The World Bank Third Secondary and Local Roads Project (P148048)
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1 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THIRD SECONDARY AND LOCAL ROADS PROJECT APPROVED ON JULY 3, 2014 TO GEORGIA REPORT NO.: RES32488 Public Disclosure Authorized TRANSPORT & DIGITAL DEVELOPMENT EUROPE AND CENTRAL ASIA Public Disclosure Authorized Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Cyril E Muller Mercy Miyang Tembon Jose Luis Irigoyen Juan Gaviria Natalya Stankevich
2 ABBREVIATIONS AND ACRONYMS FY GoG IP MRDI PDO RAP RD SLRP-III SRAMP WB Fiscal Year Government of Georgia Implementation Progress Ministry of Regional Development and Infrastructure Project Development Objective Resettlement Action Plan Roads Department Third Secondary and Local Roads Project Secondary Roads Asset Management Project World Bank
3 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID P Original EA Category Partial Assessment (B) Approval Date 03-Jul-2014 Financing Instrument Investment Project Financing Current EA Category Partial Assessment (B) Current Closing Date 30-Sep-2018 Organizations Borrower GEORGIA Responsible Agency Road Department of the Ministry of Regional Development and Infrastructure Project Development Objective (PDO) Original PDO The Project Development Objectives (PDO) are to reduce transport costs on project roads and improve the sustainability of road asset management in the secondary and local project road network. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IBRD Jul Jul Oct Sep Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No
4 Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This Restructuring Paper proposes to extend the closing date of the Project, scale up the rehabilitation of secondary road sections and make changes to some sub-component activities. This US$ 75 million Project was approved by the Board on July 3, 2014, and became effective on October 9, Disbursement stands at US$ 43.1 million (57.5%) as of June 12, The Project has accumulated some uncommitted funds and savings (around US$17 million) as a result of lower than expected contract prices for rehabilitation works and significant depreciation of the local currency since the Board approval. This is the first restructuring (including closing date extension) request. 2. The proposed Level-II restructuring of this Project is prepared in response to the Government of Georgia s (GOG) request of May 11, 2018 to extend the closing date for the Project by 21 months till June 30, 2020, end of FY20. The reasons for the extension are to (i) use the Project s uncommitted funds and savings for an increased impact of the Project through financing of additional rehabilitation of about 80 km of secondary roads, and (ii) provide continued support to the design-build contract for Bakurtsikhe-Gurjaani bypass section through the completion date of which is July 18, 2019, beyond the Project s original closing date. It is to be noted that while the Government s request included the financing of 100 km, the Project does not have sufficient funds to support rehabilitation of 100 km as requested in the GOG s letter, as the feasibility studies for the additional road sections most of which are being finalized by the time of restructuring have shown higher costs than initially estimated by the Roads Department (RD). 3. The Project Development Objective (PDO), which are to reduce transport costs on project roads and improve the sustainability of road asset management in the secondary and local project road network, is currently rated moderately satisfactory (MS). The MS rating is due to the fact that part of the PDO related to sustainability of local road assets management would not be achieved by the original closing date of September 30, The rating for implementation progress is also Moderately Satisfactory due to the need for more time to complete some of the ongoing activities beyond the original project closing date - September 30, The Project audit requirements have been satisfactory. The upgrading of the ratings of PDO and implementation progress to satisfactory will be subject to continued progress in the implementation of the new and remaining activities following the restructuring. 4. The Rehabilitation and Improvement of Secondary and Local Roads component (Component 1) has good progress to date. The total length of roads so far rehabilitated under the Project is about 157 km, out of which km is secondary and km - local road sections. The Project also supported the preparation of the currently ongoing Secondary Road Asset Management Project (SRAMP), capacity building of RD in management of its secondary road assets and implementation of road safety engineering measures in Imereti and Shida Kartli region. The RD intended to complete this major design-build contract for Bakurtsikhe-Gurjaani bypass by the Project s closing date and ahead of the official contract completion date. However, implementation of the Resettlement Action Plan (RAP) for this bypass has required more than expected time, which prevents completion of the civil works ahead of the schedule and by the Project s closing date September 30, The RAP is still under implementation for the first section (km ) of this bypass, while the RAPs for the second and third sections were implemented and civil works are completed on the second and on schedule on the third section. The Project has also been supporting the preparation of feasibility studies and detailed designs of road sections financed under this Project, ongoing SRAMP and for future projects to be financed by other donors
5 or from the state budget. 5. The Capacity Building Component (Component 2) has not been fully successful in achieving its objective of contributing to improved sustainability of local road assets management. Despite RD s efforts of developing TORs for the respective feasibility study and identifying individual consultants, the MRDI s Regional Development Department as coimplementing agency of this component has changed commitment to this study, the objective of which was to determine the feasibility of piloting local roads routine maintenance using a micro-enterprises approach. The contracts were pending signing with the selected three individual consultants for over year and are therefore are being proposed for cancellation as part of this restructuring. This activity is proposed to be replaced with another one, as per the consultations with MRDI and representatives of local municipalities (see details in Description of Proposed Changes). The Road Safety Component (Component 3) has four sub-components. One of these is aimed at supporting the identification of locations requiring road safety improvements and designing of respective engineering measures in Imereti and Shida Kartli regions. More time is needed to implement those measures beyond the original project closing date, due to the longer than expected preparation of designs for two, instead of one. Regarding the three other subcomponents, the Government has proposed (following the new policy orientation) to drop these from the subject loan operation and finance them through grant funding from other donors or state budget. These sub-components include: (i) road safety education and publicity campaigns targeting residents living along three local roads in Imereti region and other road users, (ii) technical assistance (e.g., equipment and/or training) to patrol police to monitor and enforce safety rules on these local roads, and (iii) technical assistance (e.g., equipment and/or training) to emergency services operating to timely and effectively respond to road accidents and reduce the risk of fatalities on these local roads. The two sides agreed these will be replaced by the extended scope of sub-component 3.1. II. DESCRIPTION OF PROPOSED CHANGES 1. The proposed Level-II Restructuring involves the following changes: A. Change in the Results Framework: 2. PDO Level Results Indicators are left unchanged, only the targets of the indicators for vehicle operating costs and travel time are updated for the next year (2019) and end of the project year (2020) to reflect an increased scope of Component 1 as a result of this restructuring. 3. Adjustments have been made to the following intermediate result indicators: a. end target for rehabilitated secondary roads has been updated to reflect the inclusion of additional length of secondary road sections under rehabilitation by the extended Project s closing date; b. end target of rehabilitated local roads has been decreased because the lengths of the local road sections were verified during feasibility studies financed under this Project and the actual length is now accurately reported in the Results Framework as of No more local roads will be rehabilitated under this Project; c. end target for size of the roads in good and fair condition as a share of total classified roads have also been updated to reflect the rehabilitation of additional length of secondary road sections by the extended Project s closing date; d. end target for increase in annual rehabilitation/maintenance budget allocations (GEL/km) for secondary roads by 4.5% a year has also been updated to reflect the actual situation. This end target has already been overachieved, with GEL24,000 allocated per km in 2017, which is 66% increase compared to the baseline year s budget allocations and is significantly above the target of 19.25% for this year. The end target has
6 been revised to become GEL27,388 per km in FY2020 (it was updated by using the same 4.5% annual increase starting from GEL 24,000 in 2017); e. the intermediate indicator Safe Village Program implemented in Imereti Region is replaced with road safety engineering improvement measures are implemented in Imereti and Shida Kartli regions. The original definition of Safe Village Program encompassed road safety engineering measures, education and publicity campaigns, technical assistance to enforcement and emergency services. The restructured SLRP- III will only support implementation of engineering improvements but in two, instead of one, regions. B. Change in Components and Cost: 4. The overall component structure of the Project does not change, but the cost of Component 1 is slightly decreased while that of Component 3 is slightly increased. The following changes are proposed under each of the components: (i) Component 1 (Estimated Cost of US$89.86 million, IBRD Financing of US$71.89 million. Sub-component 1.1 will support the rehabilitation of additional 80 km of secondary road sections using the Project s savings and uncommitted funds of about US$17 million. The total length of rehabilitated roads under this Subcomponent is expected to be about 269 km (222 km of secondary roads and km of local roads) by the end of the extended Project closing date. (ii) Component 2 (Estimated Cost of US$1 million, IBRD Financing of US$0.8 million). A technical assistance to MRDI, namely feasibility study on the creation of micro-enterprises for routine maintenance of local roads, under Sub-component 2.1 is replaced with a training and/or study tour on optimization of planning and budgeting for local municipalities that are in charge of management of local road assets. This training was developed and delivered to local municipalities during the implementation of the first SLRP during All representatives who received that training are no longer working at local municipalities. Following discussions between the Government and the Bank, it was agreed that repeating this training for new staff of the local municipalities would be beneficial in developing their capacities. In addition, this sub-component will also include a study tour that would enhance their planning and budgeting practices. (iii) Component 3 (Estimated Cost of US$2.7 million, IBRD Financing of US$2.16 million). Three activities, namely education and publicity campaigns in Imereti region, technical assistances to patrol police and emergency services are cancelled. The unused funds are allocated to the implementation of road safety engineering measures in Imereti and Shida Kartli regions. C. Change in Loan Closing Date: 5. The Loan Closing date is requested by the GOG to be extended till June 30, D. Change in Disbursement Estimates: 6. The disbursement estimates are changed and reflected in the datasheet below. The disbursement updates reflect the forecast of implementation of additional rehabilitation works on approximately 80 km of secondary road sections until June 30, 2020 as per the GOG s request. E. Change in Implementation Schedule:
7 7. The implementation schedule is updated to reflect the time needed for the completion of the Bakurtsikhe-Gurjaani design-build contract and support of rehabilitation of about 80 km of secondary road sections. The civil works program for year 4 is to be completed by June 30, F. Change in Economic and Financial Analysis: 8. A list of additional 12 road sections was suggested by the Government for financing from the project s savings. The candidate sections were selected from the RD s Five-Year Rolling Program for Preservation and Improvement of Secondary Road Assets, which is annually updated based on a multi-criteria analysis. The RD is finalizing feasibility studies and detailed designs for 15 road sections under the financial support of SLRP-III, 12 of which are proposed for rehabilitations as part of restructuring. The extended SLRP-III will benefit poor people through improving their road access to markets, employment and social services and enabling users to travel more safely. The results of the economic analysis for road works are presented in the table below. EIRR varies from 11 percent to 31.5 percent, and most roads have an EIRR of over 12 percent. The overall NPV at 12 percent discount rate is GEL million, and the overall EIRR is about 17 percent. G. Technical, Social and Environmental Analyses 9. There are no changes in the results of technical, social and environmental analyses. The extended SLRP-III will use the uncommitted funds and savings to support the rehabilitation of additional 80 km of secondary road sections in Kakheti, Kvemo Kartli, Shida Kartli, Kvemo Svaneti and Samtskhe-Javakheti regions. Rehabilitation is to be mostly executed within the existing horizontal alignment of the roads. The designs and bidding packages are being finalized under the same project and the first round of tenders are to be announced in July All works are to be completed by June 30, There is no change in the result of social analysis of this Project. Rehabilitation of these additional secondary road sections will be of similar nature and scale, which the existing Resettlement Policy Framework (RPF), approved by the Bank and disclosed on April 14, 2014, will be able to address adequately. Like other rehabilitation and improvement works financed under this Project, impact on private lands or asset is expected to be minimum, if at all. The implementation agency has many years of experience and in-house capacity to handle involuntary resettlement under the Bank safeguard policies. Positive benefit from such additional works will include an improved access to markets, employment and social services, as well as improved road safety. Risks related to labor influx and community health and safety are expected to be minor, as is the case for other similar works financed under the Project, and will continue to be addressed under the ESMP. 11. There is no change in the result of environmental analysis of this Project. The extended SLRP-III will support the rehabilitation of additional road sections of about 80 km total length along existing alignments predominantly within their existing right-of-way. The Project continues to be classified as Category B for environmental assessment purposes. The same Environmental and Social Management Framework developed during SLRP-III preparation, approved by the Bank and disclosed on April 14, 2014, continues to apply. The potential environmental impacts of rehabilitating additional road sections are expected to be modest. Environmental and Social Management Plans (ESMPs) are being developed to be included in the tender packages to be issued for procurement of civil works and then incorporated into the contracts for the provision of work, so that compliance with ESMPs is mandatory for contractors. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal.
8 PDO_IND_TABLE III. SUMMARY OF CHANGES Changed Change in Results Framework Not Changed Change in Components and Cost Change in Loan Closing Date(s) Change in Disbursement Estimates Change in Implementation Schedule Change in Economic and Financial Analysis Change in Implementing Agency Change in DDO Status Change in Project's Development Objectives Cancellations Proposed Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Overall Risk Rating Change in Safeguard Policies Triggered Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Other Change(s) Change in Technical Analysis Change in Social Analysis Change in Environmental Analysis IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators
9 Reduction in vehicle operating costs for cars, GEL/km Unit of Measure: Number Value Revised Reduction in vehicle operating costs for trucks, GEL/km Unit of Measure: Number Value Revised Reduction in travel time measured by a proxy variable = average vehicle speed, km/hour Unit of Measure: Number Value Revised Improved condition of project roads, IRI Unit of Measure: Number Value Revised Intermediate Indicators IO_IND_TABLE Roads in good and fair condition as a share of total classified roads Unit of Measure: Percentage Value Revised
10 Size of the total classified network Unit of Measure: Kilometers Supplement Value No Change Length (km) of rehabilitated secondary roads Unit of Measure: Kilometers Value Revised Length (km) of rehabilitated local roads Unit of Measure: Kilometers Value Revised Date 04-Apr Jun Sep-2018 Increase in annual rehabilitation/maintenance budget allocations (GEL/km) for secondary roads by 4.5% a year Unit of Measure: Percentage Value Revised MRDI's active role in coordination of preparation of Annual Programs by Municipalities based on the Guidelines Unit of Measure: Yes/No Value No Yes Yes No Change
11 OPS_DETAILEDCHANGES_COMPONENTS_TABLE OPS_DETAILEDCHANGES_LOANCLOSING_TABLE Date 04-Apr Apr Sep-2018 Road safety engineering improvements implemented in Imereti and Shida Kartli Regions Unit of Measure: Yes/No Value No No Yes Revised COMPONENTS Current Component Name Component 1. Rehabilitation and Improvement of Secondary and Local Roads Component 2. Capacity building and strengthening in local and secondary roads management Component 3. Road Safety Technical Assistance Current Cost (US$M) Action Revised 1.00 Revised 2.20 Revised Proposed Component Name Component 1. Rehabilitation and Improvement of Secondary and Local Roads Component 2. Capacity building and strengthening in local and secondary roads management Component 3. Road Safety Technical Assistance Proposed Cost (US$M) TOTAL LOAN CLOSING DATE(S) Ln/Cr/Tf Status Original Closing Revised Closing(s) Proposed Closing Proposed Deadline for Withdrawal Applications IBRD Effective 30-Sep Jun Oct-2020 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes
12 Year Current Proposed ,000, ,682, ,000, ,691, ,000, ,410, ,000, ,778, ,000, ,000, ,436, Note to Task Teams: End of system generated content, document is editable from here.
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