomes and Impacts (positive or negative) 72. As already mentioned in section 2.4, the project appears to have had an important impact on the performance of local construction firms. The borrower identified, as one of the main benefits of the project, the increased awareness of environmental matters by the local firms, which are now routinely using in their work the knowledge acquired during the implementation of the project. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable 4. Assessment of Risk to Development Outcome Rating: Moderate 73. The level of risk to development outcomes is rated as Moderate considering the following factors: Roads improved through rehabilitation and surfacing contracts under the project are likely to be sustained in the near future because of the good quality of the works and the commitment of the government to maintain the good condition of the state road network in their latest development plan. This was backed by the fact that as demonstrated by Intermediate Indicator No. 1, 82 percent for a network of 4,400 km, including the project roads which had works 5 6 years ago, is still in a good shape. Meanwhile, possible financial constraints raise some doubts on the capacity of the Government to fulfill that commitment in the long run. In the case of the CREMA component, full acceptance of this performance-based modality is pending the results of an ongoing study comparing the CREMA costs with the costs of conventional contracts. On the other hand, the management systems and tools developed by the project, such as PMS and the PELT are considered sustainable in the mid term since they are being mainstreamed to continue to provide efficient planning, implementation, and monitoring of the state road infrastructure, though the long-term challenge would be to keep the system relevant through the continuous updating of the input information. Finally, the improvements in the geographical information systems and the development of PPPs are incorporated into the operational processes in the state agencies and their contributions are expected to be sustainable in the long term as well. 20

32 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 74. The World Bank s performance during the preparatory period was Satisfactory with regard to the strategic relevance and approach; technical, financial, and economic analysis; and paying adequate attention to fiduciary and safeguards (particularly considering the challenging social and environmental aspects of the region). The World Bank played an important role in improving the economic viability of the surfacing subcomponent through the revision of the pavement designs and the introduction of more cost-effective solutions. Since the project was the World Bank s first major road sector project in Mato Grosso do Sul, the task team interactions at this phase played a significant role in (a) arriving at a project that focused on key challenges at that time and a choice of components/actions that directly addressed those challenges within the borrower s capabilities and (b) providing effective leadership and stepping up the PMU involvement and thereby building competencies in project preparation. In retrospect however, the difficulties in preparing complex terms of references (TORs) were underestimated and resulted in implementation delays. The other minor shortcoming was the erosion problem on MS-436 since again with the benefit of hindsight, atypical soil areas should have been identified by the World Bank team early in the preparation period. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory 75. Quality of supervision during the project implementation was Satisfactory. Traditional supervisory activities to monitor progress toward project outcomes were carried out and missions traveled to the field more than twice a year, with additional regular World Bank support provided directly by the project team. The World Bank had been fully engaged with the client during the implementation of all planned activities, paying due attention to the client s priorities and preferences as well as the World Bank s fiduciary and safeguards requirements. Adequate numbers of staff with requisite skills and expertise in technical and safeguards functions were engaged in supporting implementation including through missions at regular intervals. The mission Management Letters and Aide Memoires suggest comprehensive attention to all major components, duly highlighting the achievements as well as areas of concern, along with suggestions for addressing the proximate challenges. It is particularly noteworthy that the supervision, including safeguard, has been fairly alert and responsive. One positive development is that such rigorous supervision in the area of environmental safeguard eventually provided a higher awareness to several small construction companies involved in the project and these companies are now routinely using in their work the knowledge acquired during the implementation of the project. 76. Supervision missions were also attentive to the relatively more housekeeping needs such as changes in the monitoring framework or extending the closing date. The key issues in implementation were regularly brought to the attention of the sector and country 21

33 management through the Implementation Status and Results Reports (ISRs). The ISR ratings assigned to the quality of implementation provide a fairly accurate reflection of the project s performance in the corresponding periods, for instance, with the downgrading of the environmental management of the project. The quality of the World Bank team s support during the implementation was uniformly appreciated by the PMU. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 77. The Satisfactory rating is based on the fact that both the design and the supervision of the project were satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 78. The government of Mato Grosso do Sul s support for the implementation of the project was unwavering throughout the project period, consistently supplying the necessary funding that allowed the improving of 1,252 km of state roads and implementing institutional reforms to better define the normative and execution areas of the road sector as well as providing the legal and operational framework for the implementation of PPPs. Problems in the procurement of foreign consultants, which resulted in delays in the implementation of some of the TAs, were outside of the responsibility of the state government and were the result of federal regulations. Finally, the strong eagerness to have a perfect record of compliance with agreed targets and incorporating additional domestically financed eligible works to the project, speaks highly of the Government s commitment and ownership of the project. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 79. The rating gives substantial weight to the role of AGESUL as the executing agency of the civil works under the program, the main component of the project, and as the agency responsible for the coordination of the information gathered from SEMAC, SEOP, and IMASUL on, among others, procurement planning, certification of bills, progress in the activities under way, and achievement of intermediate outcome indicators. The performance of AGESUL on these activities is rated as Highly Satisfactory, both for its general institutional capacity for executing civil works and its effective management of the project (technical, fiduciary, and safeguards). Here, it is important to note that this was the first World Bank-supported road sector project in the state and it comprised relatively large-size civil works with new norms/processes for managing social and environmental aspects, new IT-based systems, and novel contracting approaches such as use of supervision consultants, performance-based maintenance contracts, and PPPs. Consequently, the PMU staff responsible for these activities often had to go through a rather steep learning curve and, to their credit, they mostly rose to the occasion and enthusiastically built their capacities and acquired new skills. The only shortcomings, though these are minor, were the initial concentration of efforts on the civil works 22

34 component and the delay in contracting some consulting services, which triggered the oneyear extension of the project period. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 80. Based on the above considerations the overall performance of the borrower is rated as Satisfactory. 6. Lessons Learned 81. Continuity and high level of professionalism of the implementing agency and the World Bank team was a positive contributing factor to the successful implementation of the project. AGESUL maintained a cadre of excellent professionals and a high degree of continuity in its project management team, which ensured a high level of readiness at the start and stronger ownership. The highly experienced World Bank team also retained most of its members throughout preparation and implementation. These have enhanced the long-term and stable relationship for cooperation and enabled them to react quickly to new needs and possibilities for further World Bank support. 82. Project appraisal with a high level of project preparedness contributed to very rapid implementation. When the project was appraised, the engineering designs of the first batch of the road sections were almost finalized. In addition, the project was free from any expropriation issue, which is a universal factor for delay in any road projects, because the Government already secured the necessary right-of-way for the road surfacing. In particular, the state had a very innovative mechanism that when the state constructs a new road, landowners along the road are required to provide voluntarily lands required for rightof-way of the road after 10 years of the road opening. 83. Effective implementation of environmental safeguards requires early identification, close supervision, and contract integration. The implementation of environmental measures during the construction stage is likely to be more effective if they are identified early on and integrated as part of the construction contracts, with provisions for related bill of quantities and incidental items and penalties to address noncompliance. The experience of the erosion problem in the project as a result of sandy and fragile soils that required specific drainage procedures and the fact that the solution of the problem was complicated because the cost of remedial actions was not included in the contract draws the following lessons: (a) the need for early identification by the World Bank and/or the client of atypical areas requiring an in-depth environmental plan, including ex ante site visits by the World Bank environmental specialists to ensure the adequacy of planned activities; (b) the adequacy in some exceptional cases on centrally designed project based on standard statewide specifications; (c) the need to increase the supervision role of the regional offices of the road agency, more familiar with local characteristics, in project design; (d) the need to make sure that extensive environmental management knowledge at the central level translates into field operations; and (e) good integration of the implementation of environmental measures into construction contracts. 23

35 84. Introduction of new alternatives requiring long-term commitments requires sufficient time for observations and internal discussions until its final adoption. The project included a pilot project introducing the concept of CREMA, a system of performance-based contracts that usually take five or more years. In spite of the proven record of the system in Brazil s federal road network and in several states networks, a priori the system appears more expensive than the conventional ones because the tradeoffs between the short-term benefits of the latter and the long-term benefits of the CREMA (both in terms of quality and life cycle costs) are not readily evident. The government of Mato Grosso do Sul is carrying out a study to compare the pros and cons of both systems. 85. Projects should give sufficient lead time and resources for launching complex institutional building components. One of the main reasons for the delay in the implementation of the TAs under the project was the time required to develop TORs for complex assignments. World Bank project designs appear to systematically underestimate the time and resources needed for the preparation of these TORs by institutions unfamiliar with World Bank procedures and generally lacking the in-house capabilities for the clear description of the goods or services they are procuring. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 86. The implementing agency did not raise any issues. (b) Cofinanciers 87. Not applicable (c) Other partners and stakeholders 88. Not applicable 24

36 Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$, million equivalent) Components Appraisal Estimate Actual Percentage of Appraisal State Roads Rehabilitation and Surfacing a Institutional Strengthening b Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs Front-end fee IBRD Total Financing Required Note: a. The value including contingency was US$360 million according to the PAD. b. The value including contingency was US$15 million according to the PAD. (b) Financing Source of Funds Appraisal Estimate (US$, millions) Actual/Latest Estimate (US$, millions) Percentage of Appraisal Borrower IBRD

37 Annex 2. Outputs by Component The following table includes the activities carried out during the project per component linked to the outputs attained. Table 2.1. Project Activities and Outputs Component Activities Outputs Component 1: State Roads Rehabilitation and Surfacing (Actual cost US$ million) (a) Rehabilitation The project rehabilitated the state-paved roads of 799 km (including a pilot CREMA contract of 79 km) resulting in reduction of road user costs and increase in traffic demand. (b) Surfacing The project supported surfacing of the state paved roads of 454 km resulting in reduction of road user costs and increase in traffic demand. (c) Pilot output-performance based rehabilitation and maintenance contracts (CREMA) The project successfully contracted the first five-year CREMA pilot for the state-paved road of 79 km, which contributed to assure sustainability of the state road asset. Component 2: Institutional Strengthening (Actual cost US$10.34 million) (a) Support to improve efficient management of public resources (SEMAC) PPP capacity building The project supported organization of a workshop on PPP; training courses on proposal for expressions of interest and short-term Masters of Business Administration; and contracting of individual consultants in the areas of legal, economic-financial analysis, and support to the PPP coordination unit. Support to the PPP Acquisition of office furniture and computers coordination unit Management by result Integrated monitoring and evaluation system of state investments The project financed a consulting service to develop the management system based on performance results for the government entities. The project also supported the participation of government officials in a training course on this topic. A financial and project management system was developed by the borrower s own resource since the state government took over the development of the system to make it statewide. The system monitors the result indicators of the Government s investment programs, including PPP projects. The World Bank s financial management specialist provided some suggestions for further improvements of the system. (b) Support to strengthen state capacity in environmental management (IMASUL) Consolidated environmental management tool The Geographic Information System for environmental management was developed through acquisition of software and digitalization of paperbased environmental related data for the last 40 years, both of which the project financed. The system consolidates historical and geographical environmental information and contributes to improve efficiency of required environmental assessment, including environmental licensing processes. 26

38 Component Activities Outputs (c) Support to consolidate planning capacity in the transport sector (SEOP) State Logistics and Transport Plan (PELT) The project financed the preparation of the PELT. The plan identified major bottlenecks in the state s transport system in the areas of roads, railways, and ports through comprehensive origin-destination studies and demand projections and provided recommendations on the state investments in transport Impact Study of Federal Concessions Support to project management infrastructure. A study assessed potential impacts of traffic on the state road network because of the federal road concession program in the state and demonstrated that some of the state roads could be used as alternative routes of the federal roads and could have significant increase in traffic volume, which would negatively affect the conditions of the state road network. Two individual consultants were contracted to assist the PMU in the areas of institutional reform and transport policy. Socioeconomic impact The study assessed the socioeconomic impact on evaluation study of state road households of the surfacing roadworks on the two surfacing projects state roads of MS-040 and MS-320, which were not a part of the project because all of the project roads had already been finalized when the study launched and showed positive economic impact. The implementation of this study contributed to their analytical capacity of road investment programs. (d) Support to consolidate execution capacity in the road sector (the State Public Works Agency, AGESUL) Integrated road management The project successfully installed and operationalized system (PMS) the PMS in AGESUL, including the road inventory database of the state paved road network, which provides a comprehensive framework for the road rehabilitation and maintenance management decisions. While this was originally planned to be developed by SEOP (Subcomponent 2[c]), as explained in 1.7, its responsibility was transferred to AGESUL during the implementation. Support to PMU Capacity building Five individual consultants were contracted to support the PMU of AGESUL in the areas of engineering, finance management, socioenvironment, transport planning, and budget. In addition, vehicles, office furniture and equipment, and computers were acquired to support its day-to-day operation. The project assisted the public officials in participating in a training course on tax management of contracts and agreements, and on audit. External audits External audits were conducted from 2010 to 2016 following the World Bank s financial management policy. Laboratory equipment Acquisition of laboratory equipment for quality tests of road pavement and works. 27

39 Component Activities Outputs Integrated financial management system (KRONOS) The system was developed by the borrower s own resource to integrate physical and financial contract information, as well as work schedules, payments, and budgeting of new works. The project did not finance the development of this system. While this was originally planned to be developed by the SEOP (Subcomponent 2[c]), as explained in section 1.7, its responsibility was transferred to AGESUL during the implementation. The World Bank s financial management specialist provided some suggestions for further improvements of the system. 28

40 Annex 3. Economic and Financial Analysis Introduction 1. This annex summarizes the ex post economic analysis of the project. The objective of the analysis is to assess the economic costs and benefits of the state road rehabilitation and surfacing works funded by the World Bank loan, using the methodology adopted for the ex ante evaluation conducted at appraisal. The major project benefits are savings in road-user costs, including vehicle operating costs and travel time costs, and reduction in maintenance and rehabilitation costs. To develop the ex post analysis model, several modifications from the ex ante model were made taking into account and based on (a) the type of works effectively executed and (b) observed traffic volumes and unit costs for works. The evaluation was conducted by using HDM-4. The results show that the EIRR and NPV were 34.8 percent and R$291.1 million, respectively, at a 12 percent discount rate at a 2009 price. Methodology 2. The ex post economic analysis in principle adopted the same methodology as the ex ante economic assessment that included an evaluation of the state road rehabilitation and surfacing works financed by the World Bank loan with the total extension of 796 km. The ex post evaluation covered the same road sections of the ex ante evaluation: five roads for rehabilitation with 515 km and four roads for surfacing with 280 km, representing 62 percent of the total project costs. This evaluation was accomplished using HDM-4 that conducted a cost-benefit analysis of roads rehabilitation and maintenance projects using the Consumer s Surplus Approach. 3. The project benefits mainly consisted of the reduction of vehicle operating costs and passenger time costs, together with the reduction of maintenance costs to the road agency when compared to the reference scenario (a do minimum scenario including only routine maintenance and reconstruction when the infrastructure triggers a deteriorated situation). Additional benefits to road users, which have not been quantified, included reduced accidents, improved driving, and riding comfort. Following the same methodology as for the ex ante economic appraisal, the project externalities on environment (including global warming) that were expected to be negligible or even positive were not considered in the analysis. 4. The program was analyzed by assessing the actualized streams of benefits to road users over a 20-year period and savings on maintenance costs (as compared to the withoutprogram case) net of the costs of the observed road works. The yearly discount rate used was 12 percent. Traffic Volume and Growth 5. The traffic volumes were updated by the traffic count survey on 10 roads under the analysis. See table 3.1 for summaries of survey results. The traffic data after the works was obtained through the traffic volume counting surveys conducted in 2015 and The annual traffic growth rate between 2010 (a starting year of the analysis) and 2015 was 29

41 adjusted based on the observed traffic volumes. The growth rate after 2015 is assumed as 3 percent, which was applied in the ex ante analysis too. Road Section Table Traffic Counting Survey Results Surfacing Extension (km) Ex Ante Daily Vehicle Volume Survey Year Daily Vehicle Volume Ex Post Survey Year Increase in Traffic (%) MS-112 Entr. BR-158 (Três Lagoas)/ Entr. MS-444 (Selvíria) MS-112 Entr. MS-444 (Selvíria)/ Entr. MS-377(Inocência) MS-274 Angélica-Distrito de Ipezal MS-306 Entr. MS-316 (GaúchoPobre)/Entr. MS-223 (Cantina) , MS-436 Entr. BR-060 (Camapuã) / Figueirão TOTAL Rehabilitation MS-306 Cantina - Chapadão do Sul 1, ,291 Cassilândia MS-377 Entr. BR Entr. MS (Inocência) MS-141 Naviraí Ivinhema , MS-276 Entr. BR Indápolis 1, ,234 Deodapolis MS-145 Entr. MS Entr. BR TOTAL Road Costs 6. The road costs were updated based on the contract values of the works. All costs are at a 2010 price. The applied unit costs of rehabilitation and maintenance are summarized below in table 3.2. Table 3.2. Road Costs Surfacing Costs of Rehabilitation and Surfacing Works under the Project Road Section Unit Cost (R$/km) MS-112 Entr. BR-158 (Três Lagoas)/ Entr. MS-444 (Selvíria) 976,887 MS-112 Entr. MS-444 (Selvíria)/ Entr. MS-377(Inocência) 1,205,500 MS-274 Angélica-Distrito de Ipezal 626,470 MS-306 Entr. MS-316 (GaúchoPobre)/Entr. MS-223 (Cantina) 666,578 MS-436 Entr. BR-060 (Camapuã) / Figueirão 1,169,130 Rehabilitation Rehabilitation MS-306 Cantina - Chapadão do Sul - Cassilândia 291,150 MS-377 Entr. BR Entr. MS-112 (Inocência) 412,110 MS-141 Naviraí - Ivinhema 231,030 MS-276 Entr. BR Indápolis - Deodapolis 381,595 MS-145 Entr. MS Entr. BR ,050 30

42 7. Costs of rehabilitation and maintenance works used for the without-project scenario and the future works of the project scenario. Table 3.3. Cost of Rehabilitation and Maintenance Works Vehicle Operating Costs 8. Table 3.4 presents the average vehicle fleet characteristics and operation costs, which are exactly same as those used for the ex ante evaluation. Table 3.4. Vehicle Fleet Characteristics and Operation Costs Scenarios 9. The economic assessment compares the project scenario to a without-project scenario. In this analysis, HDM-4 was run on each section of work, considering the following scenarios: Without-project alternative Rehabilitation roads: 31