Completion Report. Project Number: Loan Number: 2184-INO September Indonesia: Road Rehabilitation-2 Project

Transcription

1 Completion Report Project Number: Loan Number: 2184-INO September 2011 Indonesia: Road Rehabilitation-2 Project

2 CURRENCY EQUIVALENTS Currency Unit rupiah (Rp) At Appraisal At Project Completion 8 September December 2010 Rp1.00 = $ $ $1.00 = Rp8,800 Rp8,980 ADB ASEAN BAPPENAS CTC DGH DGLT DSC EIRR ERM IDC IMA IRI IRMS ITMS km LARP PCR PMU PPTA ROW RRP RUC (i) (ii) ABBREVIATIONS Asian Development Bank Association of Southeast Asian Nations Badan Perencanaan Pembangunan Nasional (National Agency for Planning and Development) core team consultant Directorate General of Highways Directorate General of Land Transport design and supervision consultant economic internal rate of return economic review module interest during construction independent monitoring agency international roughness index integrated road management system integrated transportation management system kilometer land acquisition and resettlement plan project completion report project management unit project preparatory technical assistance right-of-way report and recommendation of the President road user cost NOTES The fiscal year (FY) of the Government of Indonesia ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2010 ends on 31 December In this report, $ refers to US dollars. Vice-President-in-Charge B. N. Lohani, Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Officer-in-Charge B. A. Finlayson, Indonesia Resident Mission, SERD Team Leader Team Member H. S. Soewartono, Senior Project Officer, SERD B. Mudiantoro, Project Officer, SERD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS Page BASIC DATA I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Output 2 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Output 11 D. Preliminary Assessment of Sustainability 11 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14 i APPENDIXES 1. Design and Monitoring Framework Chronology of Major Events Project Output Project Cost and Financing Disbursements Implementation Schedule Project Organization Structure Status of Compliance with Loan Covenants Economic Reevaluation 32

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5 BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) Indonesia 2184 Road Rehabilitation-2 Project Republic of Indonesia Directorate General of Highways $151,000,000 PCR: INO September September May June September June September September 2006 None 31 December April 2011 None 0.75% per year 25 years (inluding grace period) 5 years 8. Disbursements a. Dates Initial Disbursement 19 January 2007 Effective Date 12 September 2006 Final Disbursement 19 April 2011 Original Closing Date 31 December 2010 Time Interval 52 months Time Interval 52 months

6 ii b. Amount ($ million) Category Original Allocation Last Revised Allocation Amount Canceled Net Amount Available Amount Disbursed Undisbursed Balance 1A Civil Works Sumatra B Civil Works Kalimantan C Enforcing Controls over Truck Overloading Equipment A Consultants, DGH 3B Consultants, DGLT C Consultants, BAPPENAS IDC Unallocated Total BAPPENAS = National Agency for Planning and Development, DGH = Directorate General of Highways, IDC = interest during construction. 9. Local Costs (Financed) - Amount ($) Percentage of Local Costs Percentage of Total Cost C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total

7 iii 2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower-Financed ADB-Financed Other External Financing Total IDC Costs Borrower Financed ADB Financed Other External Financing Total ADB = Asian Development Bank, IDC = interest during construction. 3. Cost Breakdown, by Project Component ($ million) Component Appraisal Estimate Actual A. Road and Bridge Rehabilitation 1. Civil Works a. Sumatra b. Kalimantan 2. Consulting Services a. Core Team b. Field Team B. Road Sector Policy 1. Enforcing Control on Truck Overloading 2. Road Safety 3. Developing New Approaches C. Capacity Building and Training 1. Environmental and Social Impact Management 2. Project Management and Engineering Training D. Contingencies E. Taxes Total

8 iv 4. Project Schedule Item Appraisal Estimate Actual Part A : Road and Bridge Works Date of Contract with Consultants, CTC 1 Apr Nov 2006 Date of Contract with Consultants, DSC-1 1 Sep Feb 2007 Date of Contract with Consultants, DSC-2 1 Sep Feb 2007 Completion of Engineering Designs, Phase 1 1 Mar Mar 2007 Completion of Engineering Designs, Phase 2 1 Aug Mar 2008 Civil Works Contract, Phase 1 Date of Award 1 Jun May 2007 Completion of Work 30 Jun Dec 2010 Civil Works Contract, Phase 2 Date of Award 1 Sep Nov 2008 Completion of Work 30 Jun Dec 2010 Part B : Road Sector Policies Date of Contract for Truck Overloading Prevention, DGLT 1 Jun 2006 Canceled Date of Contract for Road Safety Campaign, DGLT 2 Jan Apr 2009 Date of Contract for Integrated Transportation Management System, BAPPENAS 2 Jan Nov 2009 Part C : Capacity Building on Road and Bridge Works Date of Contract for Engineering Support Training, DGH 1 Sep Sep 2008 Date of Contract for Social and Environmental Management Training, DGH 1 Jun Feb 2009 CTC = core team consultant, BAPPENAS = National Planning and Development Agency, DGH = Directorate General of Highways, DGLT = Directorate General of Land Transport, DSC = design and supervision consultant. 5. Project Performance Report Ratings Implementation Period Development Objectives Rating Implementation Progress 1 Jan Dec 2006 Satisfactory Satisfactory 1 Jan Dec 2007 Satisfactory Satisfactory 1 Jan Dec 2008 Satisfactory Satisfactory 1 Jan Dec 2009 Satisfactory Satisfactory 1 Jan Dec 2010 Satisfactory Satisfactory

9 v D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person-Days Specialization of Members a Appraisal 8 24 Sep a, a, b, c, d Inception 6 29 Sep a, e Loan Review 23 Aug 15 Sep a, e Special Loan 11 Dec Jan a, e Administration Loan Review 11 Aug 18 Sep a, e Special Project 2 19 Dec a, e Administration Loan Review 27 May 19 Jun a, e, f Safeguard Review 1 5 Jun e, g Midterm Review 17 Nov Jan a, e, f Project Review 19 Apr 20 May e, f Project Review 7 Oct 4 Nov e, f Project Review Project Completion Review 21 Feb 17 Mar Jun e, f e, e, h a a = engineer, b = financial analyst, c = programs officer, d = social development specialist, e = project officer, f = resettlement specialist, g = environmental specialist, h = economist.

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15 I. PROJECT DESCRIPTION 1. A main objective of the Indonesian government s national transport development plan is to build up intra- and interisland transport links as well as links to neighboring countries by developing the main national road corridors. However, the Asian financial crisis of the late 1990s weakened the government s financial situation and substantially reduced spending on transport infrastructure, particularly roads. The implementation of the government s long-term transport development plan came to a halt. Budget allocations for road preservation shrank. As the economy improved in the early 2000s the government was able to resume its long-term transport development focus, while addressing at the same time the road rehabilitation needs that had arisen since the financial crisis. 2. The Road Rehabilitation-2 Project was aimed at supporting the rehabilitation and improvement of strategic national roads in Sumatra and Kalimantan, in particular the most deteriorated road sections of links in 10 provinces (six provinces in Sumatra and all four provinces in Kalimantan). The links are part of trans-island corridors and serve both interregional trade and local traffic. They connect producing areas and markets on the country s two largest islands and provide access to the Association of Southeast Asian Nations (ASEAN) highway through links with Malaysia and Brunei Darussalam. The project also included measures to strengthen the capacity of central and provincial agencies to maintain and protect road surfaces and reduce the risk of accidents in areas of growing traffic. 3. The project had three components: (i) road and bridge rehabilitation works, (ii) support for the implementation of sector policy, and (iii) capacity building and training. The road and bridge component provided for (i) the rehabilitation or improvement of 1,292 kilometers (km) of national road, and (ii) the replacement or widening of about 40 bridges. Support for road sector policy involved (i) the installation of weighbridges to control truck overloading, (ii) the development of new approaches to road maintenance management, and (iii) the conduct of road safety awareness campaigns. The capacity building and training component consisted of (i) training in project management and engineering support practices, and (ii) the strengthening of capabilities in environmental and social impact management. By rehabilitating and improving 1,292 km of road on the strategic national road network, the project was expected to promote mobility, trade, investment, and economic growth, and thereby help reduce poverty and strengthen national cohesion. The project design and monitoring framework is in Appendix Project preparation was based on project preparatory technical assistance (PPTA), 1 which was completed in February The Board of Directors of the Asian Development Bank (ADB) approved a loan of $151 million for the project on 25 September The loan took effect on 12 September 2006 and had a completion date of 31 December It closed as scheduled, and no extension was required. Appendix 2 provides a chronology of major events. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 5. The project was designed to support the government s road development policy, which emphasizes the need to link more developed with less developed regions, including remote and 1 ADB Technical Assistance to the Republic of Indonesia for Preparing the Second Road Rehabilitation Project. Manila (TA 3989-INO, for $900,000, approved on 15 November).

16 2 border areas, through better-quality transport infrastructure and improved capacity along the island-based main national road corridors. The government is also committed to strengthening land transport and trade links between Indonesia, Malaysia, and Brunei Darussalam under the ASEAN regional cooperation program. The project was consistent with ADB s strategic focus for Indonesia and ADB s support for ASEAN s regional cooperation strategy. By underscoring the rehabilitation of road assets to enable their proper management in later years, the project remained relevant at completion. 6. The PPTA as the basis for project design was generally of good quality and helped the government formulate the road rehabilitation project. The PPTA was intended to (i) identify road links for high-priority rehabilitation in the national road networks of Kalimantan and Sumatra islands, to revive the economy and reduce poverty; and (ii) help the government review its Action Plan for Road Traffic and Transport Policies and revise the policies. Priority road links in Kalimantan and Sumatra were successfully selected under the PPTA, and the required investments underwent feasibility evaluation. From a long list of about 1,900 km of priority links, the PPTA identified about 1,500 km to be rehabilitated under the project. The PPTA consultant also proposed revisions in the road traffic and transport policies. But not enough resources were provided under the PPTA for the preparation and review of engineering designs for road sections in difficult geotechnical conditions. 7. The project faced significant cost increases (para. 20). Contingencies were underestimated. The design was nonetheless sound and incorporated lessons from previous projects, which helped ensure completion as originally scheduled. B. Project Output 1. Part A: Road and Bridge Works 8. This component comprised roadworks on a total length of 1,292 km, as follows: (i) 284 km of betterment works and 370 km of periodic maintenance works on 20 links in Sumatra, and the replacement of 19 timber and log bridges; and (ii) 474 km of betterment works and 164 km of periodic maintenance works on 13 links in Kalimantan, and the replacement of 21 timber and log bridges in Kalimantan. The periodic maintenance and betterment works were to bring the condition of the roads to a level where normal maintenance would suffice. These works mostly comprised resurfacing with asphalt concrete or hot-rolled sheet overlays, reshaping of shoulders, and improvement of side and cross drains. Betterment works on sections too heavily damaged to allow periodic maintenance included pavement reconstruction, drainage improvement, strengthening and minor widening of pavements and shoulders (within the existing right-of-way [ROW]), and resurfacing. Pavement markings and safety barriers and signs were safety improvements. No land acquisition, compensation, or resettlement was anticipated, as the road and bridge works were within the ROW (but two subprojects RI-01-I in Riau and BV-02-I in Central Kalimantan required more land during implementation). 9. A core team consultant (CTC) was to provide management advisory services to the executing agency, the Directorate General of Highways (DGH), and two field teams of design and supervision consultants (DSCs), one each for the Sumatra and Kalimantan regions, were to assist in (i) reviewing the designs and cost estimates, (ii) evaluating tenders, (iii) supervising civil works and certifying satisfactory completion, (iv) ensuring compliance with quality standards, and (v) monitoring project impact.

17 3 10. The road and bridge works were implemented in two phases, with 15 contract packages in the first phase and 11 in the second, and the targets were substantially achieved. A total of 1,145 km of roads and 41 bridges were rehabilitated and upgraded. Cost increases due to a combination of factors, most of which could not have been anticipated at appraisal, accounted for the slight underachievement in road length. Table 1 shows the civil works output including seven contract packages financed by the government. 2 This output is presented in detail in Appendix 3. Table 1: Road and Bridge Output Road Rehabilitation (km) Bridge Construction (no. of bridges) Location RRP Revised Target Completed Plan Contracted Completed Sumatra Kalimantan Total 1, , , km = kilometer, RRP = report and recommendation of the President. Note: The above figures include works that were eventually financed entirely by the government. Source: Final report of the Directorate General of Highways. 11. Quality assurance arrangements were set up at three levels during implementation. First, the contractor formed an assurance team consisting of a general superintendent, a laboratory engineer, and a pavement engineer. At the second level of quality assurance, a field team of DSCs under a site engineer was made responsible for the day-to-day supervision of the roadworks, the review and approval of the asphalt mix and the drawings, and the review and approval of the quality of the works. The CTCs provided technical and management advice to the DSC team and project management advice to DGH at the third level of quality assurance. The above arrangements were sound in principle and successful, yet the intended quality of the road pavement was not achieved in some cases. The use of poor-quality coal and poor supervision of the asphalt mixing plant in subprojects LP-01-I in Lampung province and SS-03-II in South Sumatra, for example, caused premature damage to the pavement. Despite efforts to deal with these issues and institute remedial measures, the quality of the pavement in these two subprojects was in doubt. 12. Most contract packages incorporated road safety measures, including road markings and road signage. In cases where the safety measures were improperly or inadequately installed, DGH used its own funds to complete the required road markings or signage. 2. Part B: Support for Road Sector Policies 13. Control of truck axle loads. To reduce road damage from overloaded trucks the project provided for the installation of new weighbridge equipment and the introduction of management arrangements involving the private sector following the model developed under the Road Rehabilitation (Sector) Project (RRSP). 3 A consultant was to assist in selecting three sites in Kalimantan and one in Sumatra, supervising minor civil works, installing the equipment, awarding management contracts, and monitoring effectiveness. 14. The Directorate General of Land Transport (DGLT), the implementing agency responsible for enforcing axle load limits, however, found the existing weighbridge operations 2 In the Central, South, and West Kalimantan provinces. 3 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Road Rehabilitation (Sector) Project. Manila (Loan 1798-INO, for $190 million, approved on 11 December).

18 4 unsatisfactory and requested ADB to cancel the installation of new weighbridges and the associated consulting services. DGLT had decided to review the performance of selected weighbridges built with various funding sources, and its axle load control policies. The project completion report (PCR) on the RRSP had also recommended that no new weighbridges be installed until appropriate laws and regulations could be established, and the operating and regulatory arrangements modified to allow effective enforcement. 4 ADB approved the DGLT s request, and agreed to a study to review the operation of existing weighbridges and the government s axle load control policies. 15. The study covered major weighbridges in five locations in Sumatra, Kalimantan, and Java and included discussions with stakeholders and seminars. It resulted in recommendations to (i) issue a presidential decree creating an institution, with BAPPEDA (Regional Planning and Development Agency), the Ministry of Transportation, the Ministry of Public Works, and the Indonesian traffic police represented, to monitor the operation of weighbridges; (ii) issue regulations governing cargo transportation; (iii) synchronize policies and laws; and (iv) operate the weighbridges in partnership with the private sector. These recommendations, together with several initiatives by various sources including donors, will be used by the government to decide the most appropriate methods to minimize truck overloading. 16. Road safety awareness campaign. The program was intended to improve awareness of the risk of accidents among children and other vulnerable groups living near the roads to be rehabilitated. Communities living in areas of West, Central, and South Kalimantan that were newly exposed to higher-volume and faster traffic were the targets of the program. A team of national consultants was hired to implement the program, which involved (i) identifying the causes of accidents along the project roads; (ii) developing relevant campaign modules; (iii) implementing the awareness campaign by holding workshops and training for the residents of 14 districts in Kalimantan, and distributing stickers and leaflets; (iv) interviewing public transport drivers and communities; and (v) creating a safety awareness community group (Kelompok Masyarakat Sadar Keselamatan). 17. Road maintenance management. To help ensure sustainable road investments, the project provided consulting services to assist in developing improved approaches to routine and periodic maintenance, assessing capabilities and training requirements in the provinces, and developing pilot projects for implementation. BAPPENAS, the implementing agency for this component, proposed to broaden the scope of the component to encompass new approaches to the development of an integrated transportation management system (ITMS), which would not be limited to the road sector but would also cover the government s strategy for managing and maintaining the country s transportation system. A national consulting team was hired to carry out the ITMS study with the support of an international consultant. 18. The objective of the ITMS study was to support the government in developing, managing, and maintaining the national transportation system by devising a new approach to more effective, efficient, and durable transportation based on optimum and efficient transportation models and regional characteristics. The consulting team produced draft policies covering manufacturing location, service and industry location, infrastructure development and management, and technological progress. But as the study was completed only when the loan was about to close, the government declared its intention to follow up the consultants recommendations in future road projects. 4 ADB Completion Report: Road Rehabilitation (Sector) Project in Indonesia. Manila.

19 5 3. Part C: Capacity Building and Training 19. Both the training program in project management and engineering support practices (PMES) and the strengthening of capabilities in environmental and social impact management (SCESIM) were well implemented by DGH. The 12-month PMES was carried out to enable the DGH regional staff to manage construction contracts, prevent or mitigate landslides, maintain slope stability and retaining walls, manage DGH finances, and prepare technical specifications for road projects. A total of 193 DGH staff participated in the training conducted in Palembang, Pekanbaru, and Medan in Sumatra, and in Palangkaraya and Pontianak in Kalimantan. The SCESIM program was implemented to (i) improve the capacity of DGH s Sub-directorate of Environmental Affairs to analyze and manage the environmental and social impact of road rehabilitation projects, (ii) prepare environmental and social impact management procedures that conformed with government regulations and donor guidelines, (iii) train DGH staff in environmental and social impact management, and (iv) train the personnel involved in project implementation. A total of 398 DGH staff from headquarters and the provinces attended the training and conducted field studies on actual environmental and social issues in the project sites. C. Project Costs 20. At completion, the total project cost was $ million, 27% more than the $ million estimated at appraisal. Several factors led to the cost increase: (i) Further road deterioration. The project appraisal was conducted in 2004, more than 3 years before the civil works were first implemented. At the time of construction, the roads had deteriorated further after a late start. The phase 1 contracts were awarded about 1 year late, and the phase 2 contracts about 14 months late. The physical contingencies, calculated at 6.6% of the local base cost, were not enough to absorb the significant cost increases due to the further deterioration in road condition. (ii) Fuel price increases of 120% in March 2005 and 29% in May These also contributed to price increases in other materials. The price escalation ranged from 15% to 21%, and averaged 17%. (iii) A change in the highway design standard for national roads after loan approval. The minimum pavement width was increased from 4 meters to 6 meters in Kalimantan and 7 meters in Sumatra, and the minimum shoulder width was increased to 1.5 meters on either side of the pavement. The change affected some 322 km of road to be rehabilitated. (iv) Underestimation of costs. The costs of a number of roads in Kalimantan (in particular under subproject BU-1-I in West Kalimantan, where the existing road was not of paved standard) did not allow for the geotechnical and soil conditions in the area and were underestimated. 21. The financing plan was modified to address the cost increase. Of the 26 contract packages, the government agreed to fully finance seven two in Sumatra and five in Kalimantan. The ADB loan of $ million was to finance the remaining 19 packages according to the cost-sharing agreement with the government. The financing plan at appraisal called for ADB to finance $ million, representing 70% of the total project cost of $ million. At project completion, the ADB loan had financed 52% of the project and the government had financed the rest. The project cost at appraisal and at completion is in Table 2 below. Appendix 4 shows the details of the project costs and the financing plan.

20 6 Table 2: Project Cost at Appraisal and at Completion At Appraisal At Completion Source Foreign Local Foreign Local Exchange Currency Total % Exchange Currency Total % ADB Government Total ADB = Asian Development Bank. Source: ADB staff estimates. D. Disbursements 22. Of the $ million ADB loan, $ million was disbursed between January 2007 and April Disbursements for all components, including consulting services, training, and civil works, were made through direct payment. After the cancellation of the weighbridge component, no equipment was procured. The imprest account, with a ceiling of $1.50 million as provided for in the loan agreement, was not used, as the contracts were large enough to justify direct payment. 23. Of the $ million disbursed, $ million were for civil works (90.79%), $8.42 million (5.89%) for consulting services, $1.0 million (0.70%) for capacity building and training, and $3.75 million (2.62%) for interest during construction (IDC). The original IDC allocation of $17.46 million was overestimated; only $3.75 million of this amount was needed to complete the project. Of the IDC surplus, $9.47 million was reallocated to finance the civil works component. At project completion, $7.95 million of the loan amount (5.2%) was canceled. The projected and actual disbursements are shown in Appendix 5. E. Project Schedule 24. All contracts financed under the project were completed by 15 December 2010, or within 6 months of the expected completion date of 30 June 2010 and before the loan closing date of 31 December The loan account was closed only on 19 April 2011, as the allocation under the government budget for expenditures incurred in 2010 was not sufficient and the government had to provide for the shortfall under its 2011 budget. 25. The final designs for the phase 1 works were completed only in March 2007, while the prequalification, bidding, and award process took 1 year longer than anticipated. Contracts for the phase 1 works were awarded by the end of May 2007, instead of June 2006 as expected at appraisal. However, despite the long process of recruitment, the CTC and DSCs were fielded in time in relation to the civil works contracts, only 2 months after loan effectiveness, through advance procurement action by DGH. 26. All the civil works contracts were implemented within days. Contract BU-01-I in West Kalimantan, which involved huge amounts of earthworks in a remote area, took the longest time to implement. This contract was completed on 15 December Most of the other contracts were completed within days after the dates set in the contracts. The delays were mostly due to the additional works, delayed review of the designs by DGH, and to hitches in the contractor s financial cash flow. Appendix 6 presents the project implementation schedule.

21 7 F. Implementation Arrangements 27. DGH was the executing agency. It established a project management unit (PMU) under its director of planning with responsibility for monitoring day-to-day project activities, preparing project reports, and ensuring that ADB procurement guidelines and financial reporting requirements were met. The PMU was assisted by the CTC. A project steering committee was established to guide, coordinate, and monitor the overall implementation of the project; it was chaired by BAPPENAS and had representatives from the Ministries of Public Works, Finance, and Transportation. DGLT was the implementing agency for axle load control and for the road safety component, and BAPPENAS was the implementing agency for the development of new policy approaches to road maintenance management. 28. The civil works were implemented by Balai Besar Pelaksanaan Jalan Nasional (Balai Besar), the Regional Agency for National Roads Implementation, in close consultation with the Directorate for Implementation of Region I (for Sumatra ) and Region II (for Kalimantan). For each civil works subproject, the Balai Besar assigned a project manager. The DSC recruited by the Directorate for Implementation assisted the project manager in supervising civil works and reviewing the road designs. For the design preparation the Balai Besar assigned the Perencanaan dan Pembangunan Jalan Nasional (P2JN, the National Roads Planning and Development Agency), in consultation with the Directorate of Technical Affairs. DGH underwent minor organizational restructuring during the implementation. The changes affected the Directorate for Implementation related to the area of coverage and led to a new assignment for the Balai Besar. The recruitment of the CTC and DSCs was delayed during the period of restructuring. 29. After the installation of the weighbridges was canceled, DGLT implemented only the road safety component, and assisted BAPPENAS in evaluating the operation of existing weighbridges and the government s policy on axle load control. The development of a new policy approach to road maintenance management was replaced by the ITMS study. This study was implemented by BAPPENAS, as it involved the responsibilities of several government departments. The project s organization structure is presented in Appendix 7. G. Conditions and Covenants 30. The loan covenants, 41 in all, covered (i) project implementation and coordination, (ii) counterpart funding, (iii) reporting, (iv) environmental management, (v) social safeguards, (vi) health and safety, (vii) auditing, (viii) fiduciary and ethics control, and (ix) monitoring. No covenants were modified or waived during implementation. Except for the provision relating to the prevention of truck overloading, all covenants were complied with. Compliance with the loan covenants is detailed in Appendix 8. H. Technical Assistance 31. No technical assistance was attached to the project. I. Consultant Recruitment and Procurement 32. Consulting services. Consultants were recruited through quality- and cost-based selection (QCBS), according to ADB s Guidelines on the Use of Consultants (2006, as amended from time to time), to form three consulting teams that would provide advisory services in civil works implementation. The entire recruitment process took about 2 years. The length of the

22 8 process was attributable to (i) the replacement of the recruitment committee as a result of the DGH restructuring, and (ii) delay in finalizing the technical and final evaluation of each consultant. However, as mentioned earlier, DGH took advance procurement action and the three consulting teams were fielded on time. Other consultants were also recruited on the basis of government procurement procedures acceptable to ADB to assist in the implementation of (i) the road safety campaign, (ii) the engineering support component, (iii) the capacity-building program in environmental and social impact management, and (iv) the development of a new approach to integrated transportation management. Four separate consulting teams were formed. The recruitment of these consultants averaged about 8 months. The contract with the CTC was signed in November 2006, and both DSC contracts were signed in February The contract with the CTC was terminated in 2008 after a prolonged contractual dispute with DGH related to the qualifications of the assigned team leader and tax liabilities. A bridging team of national consultants recruited through single-source selection took over the CTC services for about 15 months, during the recruitment of a new CTC through QCBS. The new CTC was fielded in December Owing to the bridging arrangement, there was no interruption in services during the transition between CTCs. 34. The fielding of consultants was well below the estimates in the report and recommendation of the President (RRP). International consultants were fielded for only person-months (45% of the 284 person-months in the RRP) and national consultants for only 2,246 person-months (68% of the 3,324 person-months in the RRP). The significant difference was due to (i) the transfer of seven civil works contract packages, including the services of the supervision consultants, to government financing; (ii) the cancellation of the weighbridge component; and (iii) the slightly shorter duration of assignments for the road safety campaign, the training in project management and engineering support practices, and the strengthening of capabilities in environmental and social management. 35. Procurement of civil works. The civil works packages were divided into two phases according to the state of readiness of the detailed engineering design. Phase 1 consisted of 15 packages; contractors were selected through prequalification for 11 of these packages, and through post-qualification for four packages. The contractors for all four contract packages in phase 2 were selected through post-qualification. Prequalification took about 376 days on average while bidding took about 238 days, for a total of about 614 days from prequalification to contract award. DGH adopted post-qualification for the remaining four packages in phase 1 and for the phase 2 packages, at ADB s urging; as a result, the total bidding time was cut to 350 days on average. J. Performance of Consultants, Contractors, and Suppliers 36. Consulting services. The performance of the consultants recruited for the project was generally satisfactory. However, performance was uneven in quality among the DSC staff assigned to supervise construction in the field. The following factors may have contributed to the inconsistency of performance: (i) personal professionalism and dedication (or the lack of it) conditioning the performance of most DSC staff, who were not permanent personnel of the consultant firm and could therefore not be counted on to show the past performance of their employer to best advantage; (ii) large delays in contract signing, leading to lower-quality replacements for the originally proposed staff who were no longer available; and (iii) inadequacies in the capabilities and performance of the other actors, including government officials and contractors, which affected the outcome of the DSC activities. Overall, the effectiveness of the CTC and DSC teams was hampered by the complex institutional

23 9 arrangements governing the responsibilities of central and regional agencies, which involved many crisscrossing lines of reporting, consulting, and advice. It is still too early to assess the outcome of the study on a new approach to an ITMS and of the evaluation of the operation of the existing weighbridges, as this outcome will depend on government follow-up on the findings and recommendations. 37. Contractors and suppliers. All contractors were either pre- or post-qualified, had appropriate experience in works of a similar nature and size, and generally performed satisfactorily. Foreign contractors (from the Republic of Korea and Japan) participated in some bids but could not compete with qualified national contractors who were able to quote lower unit prices because of lower overhead costs. The two cases of low-quality pavement and premature damage, caused by the use of coal as fuel in the asphalt mixing plant, showed that DGH must be extra cautious when allowing contractors to use coal as fuel. The coal types that are allowed should be specified more stringently. Also, some contractors experienced cash flow difficulties as the price of fuel and asphalt increased significantly and price adjustments were delayed. All civil works were nonetheless completed before the loan closing date. No suppliers were involved, as the procurement of weighbridges, the only supply package, was canceled. K. Performance of the Borrower and the Executing Agency 38. The performance of the borrower and the executing agency was highly satisfactory. The borrower provided timely counterpart funding, resolved the project cost overrun by fully financing seven contract packages, and submitted withdrawal applications to ADB on time. DGH, the executing agency, demonstrated its commitment to complete the project on time. Issues that arose, such as the dispute with the first CTC, resulting in contract termination, were quickly resolved by a bridging consultant team. DGH proactively fielded an independent quality auditor to resolve the quality issues. It also requested the State Auditor Board (Badan Pengawasan Keuangan dan Pembangunan [BPKP]) to audit every contract variation, including price escalations, and coordinated effectively between implementing agencies and assisted in resolving issues. The cancellation of the planned installation of the weighbridges reflected a change in the government s understanding of how best to approach the issue of truck overloading, and was consistent with the recommendations of the PCR on the previous ADB-financed road sector project in Indonesia (footnote 4). L. Performance of the Asian Development Bank 39. ADB provided effective advice to DGH and responded promptly to inquiries from the executing and implementing agencies. It met with the PMU every two months to anticipate potential implementation issues and coordinate with DGH. ADB also fielded review missions on time and special project administration missions as required. Two major changes were made in the project during implementation to respond to (i) the project cost overrun, and (ii) the cancellation of the installation of the weighbridges. To avoid a repeat of the excessively long procurement process in Phase 1, ADB urged DGH to adopt post-qualification instead of prequalification in Phase 2. Procurement time was cut by almost half as a result. ADB also processed withdrawal applications without delay, and made timely disbursements. 40. The borrower, the executing agency, and the implementing agencies appreciated the transfer of project administration responsibility to the ADB Indonesia Resident Mission at an early stage of project implementation. The transfer resulted in more efficient communications, and enabled the parties to resolve implementation issues without delay. ADB s performance during project implementation was satisfactory.

24 10 III. EVALUATION OF PERFORMANCE A. Relevance 41. The project was highly relevant to the government s Medium-Term Development Plan , which emphasized the development of infrastructure through more efficient services and greater private sector participation, and with ADB s Country Strategy and Program Update on regional cooperation at the time of appraisal, and it remains highly relevant to this date. The islands of Sumatra and Kalimantan had been lagging behind other regions in road development, and the road deficiencies were seen to constrain growth. Improving the quality of the road infrastructure on the islands, and thereby also providing access to the ASEAN highway through links with Malaysia and Brunei Darussalam, was therefore an appropriate response. The changes made in the project the modification in the financing plan, the cancellation of the installation of the weighbridges, and the replacement of the road maintenance management study with a study on ITMS demonstrated the government s commitment to the objectives of the project and helped to ensure that the project remained fully relevant. The cancellation of weighbridge procurement was a sound decision considering the government s realization after the start of the project that its approach to controlling truck overloading was not effective. By financing consulting services for the evaluation of the operation of existing weighbridges, the project stayed relevant in regard to this issue. Several initiatives have been taken since then, at both the central and provincial levels, to deal with the issue of truck overloading and its negative impact. As for the ITMS study, planning and managing the transport system in an integrated manner in coordination with the various sectors of the real economy is a crucial task of government, and it deserved the project s support. B. Effectiveness in Achieving Outcome 42. The project was effective in achieving its purpose. It improved vehicular access on strategic national roads in Sumatra and Kalimantan, reduced road transport tariffs on selected routes, raised awareness of road safety, and strengthened governance in project implementation. Better roads, particularly in poor areas, now enable farmers to sell their agricultural produce in towns and cities at fairer prices and give them better access to health care, public services, and alternative employment opportunities. According to the report on the post-construction Socioeconomic Monitoring and Evaluation Program (SEMEP), road improvements on Link 35 and Link 36 in South Kalimantan have cut travel time to destinations 50 km or more away by about 30%. 5 Passenger fares have also decreased significantly by up to 50% for several destinations. The minibus fare for one destination was reported to have decreased from Rp25,000 to Rp10,000. In all locations covered by the post-construction SEMEP, a marked increase in travel by motorbike, at the expense of travel by public transport, was noted. Higher incomes in general had much to do with the increase, but so had the improved road conditions. Road safety awareness is expected to intensify in the target areas of the road safety campaigns. The wider shoulders provide more secure road space for nonmotorized traffic and pedestrians, heavy users of most of the roads. Not much progress has been made in reducing the premature failure of roads. But providing four weighbridges could not have had any noteworthy impact on this complex institutional issue. In sum, the project is likely to contribute to the wider developmental goal of fostering economic growth and improving the lives of those living in the influence areas of the project. 5 The SEMEP report was prepared by the CTC.

25 11 C. Efficiency in Achieving Outcome and Output 43. On the basis of a reevaluation of the economic internal rate of return (EIRR) of the subprojects, the project is rated efficient. The selection of road links followed approved procedures aimed at guaranteeing economic viability. At appraisal, the estimated EIRR of the 19 subprojects was between 10.3% and 49.9%, with the returns being higher on average for subprojects in Sumatra than for those in Kalimantan. 6 These calculations used the data and methods of the economic review module (ERM) of DGH s integrated road management system (IRMS). 44. The reevaluation of EIRRs also used DGH s ERM but applied the final construction costs, updated traffic data, as-built geometric characteristics and pavement thicknesses, and post-construction roughness indices. The reevaluation showed EIRRs of 16% 46% for the Sumatra subprojects and 15.2% 40% for the Kalimantan subprojects, and an overall EIRR of 26.9%. One subproject in West Kalimantan was not reevaluated because not all the necessary data were available. 7 Spot observations, however, revealed that the improvement and widening of this road section had significantly cut road user costs. It had also successfully opened up the remote area in West Kalimantan province, and provided access to Central Kalimantan province. Despite the significantly higher costs, the reevaluated EIRRs were broadly in the same range as the EIRRs at appraisal. The impact of the cost increases was counterbalanced by (i) higher savings in road user costs resulting from the averted deterioration of the roads; (ii) for the majority of subprojects, higher savings in road user costs resulting from improvements that were more substantial than anticipated at appraisal; and (iii) higher traffic volumes than predicted at appraisal, in more than half of the cases. These results are robust considering (i) the condition of the roads before the improvements, (ii) the levels of traffic on the roads, (iii) the improvements that were made, and (iv) the cost of the works. More details on the reevaluation are given in Appendix The output of the capacity building and training component was achieved with less input and at lower cost. The ITMS study and the evaluation of the operation of the existing weighbridges still require follow-up actions to realize their broader outcomes. All the project components started with some delay, implying less than efficient use of project resources. D. Preliminary Assessment of Sustainability 46. The project s output and outcomes are likely to be sustainable. The sustainability of the road rehabilitation and betterment works largely depends on three factors: (i) the appropriateness of the designs and the quality of construction, (ii) the quality of maintenance after the works are completed, and (iii) the effectiveness with which vehicle axle load limits are enforced. With respect to design and quality of construction, the investment is likely to be sustainable overall, as care was taken to ensure that final designs were appropriate and construction was adequate. In cases where there were early failures in construction, fully adequate remedial measures have been taken. But there is a measure of variability between subprojects in the quality of the designs and construction, in particular where terrain and soil 6 Three subprojects in Kalimantan with an EIRR below the threshold (10.4% 10.6%) were considered justified on the basis of socioeconomic factors, their role in the development of strategic corridors within Kalimantan, and their role in developing cross-border links with Malaysia. 7 This subproject showed marginal returns at the time of appraisal and may remain marginal. The road link ends at a wide river crossing (1 km), where the ferry service is unavailable for long periods at times of low water. A bridge is planned for this location, and bid preparation for this is under way. Experience in similar situations indicates that traffic levels could increase substantially and the road improvement could eventually have a satisfactory rate of return.

26 12 conditions are concerned. The works on road sections in difficult soil conditions will require particular attention in the coming years. Regarding the effectiveness of maintenance policies and practices during the remaining life of the investment, the performance of DGH has improved over the years. The implementation arrangements for the management of national roads have been streamlined, with clearer lines of authority and responsibility than in the past. The fund allocation for the routine maintenance of national roads has increased and is on the order of Rp40 million per kilometer per year. 47. The greatest uncertainty as to the sustainability of some road investments derives from the continued poor enforcement of vehicle axle load limits. The government, however, seems committed to addressing this issue and is drafting more effective policies in part as a follow-up to the review of existing weighbridges. One element of the approach it is considering is to design roads on the basis of the actual axle loads observed on the roads rather than the legal limits. But implementing such policies could take time; meanwhile, some road sections could suffer damage from heavily loaded trucks. One encouraging sign is the initiative taken by some provinces to issue decrees on truck overloading, and thus begin addressing the issue independently from the central government. In 2008, the provincial government of South Kalimantan banned trucks carrying coal from the public road network, and the mines have subsequently built their own access roads to seashore loading points. The government of West Sumatra does not allow overloaded trucks to enter the province. E. Impact 48. At appraisal, the project was classified under environmental category B (sensitive). Initial environmental examinations (IEEs) were prepared and public consultations were held during project processing. The IEEs confirmed that the project would have no major adverse environmental impact. During project implementation, a team of environmental and socioeconomic specialists was recruited under the CTC to help manage and mitigate any possible environmental and social issues. The team (i) drafted environmental management and monitoring guidelines, (ii) drew up a checklist of environmental compliance for each contract package, (iii) prepared and implemented a program for monitoring environmental impact during construction, and (iv) reported on the implementation of the environmental monitoring program. For the social aspects, the team prepared a land acquisition and resettlement plan (LARP), and assisted local governments in (i) forming a land acquisition team, (ii) disseminating the LARP and consulting with affected people, (iii) setting a compensation structure, and (iv) forming an independent monitoring assessment (IMA) team. These measures and activities were carried out effectively. 49. The project design did not provide for any land acquisition, but the increase in road width standards to 7 meters in Sumatra and 6 meters in Kalimantan during implementation created a need for some minor land acquisition in two cases: (i) subproject RI-01-I in Riau province (Sumatra), and (ii) subproject BV-02-I in Central Kalimantan province. In subproject RI-01-I, the original pavement design varied between 5.0 meters and 6.0 meters. The increase to a uniform standard of 7.0 meters involved the resettlement of 191 households living along the ROW of the first 7 km section of the total km of road being rehabilitated. DGH, with the assistance of the CTC, prepared the LARP, which was approved by ADB and was a condition for contract signing. The LARP implementation was completed and was reported to ADB in September An IMA team was hired to confirm actions carried out by the local government and the contractor, and to record the satisfaction of the affected households with the remedial measures.