Road Maintenance and Upgrading (Sector) Project

Completion Report

Project Number: 32124 Loan Numbers: 1709, 2242, 2243 October 2013

Papua New Guinea: Road Maintenance and Upgrading (Sector) Project

This document is being disclosed to the Public in accordance with ADB’s Public Communications Policy 2011

CURRENCY EQUIVALENTS

Currency Unit – Kina (K)

At Loan At Supplementary At Project Appraisal Loans Appraisal Completion (29 April 1999) (31 May 2006) (4 October 2012) K1.00 = $0.37 $0.325 $0.485 $1.00 = K2.7 K3.076 K2.063

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund CSP – Country Strategy Program DOW – Department of Works EA – Executing Agency EIRR – Economic Internal Rate of Return EMP – Environmental Management Plan HRMG – Highlands Region Maintenance Group ICB – International Competitive Bidding NCB – National Competitive Bidding MTDS – Medium Term Development Strategy PFMS – Project Financial Management System PNG – Papua New Guinea PNRM – Papua New Guinea Resident Mission PCR – Project Completion Report RAMS – Road Asset Management System STI/HIV/ – sexually transmitted infections/human immunodeficiency AIDS virus/acquired immunodeficiency syndrome

NOTES

(i) The fiscal year of the Government coincides with the calendar year.

(ii) In this report, "$" refers to US dollars.

Vice President Stephen P. Groff, Operations 2 Director General Xianbin Yao, Pacific Department (PARD)

Director Marcelo Minc, Papua New Guinea Resident Mission (PNRM), PARD

Team leader Jagath Peththawadu, Portfolio Management Specialist (Procurement), PNRM, PARD Team members Ganiga Ganiga, Senior Project Officer, PNRM, PARD John Bego, Associate Project Analyst, PNRM, PARD

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.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Consultant Recruitment and Procurement 6 I. Performance of Consultants, Contractors, and Suppliers 7 J. Performance of the Borrower and the Executing Agency 9 K. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons Learned 13 C. Recommendations 14

APPENDIXES 1. PROJECT FRAMEWORK 16 2. SUMMARY OF PROJECT ROADS CONSTRUCTED 21 3. SUMMARY OF TRAININGS COMPLETED 23 4. PROJECT COST 24 5. ANNUAL EXPENDITURES BY LOAN CATEGORY 25 6. PROJECTED AND ACTUAL DISBURSEMENT 26 7. CHRONOLOGY OF MAIN EVENTS 27 8. PROJECT IMPLEMENTATION SCHEDULE 33 9. PROJECT MANAGEMENT FRAMEWORK 36 10. STATUS OF COMPLIANCE WITH LOAN COVENANTS 37 11. ECONOMIC REEVALUATION 53 12. CONTRACTS AWARDED AND FINANCED BY ADB 83 13. PROJECT EVALUATION RATING SCHEDULES 91

BASIC DATA: L1709

A. Loan Identification

1. Country Papua New Guinea 2. Loan Number 1709 (OCR) 3. Project Title Road Maintenance and Upgrading 4. Borrower Independent State of Papua New Guinea 5. Executing Agency Papua New Guinea Department of Works 6. Amount of Loan USD63.0 million 7. Project Completion Report Number PCR:PNG 1412

B. Loan Data 1. Appraisal – Date Started 28 June 1999 – Date Completed 9 July 1999

2. Loan Negotiations – Date Started 13 September 1999 – Date Completed 20 September 1999

3. Date of Board Approval 16 November 1999

4. Date of Loan Agreement 17 November 1999

5. Date of Loan Effectiveness – In Loan Agreement 15 February 2000 – Actual 15 February 2000 – Number of Extensions None

6. Closing Date – In Loan Agreement 30 June 2006 – Actual 10 November 2010 – Number of Extensions 2

7. Terms of Loan – Interest Rate LIBOR-based (floating) – Maturity (number of years) 25 years – Grace Period (number of years) 5 years

8. Terms of Relending (if any) NA – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval

11 December 2000 9 November 2010 123.80 months

Effective Date Original Closing Date Time Interval

15 February 2000 30 June 2006 76.50 months

b. Amount $63,000,000

Category or Last Net Subloan Original Revised Amount Amount Amount Undisbursed Allocation Allocation Canceled Available Disbursed Balance Civil Works 28,700,000 35,631,894 35,631,894 35,631,894 0 CW-Road 00 0 0 0 Upgrading Part A Ogulbeng-Mt. 554,707 0 554,707 554,707 0 Ambra Kisenapoi Ialibu 2,145,311 0 2,145,311 2,145,311 0 Wabag- 00 0 0 0 Meriamanda Mt.Ambra-Kotna 3,005,967 0 3,005,967 3,005,967 0 Kundiawa-Goro 391,000 0 391,000 391,000 0 Nupuru-Okapa 121,405 0 121,405 121,405 0 Wabag- 00 0 0 0 Warumanda Mt.Hagen-Baiyer 0 0 0 0 0 Oliguti-Lufa 2 2,191,855 0 2,191,855 2,191,855 0 Goro-Gumine 8,431,045 0 8,431,045 8,431,045 0 Meriamanda- 00 0 0 0 Kompiam Kotna-Banz 8,124,478 0 8,124,478 8,124,478 0 Korifegu-Nupuru 3,476,739 0 3,476,739 3,476,739 0 CW-Rd Asset 8,700,000 0 0 0 0 0 Management Oliguti-Lufa 1 786,024 0 786,024 786,024 0 HQ-RAMS 1,404,674 0 1,404,674 1,404,674 0 Extension Miunde Bridge- 00 0 0 0 Rabia Junction Mendi-Nipa 1,067,549 0 1,067,549 1,067,549 0 Chauve-Move 2,193,461 0 2,193,461 2,193,461 0 Liagam-Kandep 1,737,679 0 1,737,679 1,737,679 0

Consultancy CS-Design and 5,100,000 0 0 0 0 0 Supervision CS- 7,800,000 14,346,181 0 14,346,181 14,346,181 0 Implementation & Strengthening

Interest Charges 12,700,000 9,202,843 0 9,202,843 9,202,843 0

Imprest Account 00 0 0 0

Total 63,000,000 59,180,919 59,180,919 59,180,919 0

10. Local Costs (Financed) NA - Amount ($ million) 43.0 - Percent of Local Costs 37.0% - Percent of Total Cost 45.0%

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C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 71.8 59.1 Local Currency Cost 42.9 45.6 Total

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 51.7 45.6 ADB Financed 50.3 49.9 Other External Financing Total 102.0 95.6 IDC Costs Borrower Financed 0 ADB Financed 12.7 9.2 Other External Financing 0 0 Total 114.7 104.8 ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual A. Road Improvement 77.4 81.21 1. Road Upgrading 50.0 61.85 2. Road Asset Management including 27.4 19.37 Rehabilitation B. Training 2.2 C. Detail Design and Supervision 6.0 D. Implementation and Strengthening Road 8.6 14.35 Maintenance Operation

Base Cost Including Contingencies 94.2 95.56

Land Acquisition 7.8 Interest During Construction 12.7 9.20 Total 114.7 104.76

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants Q1 2000 21 November 2000 Completion of Engineering Designs Q3 2000-Q1 2004 Q1 2001 Civil Works Contract Date of Award Q2 2000 29 October 2001 Completion of Work Q4 2005 Q4 2010

5. Project Performance Report Ratings Ratings

Development Implementation Implementation Period Objectives Progress 30 November 1999 to 31 May 2000 S S 01 June 2000 to 31 December 2000 S S 01 January 2001 to 30 June 2001 S S 01 July 2001 to 31 December 2001 S S 01 January 2002 to 30 June 2002 S S 01 July 2002 to 31 December 2002 S S 01 January 2003 to 30 June 2003 S PS 01 July 2003 to 31 December 2003 S S 01 January 2004 to 30 June 2004 S S 01 July 2004 to 31 December 2004 S S 01 January 2005 to 30 June 2005 S S 01 July 2005 to 31 December 2005 S S 01 January 2006 to 30 June 2006 S S 01 July 2006 to 31 December 2006 S S 01 January 2007 to 30 June 2007 S S 01 July 2007 to 31 December 2007 S S 01 January 2008 to 30 June 2008 S S 01 July 2008 to 31 December 2008 S S 01 January 2009 to 30 June 2009 S S 01 July 2009 to 31 December 2009 S S 01 January 2010 to 30 June 2010 S S 01 July 2010 to 31 December 2010 S S

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person- of Membersa Days Fact-Finding Inception review 04-11 July 2000 2 16 b,e Project review 1 15-23 March 2001 2 15 b,e Project review 2 06-14 February 2002 2 13 d,e Project review 3 16-31 October 2002 3 22 b,e,f Mid-term review 31 Mar 2003-11 April 2003 3 33 b,e,f Special loan administration 28 Oct-13 Nov 2003 3 45 b,e,f Special loan administration 21 April-02 May 2004 2 20 b,e Project review 4 09-20 November 2004 2 19 a,e, Project review 5 13-21 May 2005 2 14 a,e, Project review 6 08-21 November 2005 2 28 a,e, Special project administration 21-24 May 2006 1 4 e Project review 7 10-23 October 2006 1 14 e Project review 8 05-14 November 2006 1 10 e Project review 9 26-30 June 2007 1 5 c Project review 10 26 Mar - 04 April 2008 2 10 b,c Project review 11 22-30 January 2009 3 27 a,c,f Project review 12 19-22 October 2009 3 12 a,b,c

Project review 13 22-31 March 2010 3 30 a,b,c Project review 14 28 Jun-06 Jul 2010 3 27 a,b,c Project Completion Reviewb 01 Oct 2012-04October 2013 4 4 a,b,e,f

Notes: a – Project Officer, b – Project/Financial analyst, c – Head of Project Administration Unit, d - Economist, e – Project Specialist, f - Consultant.

BASIC DATA: LOAN 2242/2243

A. Loan Identification 1. Country Papua New Guinea 2. Loan Number 2242 (OCR) and 2243 (ADF) 3. Project Title Road Maintenance and Upgrading (Supplementary) 4. Borrower Independent State of Papua New Guinea 5. Executing Agency Papua New Guinea Department of Works 6. Amount of Loan USD53.0 million 7. Project Completion Report Number PCR: PNG 1412

B. Loan Data 1. Appraisal – Date Started 26 February 2006 – Date Completed 13 March 2006

2. Loan Negotiations – Date Started 01 April 2006 – Date Completed 20 June 2006

3. Date of Board Approval 29 June 2006

4. Date of Loan Agreement 13 September 2006

5. Date of Loan Effectiveness – In Loan Agreement 09 November 2006 – Actual 09 November 2006 – Number of Extensions 0

6. Closing Date – In Loan Agreement 30 June 2010 – Actual 07 February 2013 – Number of Extensions 1

7. Terms of Loan – Interest Rate Loan 2242 “LIBOR-based”, Loan 2243 “Fixed” – Maturity (number of years) 24 years (Loan 2242), 32 years (Loan 2243) – Grace Period (number of years) 4 years (Loan 2242), 8 years (Loan 2243)

8. Terms of Relending (if any) NA – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval

23 November 2007 29 November 2012 60.76 months

Effective Date Original Closing Date Time Interval

09 November 2006 30 June 2010 43.30 months

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b. Loan 2242 Amount $35,000,000

Cat. Category or Original Partial Last Amount Undisbursed No. Subloan Allocation Cancellations Revised Disbursed Balance Allocation (1) (2) (3) (4=3-5) (5) (6) (7=5-6)

01 Civil Works 31,242,097 31,242,097 31,242,097 Korinige- Kerowagi 947,000 947,000 947,000 Seven Corners- 212,199 212,199 212,199 Kagua Kindeng-Kondopina 2,340,812 2,340,812 2,340,812 Banz Town- 2,163,711 2,163,711 2,163,711 Karameng Karameng-Dona 2,995,972 2,995,972 2,995,972 Ialibu-Pangia 5,329,334 390,031 4,939,303 4,939,303 Goroka-Lahame 2,773,103 2,773,103 2,773,103 Kamaliki-Bekuvia 4,127,582 4,127,582 4,127,582 Lame-Laiagam2A 3,980,814 3,980,814 3,980,814 Lame-Laiagam2B 4,178,407 4,178,407 4,178,407 Rypinka-Okapa 2,583,195 188,998 2,583,195 2,583,195 Backroad Okapa Backroad- Okapa Station

02 Consultancy 3,178,873 3,178,873 3,178,873 03 Unallocated

Total USD 35,000,000 579,029 34,420,970 34,420,970

Loan 2243 Amount SDR12,075,000 ($18,000,000) Cat. Category or Original Partial Last Amount Undisbursed No. Subloan Allocation Cancellations Revised Disbursed Balance Allocation (2) (3) (4=3-5) (5) (6) (7=5-6) 01 Civil Works Korinige- Kerowagi 309,378 309,378 309,378 Seven Corners- 71,922 71,922 71,922 Kindeng-Kondopina 773,293 773,293 773,293 Banz Town-Karam 416,738 416,738 416,738 Karameng-Dona 1,040,345 1,040,345 1,040,345 Ialibu-Pangia 2,112,808 473,024 1,639,784 1,639,784 Goroka-Lahame 919,155 919,155 919,155 Kamaliki-Bekuvia 1,260,758 1,260,758 1,260,758 Lame-Laiagam2A 1,309,503 1,309,503 1,309,503 Lame-Laiagam2B 1,371,908 1,371,908 1,371,908 Rypinka-Okapa 1,344,070 229,215 1,114,855 1,114,855 Okapa Backroad-

02 Consultancy 1,145,122 1,145,122 1,145,122 03 Unallocated

Total SDR 12,075,000 702,239 11,372,761 11,372,761 USD Equiv 18,000,000 1,080,303 17,553,905 17,553,905

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10. Local Costs (Financed) NA - Amount ($ million) 25.07 - Percent of Local Costs 32.0% - Percent of Total Cost 32.0%

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 46.52 51.63 Local Currency Cost 31.55 27.62 Total

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 10.70 27.62 ADB Financed 63.65 51.63 Other External Financing Total 74.35 79.25 IDC Costs Borrower Financed 0 ADB Financed 4.40 0.0 Other External Financing 0 0 Total 78.75 79.25 ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual A. Road Improvement 53.25 74.43 1. Road Upgrading 34.61 56.71 2. Road Asset Management including 18.64 17.72 Rehabilitation B. Consulting Services 10.43 4.82 1. Engineering Design 3.21 2. Project Design 2.66 3. Construction Supervision 4.26 4.82 4. Financial Auditing 0.06 5. Training 0.24 C. Contingencies 9.99 0.0 D. Interest During Construction 4.40 0.0 Total 78.07 79.25

4. Project Schedule Item Appraisal Estimate Actual

Date of Contract with Consultants Q4 2006 29 June 2007 Completion of Engineering Designs Q4 2006 Q2 2007 Civil Works Contract Date of Award Q2 2006 03 July 2007 Completion of Work Q4 2010 31 December 2012

5. Project Performance Report Ratings Ratings

Development Implementation Implementation Period Objectives Progress 30 June 2006 to 31 December 2006 S S 01 January 2007 to 30 June 2007 S S 01 July 2007 to 31 December 2007 S S 01 January 2008 to 30 June 2008 S S 01 July 2008 to 31 December 2008 S S 01 January 2009 to 30 June 2009 S S 01 July 2009 to 31 December 2009 S S 01 January 2010 to 30 June 2010 S S 01 July 2010 to 31 December 2010 S S 01 January 2011 to 30 June 2011 S S 01 July 2011 to 31 December 2011 S S 01 January 2012 to 30 June 2012

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person- of Membersa Days Fact-Finding Inception review 27 Aug -07 Sept 2006 2 8 a,e Loan review 1 23-28 August 2007 1 6 e Loan review 2 26 Mar-04 Apr 2008 2 10 b,c, Loan review 3 31 Jan-08 February 2009 3 27 a,c,f Loan review 4 23-27 October 2009 3 15 a,b,c Loan review 5 22-30 March 2010 3 27 a,b,c Loan review 6 06-10 November 2010 2 10 a,c Loan review 7 24-28 January 2011 2 10 a,c Loan review 8 10-15 April 2011 3 18 a,b,c, Loan review 9 10-12 July 2011 2 6 a,c, Loan review 10 24-29 October 2011 3 15 a,b,c, Loan review 11 31 Jan-08 Feb 2012 2 16 a,c Project Completion Review 01 Oct 2012-31 Mar 2013 4 a,b,e,f

Notes: a – Project Officer, b – Project/Financial analyst, c – Head of Project Administration Unit, d - Economist, e – Project Specialist, f - Consultant.

I. PROJECT DESCRIPTION

1. In November 1999, the Asian Development Bank (ADB) approved the Loan 1709; Road Maintenance and Upgrading (Sector) Project 1. The project represented a six-year time-slice of the Papua New Guinea (PNG) Government's investment plan for road restoration in the Highlands Region. The government investment plan included 935 kilometers (km) of road upgrading and 776 km of rehabilitation covering critical national and provincial road links in the five Highlands provinces. The Project aimed to restore the Highlands road network, which serves about half of the country's population, and facilitates more than 70% of its exports, involving 220 km of upgraded roads and 450 km of rehabilitated roads.

2. In June 2006, ADB approved supplementary financial assistance for the same project under Loans 2242 and 2243 2 , adding a four-year time-slice of the PNG Government's investment plan for road restoration in the Highlands Region. These two loans aimed at providing additional finance for road upgrading and rehabilitation subprojects with a length of 270 km in the five Highlands provinces. The Department of Works (DOW), the executing agency (EA), had fully committed all proceeds of Loan 1709-PNG by the time which were able to finance only 50.4% of the total length of roads targeted in the original L1709 project scope. The additional L2242/2243 loan proceeds were to enable achievement of 91% of the originally targeted road length.

3. The Project was part of ADB's strategy for the road sector, and targeted economic growth, social integration, and improvement of standard of living. It supported the Government's efforts to restore and maintain the road infrastructure in the Highlands Region 3 . Poor road conditions were adversely affecting the economy in the Highlands Region and the export earnings of PNG. Travel times on the roads were excessive, routes were difficult, and in many locations, unsafe. Recurrent traffic interruptions on the major road links had increased isolation of the communities and led to loss of export and business income. This had worsened social conditions and contributed to social unrest and breakdown of peace and security conditions.

4. The Project was to contribute to export growth and integration of the Highlands subsistence population into the mainstream economy by improving critical road links; establish a sustainable and effective road maintenance operation in the region; and improve sector management through further privatization, employment generation, and enhanced sector services. It was to upgrade and rehabilitate road conditions to induce growth, enable effective maintenance, and establish an effective asset management operation. The subprojects included: (I) road upgrading in the provinces of Eastern Highlands, Enga, Simbu, Southern Highlands, and Western Highlands; (ii) asset management of national and provincial roads, including rehabilitation and resurfacing subprojects, in the same provinces; (iii) training; (iv) detailed design and construction supervision; and (v) strengthening of project implementation and road maintenance operations. The project’s output was well short of the targets and only 252 kilometers of road were constructed/rehabilitated. Road maintenance operations have improved, but no data has been recorded to assess achievements against the operational and economic performance targets as outlined in the Project Framework included as Appendix 1.

1 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Papua New Guinea for the Road Maintenance and Upgrading (Sector) Project. Manila. (Loan 1709-PNG, approved on 16 November). 2 ADB. 2006. Report and Recommendation of the President to the Board of Directors on a Proposed Supplementary Loans to Papua New Guinea for the Road Maintenance and Upgrading Project. Manila. (Loan 2242-PNG and Loan 2243-PNG(SF), approved on 29 June). 3 PNG Department of Transport and Civil Aviation. 1993. Blueprint on Capital Works, 1994-2003. Port Moresby

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. At Appraisal, the Government’s Medium Term Development Strategy (MTDS) 1997- 2002 was the principal policy guideline for the country's economic and social development. It aimed to create an environment that enables the local population to make better use of their land, labor, and natural resources for their own and national benefit. For this, the Government placed importance on infrastructure, provision of health and education services, creation of opportunities for income generation, and addressing peace and security problems. Infrastructure development emphasized restoring and maintaining the existing infrastructure and improving planning and management.

6. The Project was in accordance with ADB's strategy, aiming to sustainably improve access to markets in the Highlands. It also strengthened asset management and public administration, and contributed to poverty reduction through improved access to social services and markets, and generation of employment. The Project reinforced the role of the private sector and communities by establishing a sustainable road sector by seeking to develop an effective road maintenance operation.

7. However, while ADB had learned lessons through the previous five loans ADB had made to PNG road sector and the Appraisal Report had identified strong measures for mitigating such risks4, L1709 does not seem to have followed an adequate formulation process to arrive at the intended sound design. For instance, the design of L1709 was not able to identify at Appraisal the road subprojects, a failure that was rectified at Appraisal for L2242/2243. Without identification of the subprojects, relevant community support was not generated and land and other compensation issues not settled in a timely manner. The sector loan approach, only requiring the economic appraisal of a single road subproject, further contributed to the project design failure5, by assuming the EA had the capacity to undertake technical, financial, economic and safeguard considerations. It appears that the sector loan approach adopted was not suitable. The Government’s capacity and willingness to provide counterpart funding was not adequately assessed and mechanisms put in place to ensure counterpart funding commitments would not cause excessive project implementation and loan disbursement delays. The design assumed unrealistic timelines for procurement and implementation and failed to put in place mitigating mechanisms to address contracting difficulties associated with the remote areas where subprojects were located, law and order difficulties, as well as the deficiencies of local contracting firms. The implementation arrangements assumed an unrealistic capacity of the DOW.

8. During Project formulation, insufficient attention was paid to assessing road upgrading and rehabilitation unit costs for contracting in remote areas, with likely law and order issues, and where local contractors were the only likely bidders on small package contracts. As a consequence, the output road distances incorporated in the Project Framework were significantly optimistic. In addition, the Appraisal design identified a higher proportion of roads to be rehabilitated compared to that to be upgraded with sealed road surfaces. In the context of

4 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Papua New Guinea for the Road Maintenance and Upgrading (Sector) Project. Manila. Table 1: Risk Mitigation Mechanisms, page 11-12. 5 In view of the difficulties associated with small highland roads subprojects, the failure to identify all road subprojects and complete economic appraisal of all subprojects was the root cause of initial project delays to contracting and disbursement.

3 highlands road materials and weather conditions, and a Government policy towards preference for sealed road surfaces, this proportioning is considered inappropriate. This was later reflected in the completed Project outputs, which showed a reversal of the proportion of roads completed that were improved compared to those rehabilitated.

9. Some design improvements were incorporated at Appraisal of the supplementary loans, with a steady improvement in the capacity of the DOW and implementation process, through closer Bank supervision executed by ADB’s Papua New Guinea Resident Mission (PNRM). The shortage of counterpart funding, procurement processing delays and limited capacity of local contractors remained as project implementation issue at project completion.

B. Project Outputs

10. The L1709 intended to upgrade 220 km and rehabilitate 450 km of provincial roads. In June 2006, the supplementary loans L2242/2243 added a further output of reducing roughness of an additional 270 km of provincial roads by end 2009. Summary details are provided in the Outputs section/Achievements column of the Project Framework in Appendix 1.

11. Of the contracted roads, DOW actually upgraded 112.1 km under L1709 and 91.3 km under L2242/2243. DOW also rehabilitated 70.2 km under L1709 and 17.5 km under L2242/2243. If the number of kilometers of roads with reduced roughness is used as the criteria for comparison, the two projects have improved a total 291.1 km of the total appraisal output targets of 940 km. Under L1709, DOW completed 182.3 km of provincial roads, representing 27.2% of the total 670 km appraisal target. Under L2242/2243, DOW completed 108.8 km of provincial roads, representing 40.3% of the total 270 km appraisal target. A summary of infrastructure completed is included in Appendix 2.

12. DOW transferred a considerable number of provincial road improvements that could not be financed by ADB for government funding during project implementation. With government funding, DOW upgraded an additional 110.5 km of roads and rehabilitated 21.8 km of roads. After infusion of additional government funds, it is estimated that only 60% of the appraisal output target for upgraded road km and 20% of the appraisal output target for rehabilitated road km was completed. It is noted that the Implementation Consultants provided design, procurement and supervision input to these government completed roads, which partly offsets the failure to complete the required road kilometres through project funding. Details of individual subprojects, including those contracts financed by ADB as well as those transferred for Government financing are in Appendix 12. There were many reasons for the shortfall in road subproject completions; (i) lack of subprojects being identified and evaluated at L1709 Appraisal; (ii) long period of 14 months spent on recruitment and mobilization of the Implementation Consultants6; (iii) long period until road subprojects approved by ADB7, such that only the first 7 road subprojects were approved within 3 years of Loan Effectiveness; (iv) long and in some cases flawed procurement process, generally in excess of 1 year; (v) contract costs in excess of engineer’s estimates; (vi) significant shortfall in government counterpart funding; (vii) poor contractor performance, which was exacerbated by inadequate supervision by

6 The full team of implementation advisors was fully mobilized in August 2002, some 31 months after Loan Effectiveness. Even though ADB insisted to mobilize the Implementation Consultants early, there was little project work to undertake and the EA had not yet provided the counterpart support staff or offices. 7 The first road subproject was approved on 27 October 2000, some 12 months after Loan signing; 4 road subprojects were approved by ADB in the second half of 2001, though 2 of these were further delayed due to a need to reappraise the subprojects due to design/costing errors; 2 subprojects were approved in the second half of 2002, 1 of which required rescoping.

4 the Implementation Consultants and EA; (viii) law and order issues, in some part a consequence of inadequate prior consultation with affected communities/land owners; and (ix) inadequate ADB project oversight from Manila (2000 to 2003), sometimes limited to an annual review mission.

13. Despite the significant increase in the allocation of loan funds to finance the implementation Consultants and Road Asset Management System (RAMS), outputs related to (i) annual routine and period road maintenance; (ii) baseline data; and (iii) socioeconomic impact assessment did not eventuate. Significant training, capacity building and implementation support was provided under the project, though the sustainability of these outputs has been lessened through DOW staff transfers and staff leaving to work in the private sector where wages are higher.

C. Project Costs

14. Components of the appraised costs and actual project costs are detailed in Appendix 4. Appraisal and actual project expenditures, together with an outline of the financing plan, is in Appendix 5. Final project costs were slightly lower than the revised cost estimates and $25.1 million less than the original appraisal costs for L1709. ADB funds were not used for land acquisition. ADB financing was $5 million lower than estimated. While Government financing was $4.3 million above the revised expenditure estimate, it was $19.7 million lower than estimate at L1709 Appraisal. It is noted that Government expenditure on training, stakeholder relations, financial audit and land acquisition were not provided. Government expenditure includes funding after loan closures on roads which had been part financed by ADB but not completed prior to loan closures, which are shown separately in Appendix 2 and 12. Roads which were designed and tendered under the Project, and which did not receive ADB funding and were completed using Government funding, but were designed, procured and supervised by the project consultants are shown separately in Appendix 2 and 14, but are excluded from the project cost tables. Government spending on these roads was $47.8 million. Table 1 outlines the final costs for the Project by loans.

Table 1. Actual Project Expenditures ($million) Actual Expenditures Actual Expenditures Actual Expenditures All

Source L1709 L2242/2243 Loans ADB Government Total ADB Government Total ADB Government Total Civil Works Road Upgrading 25.8 23.3 49.1 36.7 15.7 52.4 62.5 39.0 101.6 Road Asset Management, 8.5 11.2 19.7 10.1 6.7 16.5 18.6 17.9 36.3 including Rehabilitation HQ RAMS Extension 1.4 0.0 1.4 0.0 0.0 0.0 1.4 0.0 1.4 35.7 34.5 70.2 46.8 22.4 68.9 82.5 57.0 139.2 Consulting Services Implementation Support and 14.3 14.3 4.8 4.8 14.3 4.8 4.8 HRMG Interest during Construction 9.2 0.0 9.2 0.0 0.0 0.0 9.2 0.0 9.2 Total 59.2 34.5 93.7 51.6 22.4 73.8 110.8 57.0 167.6 HQ = Headquarters; HRMG = Highland Region Maintenance Group; RAMS = Road Asset Management System Source: PCR Mission

D. Disbursements

15. Following Loan Approval on 16 November 1999 and effectiveness on 15 February 2000, ADB first disbursed loan funds for project activities on 11 December 2000, almost 1 year later than the appraisal estimate8. The projected and actual disbursements under the L1079/2242 and 2243 are compared in Appendix 6 and show a slow start to disbursements, such that the first $10.0 million was only disbursed by 2004, two years later than estimated. Disbursements in the first three years were mainly payments to DOW and Implementation Consultants. The disbursement gap remained throughout the project and peaked in 2006, with actual cumulative disbursement being $15.2 million less than estimated after the Loan 1709 extension or $40.1 million less than estimated at L1709 Appraisal. During the last 4 years of the project the disbursement gap fell to $4-6 million.

E. Project Schedule

16. Appendix 7 provides a chronology of main events during project implementation. At L1709 Appraisal, it was estimated that the project would be implemented over 6 years. The original closing date was 30 June 2006, which was extended to 30 June 2008 in December 2004, and was extended a second time to 30 June 2010, in September 2007. At L2242/2243 Appraisal, it was estimated that the project would be implemented over 4 years. The original closing date was 30 June 2010, which was extended to 30 June 2012 in January 2010. Appendix 8 outlines a comparison of the time-based appraisal implementation schedule with actual implementation.

F. Implementation Arrangements

17. The implementation arrangements at L1709 Appraisal remained unchanged throughout the project. DOW was the Executing Agency and the project implementation unit was the Highlands Region Maintenance Group (HRMG), assisted by a team of international and local consultants. HRMG was headed by a field project manager and an office was located in each province, comprising an implementation advisor, a community relations officer, and other necessary project staff. HRMG’s role was to: (i) design the subprojects and prepare the bidding documents; (ii) handle the bidding process; (iii) provide construction supervision and manage contracts; (iv) monitor the project progress; (v) prepare withdrawal applications; (vi) maintain project accounts and complete the financial records for auditing; (vii) prepare project progress reports and the project completion report; (viii) monitor environmental and socioeconomic impacts; (ix) implement a cost-effective contracting-out system for road maintenance and so ensure the roads completed under L1709 and L2242/2243 are properly maintained; and (x) provide training on road maintenance, road safety, and sexually transmitted infections/human immunodeficiency virus/acquired immunodeficiency syndrome (STI/HIV/AIDS) prevention. A project steering committee was established to ensure close interagency coordination and monitor implementation of the Project.

18. The implementation arrangements structure as designed at Appraisal was assessed as adequate to deliver project outputs and achieve the project purpose. Implementation delays and procurement difficulties arose mainly because of capacity and oversight deficiencies. While the project steering committee was to meet quarterly, only 1-2 meetings annually occurred during the Project.

8 The initial disbursement of $1.39 million was the mobilization payment for the implementation consultants, though full mobilization occurred throughout 2001.

G. Conditions and Covenants

19. ADB made the loan effective within 3 months after L1709 approval, and within 2 months of L2242/2243 approval. While the project complied with most loan covenants, the most significant non-compliance was with the L1709 government requirement to provide timely budget allocations for road maintenance at an annual level of not less than K70 million in 1999 prices. The government also did not deposit counterpart funds at the time of submission of subproject evaluation reports as required. In addition, the government did not set up road maintenance trust accounts for each highland province within 3 months of Loan Effectiveness as required under L1709. The Government determined that it is difficult to manage separate road maintenance accounts in each province and, with ADB concurrence, established one central account9 with separate provincial ledgers to better deal with the risks of errors and funds misuse. The government also partially complied with the L1709 requirements to implement RAMS, in order to identify prioritized road maintenance and rehabilitation works schedules and to guide the allocation of road maintenance funding. The provision of counterpart funding can be expected to remain an issue with future similar projects in PNG. Delays were also encountered with submission of audited project accounts, with consistent late compliance. The government also failed to comply with the L2242/2243 loan covenant to implement and maintain the Project Performance Monitoring and Evaluation system 10 , including preparation of the government project completion report for those loans. Appendix 10 presents the overview of compliance with loan covenants.

H. Consultant Recruitment and Procurement

20. Consultant recruitment diverged significantly from the L1709 Implementation Schedule. The Implementation Consultants were to be recruited within 3 months of loan effectiveness and the Design and Supervision Consultants were to be recruited 4 months after loan effectiveness. Given the lengthy procurement process in PNG, this was an optimistic schedule and there was no provision for advance recruitment procedures. Even though DOW completed Implementation Consultants contract negotiations11 in July 2000, they were engaged by the government only four months later in November 2000. The consultants engaged two team members by February 2001 and the full team was only mobilized around December 2001, 21 months after loan effectiveness. DOW commenced actual recruitment of the Design and Supervising Consultants only on 30 July 2002, 29 months after Loan Effectiveness and 21 months after ADB approved the first road subproject. In May 2004 the award of the Design and Supervising Consultants was deferred till the October 2004 Review Mission, and in November 2004 the contracting process was cancelled before mobilization and the work transferred to the Implementation Consultants12. Most road subprojects under L1709 had already been designed and contracts had been awarded. This was given as the reason for the cancellation. There is no evidence in Bank Review Mission reports of consideration having been given to expedite the engagement of the Design and Supervising Consultants to speed up the processing of road subprojects under L1709 and to supervise road subproject construction that commenced in September 2001.

9 This account was established in April 2001, 14 months after Loan Effectiveness. 10 No baseline data has been recorded for all road subprojects and no post completion or annual benefits surveys or traffic counts have been completed. 11 Implementation Consultants contract value $9.3 million exceeded original allocation of $7.8 million, which was funded by a transfer of $1.5 million from design and supervision consultancy services allocation. 12 Use of two separate consulting firms, one for design and supervision and the other for implementation support, could be viewed as a design failure when viewed in the PNG highlands road project context. Logically the design precedes implementation support and supervision. A single consultant firm would have more effectively handled all three tasks.

21. DOW awarded road upgrading and rehabilitation works financed under L1709 on the basis of international competitive bidding (ICB) and national competitive bidding (NCB) in accordance with ADB Procurement Guidelines. NCB was used for contracts less than $1.0 million equivalent, in accordance with the Government's standard procurement procedures acceptable to ADB, in remote areas for which international interest is limited. DOW, supported by HRMG advisory consultants, determined contract packages. DOW procured all contracts equal to or greater than $1.0 million equivalent in value under ICB. Such contracts were encouraged to include joint-venture arrangements with local contractors. DOW, supported by the project implementation consultants, applied prequalification of contractors in accordance with ADB Procurement Guidelines. This resulted in delayed contract awards due to the slowness of the Government’s approval procedures. Of the 13 ADB-financed civil works contracts under L1709, 11 went through a prequalification stage. The average duration for prequalification was about 9 months. The government spent an additional 20.5 months on average from prequalification to contract award. Pursuant to the Government’s rules, any contract valued above K10 million (equivalent to $3.2 million) requires the approval of the National Executive Council (the national Cabinet) upon recommendation of the Central Supply and Tenders Board. This process caused delay in awarding contracts. Under L1709, securing Government approval of contract awards took 2 to 9 months.

22. Procurement of civil works under L2242/2243 also followed ADB Procurement Guidelines. DOW applied NCB for procurements below $3 million, the applicable threshold for PNG. Packages above $3 million were procured under ICB. Given the experience under L1709, ADB and DOW agreed to discontinue prequalification of contractors and apply single-stage one envelope bidding procedure with postqualification for both ICB and NCB contract packages to shorten the procurement period. Contractors with adequate technical and financial capacity were allowed to bid for several packages and were awarded more than one contract based on the least-cost combination of contracts.

23. Procurement mistakes/omissions and misprocurement occurred during the procurement process for the early L1709 road subprojects, due to the lack of experience and knowledge of ADB procurement within DOW, as well as poor ADB oversight of the procurement procedures. The affected road subprojects were generally transferred to fully government funded subprojects. These issues decreased as the subproject procurement progressed and DOW gained experience in procurement. A significant procurement issue that remained throughout the Project was the incidence of bids exceeding engineer’s estimates by a large margin. Engineer’s estimates were too low and outdated. ADB appraised the project in April 1998 and DOW awarded the first civil works contract after a lapse of 3 ½ years in October 2001. In addition, there was only limited contractor interest in remote highlands road contracts with a consequential impact of single contractors tenders incorporating excessive profit margins. DOW also did not receive a sufficient number of competitive bids on some road subprojects. In such cases, several road subprojects were re-packaged in 2-3 smaller contract packages to encourage more competitive bidding from contractors, with some success.

I. Performance of Consultants, Contractors, and Suppliers

24. Overall, the performance of the Implementation Consultants was partly satisfactory, as reflected in the ADB Review Mission Back-to-Office Reports. The firm took about 12 months after the contract to mobilize fully. The consultant’s inception report indicates that they delivered their structured program 7 months13 after the initial mobilization. They also failed to provide a

13 Compared with the 2 months after mobilization delivery date in the consultants terms of reference.

8 timely focus on their terms of reference requirement to advise and assist with road subproject identification and preparation of feasibility documentation. All these reasons significantly contributed to the delayed implementation of the road subprojects included in this Project under L1709. During their initial year, the consultancy firm frequently withdrew and replaced consultants, including the chief implementation advisor, due to: (i) the long visa application process; (ii) concerns over security and living conditions in the country; and (iii) health and family reasons. The implementation consultancy firm remained stable from 2002, however, there was a second period of high turnover and instability in 2006 when the same firm was engaged to continue the services for L2242/2243. During implementation of L1709 the consultancy firm was to establish a functioning Project Financial Management System (PFMS) to provide detailed costing of components, which took until May 2003 to become fully operational, more than 3 years after mobilization. When operational, this PFMS could not separate funding source between ADB disbursements and Government counterpart funding. This issue was never resolved and from December 2004, separate Excel table spread sheets were compiled to present the expenditure funding sources tables. During their engagement under L2242/2243 the Implementation Consultancy firm was required to undertake socioeconomic monitoring and evaluation, involving the establishment before April 2007 of baseline data and a set of performance indicators. The firm recruited an appropriate specialist in November 2007 for a period of 5 months, but this specialist only completed 3 weeks input as the work program was terminated by the EA and the consultant time transferred to engineering consultant resources. Consequentially, no socioeconomic monitoring and evaluation outputs were provided. The Implementation Consultants did not prepare the government’s Project Completion Report, as required in their terms of reference. The focus of the Implementation Consultants work throughout the Project was on implementation support, training and the preparation of operational and training manuals.

25. The performance of civil works contractors was partly satisfactory overall. DOW terminated three road subproject contracts due to unsatisfactory performanc14. There was no major difference in performance between international and national contractors and both were subject to similar negative disruptions but by varying degrees. Progress depended on the contractor’s way of managing the risks related to land and landowner disruptions 15 . In evaluating contractor performance it is recognised that most contractors have suffered from the difficult law and order situation in the Highlands, particularly in Southern Highlands, Enga, and Western Highlands provinces. The region frequently experiences ethnic clashes amongst traditional rivals and highway robberies. Modern weapons and drugs are freely available and law enforcement suffers due to under-resourcing of provincial policing units. For example, shooting and killing incidents in Western Highlands Province in November 2005 forced the contractors to stop civil works for 3 weeks. The most significant factor impacting on contractor performance was their inadequate capacity, with most road subprojects experiencing lengthy time extensions beyond their original completion dates. This was largely due to the limited availability of suitable construction materials, equipment and plant, manpower and financial resources. Some contractors were implementing too many contracts simultaneously, with limited resources (trucks, equipment, etc.) and inadequate management capacity. As a result, resources were being moved around without DOW’s permission, which was difficult to detect in the tough physical working conditions on the road subproject sites. Efforts by DOW to provide stronger supervision and monitoring against 2-month rolling plans, applying contractual

14 See Appendix 12 for details of contract terminations and subsequent transfer of contracts to other contractors or completion under full funding by government. 15 Working with landowners and having them understand the importance of the road and their cooperation improved implementation progress.

9 measures such as liquidated damages and other penalties to fast-track subproject implementation had limited effect. DOW also had to introduce time-bound recovery action plans to complete outstanding and defective works. Construction work also suffered due to land disputes and compensation claims originating from disputes associated with clan claims over ownership and access to quarry materials and clans wanting more compensation from contractors and the government. There was some improvement in contractor performance as the Project progressed.

J. Performance of the Borrower and the Executing Agency

26. The performance of the borrower and DOW, the executing agency, was partly satisfactory, with noticeable improvements in the capacity and performance of DOW by the end of the project. The government’s failure to provide appropriate levels of counterpart funds in the first 5 years of the project had a significant impact on implementation progress. This resulted in slow and untimely counterpart fund releases to the contractors who showed reluctance to work until they received contract payments on a timely basis. This led to ADB revising the government cost sharing ratio under civil works from 52% to 30% in September 2003, with no change in the loan amount, but reducing the project cost from $115 million to $90 million. The lack of timely counterpart funding was recognized as a risk at L1709 appraisal, though the mitigating mechanisms proposed were not enforced by ADB. The provision of counterpart funding remained an issue throughout the project.

27. The project implementation start-up delay was partly due to the difficulty of setting up HRMG as a functional project implementation unit. Formal training provided by implementation advisors, combined with learning by doing, brought clear improvement in HRMG capacity in the areas of engineering design, contract administration, construction supervision, quality control, and computer skills. The Project gained momentum in 2004, increasing the number of major contracts awarded and civil works in progress16, though this level of activity was not sustained. DOW encountered implementation delays again in 2007 when the Implementation Consultant team changed with the commencement of L2242/2243, indicating the reliance HRMG had on consultant implementation support. HRMG gained improved capacity from 2008 which will help it to implement future highlands road projects. .

28. The DOW has failed to implement the Project Performance Monitoring and Evaluation and has not submitted the government’s Project Completion Report (PCR) for L2242/2243.

K. Performance of the Asian Development Bank

29. Performance of ADB is rated satisfactory overall, but the performance varied throughout the project, and has been assessed in three periods, which coincide with different ADB staff supervising the project. In the initial period through to late 2003, ADB should have spent more efforts at ensuring start up compliance prior to loan approval. A prioritized investment plan was not available at the time. And given DOW’s capacity at the time, ADB should have been more involved in guiding DOW to recruit the implementation consultants early, enforcing the mobilization of the core consultants and helping DOW and the consultants to conduct technical feasibility studies, financial, environmental, and social due diligence, and to prepare the technical design and bidding documents. Procurement of civil works could have followed a one- stage bidding process with post-qualification, as the construction sector in PNG has limited

16 Some 9 road subprojects were approved in 2004, and 5 in 2005. Two contracts were awarded in 2004, three in 2005, and two in 2006.

10 competition. ADB also needed to strengthen its policy dialogue with the government, aiming to simplify the latter’s approval process for awarding contracts. At this time, the project was managed from Manila and short review missions once annually were conducted. During this period there was an unjustified diversion of the civil works funds to the RAMS project17, which ultimately failed to make any contribution to the project. There appears to have been little ADB senior management oversight action to implement remedial actions to improve disbursement levels. The most significant project delays occurred in this period and ADB initiated limited remedial action. In this period, ADB’s performance is rated unsatisfactory.

30. During the second period of 2004 to 2007, the project was still managed from Manila, but the incidence of review missions, usually for longer periods than previously, increased to 2-3 annually. The review mission involved more extensive subproject site visits. During this period, ADB processed the supplementary loans L2242/2243 and undertook close project supervision with more attention to progress against agreed implementation plans for individual road projects. In late 2007, with a change in the Manila-based ADB staff managing the project, the incidence of review missions returned to a single mission in 2008 and the level of supervision and attention to implementation was lower than the previous 3 years. Overall, due to the significant improvements in implementation progress and loan disbursement in this period ADB’s performance is rated satisfactory.

31. The third period is taken from the date the loan administration was transferred to PNRM in January 2009 until the completion of the project. During this period the incidence of review missions increased and ADB held monthly progress meetings with DOW. Implementation delays were addressed in a timelier manner, each review mission set time-bound achievement targets, and regular communications between DOW, HRMG and Implementation Consultants were maintained. ADB undertook subproject site visits more extensively than earlier in the project and held frequent meetings with the contractors. Monthly subproject targets were set commencing in 2010. In this period ADB’s performance is rated satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

32. At both appraisal and completion of L1709 and L2242/2243, the project design was relevant to government and ADB policies and strategies to develop rural communities and reduce poverty. At L1709 appraisal, one of the Government's three macroeconomic objectives aimed at stability through improvement of living standards by investing in infrastructure maintenance, health, and education. The MTDS 1997-2002 aimed to create an environment that enables the local population to make better use of their land, labor, and natural resources for their own and national benefit. For this, the Government placed importance on infrastructure and the creation of opportunities for income generation. Infrastructure development emphasized restoring and maintaining the existing infrastructure, and improving planning and management. At L2242/43 Appraisal, the Government attached great importance to improving transport infrastructure to achieve its overarching development strategy of export-driven economic growth, rural development, and poverty reduction. Transport infrastructure rehabilitation and maintenance was the first of seven expenditure priorities in Government’s MTDS (2005–2010).

17 A total of $1.4 million was disbursed to RAMS office at DOW, with little identified output in the form of improved road maintenance data or performance..

33. At L1709 appraisal, the project was in accordance with ADB's strategy that aimed to sustainably improve access to markets in the Highlands, strengthen asset management and public administration, and contribute to poverty reduction through improved access to social services and markets, and generation of employment. The project reinforced the role of the private sector and communities by establishing a sustainable road sector by developing an effective road maintenance operation. At L2242/2243 appraisal the project was consistent with the ADB country strategy for PNG, as documented in the country strategy and program (CSP)18, which identified the transport sector as one of four priority sectors or theme for the CSP 2006- 2010, with ADB support to focus on the roads and maritime subsectors. However, L1709, approved in 1999, had not been designed in line with the rigorous design guidelines later adopted by ADB, while there has been an improvement in this regard in L2242/2243.

B. Effectiveness in Achieving Outcome

34. The project was less effective in achieving the outcomes. Even though the project seems to have improved rural access to market centers, the targeted project outcome of L2242/2243, due to the absence of baseline data and socioeconomic monitoring and evaluation reporting during the project, it is not possible to assess the effectiveness in achieving this outcome. While i) reduction of travel time, ii) reduction of vehicle operating costs, iii) reliable passenger transport, iv) reduction of road closures, v) increase in coffee production, vi) reduction of freight rates and vii) improved road safety were the targeted outcomes, no baseline benchmarks were set. The project did not establish a benefit and monitoring system either. It is noted that only 60% of the appraisal output target for upgraded road km and 20% of the appraisal output target for rehabilitated road km was completed, after infusion of additional government funds. Observations suggest that vehicle traffic has increased significantly. It is likely that vehicle operating costs and travel time have reduced. The project seems to have benefited rural farmers and the households who gained improved access due to the project, reducing rural poverty. The effectiveness of the RAMS component of the project has been limited since the provision of road data was not completed and updating has not occurred. The training component continued throughout the project, though high staff turnover in those being trained led to retraining requirements and loss of institutional capacity built during the extensive training program. The effectiveness of the strengthening of project implementation and road maintenance operations as well as detailed design and construction supervision components, were affected by the periods of consultant team instability during 2001 to 2003 and again in 2006-2007. It is noted that lack of focus on benefit and monitoring is a generic problem in PNG. While both the government and development partners are increasingly drawing their attention to this issue, more needs to be done.

C. Efficiency in Achieving Outcome and Outputs

35. The project was efficient despite delayed performance and the cost increases of the road subprojects. Details of the economic and financial reappraisals are in Appendix 11. During the reappraisal, the methodologies, assumptions, and results of appraisal were reviewed. It followed the same appraisal methodology and benefited from having actual project costs, though there was limited post-project survey data. The Project recorded an economic internal rate of return (EIRR) of 14.9%, above the 12% benchmark set during L1709 appraisal and below the 18.8% calculated in the L2242/2243 appraisal. The economic benefits arise from: (i)

18 ADB. 2005. Papua New Guinea Country Strategy Program Update (2005–2006). Manila and ADB. 2006. Papua New Guinea Country Strategy Program (2006–2010). Manila

12 savings in vehicle operating costs, particularly repair costs, from improved road conditions; (ii) savings in maintenance costs; (iii) time savings for road users; and (iv) benefits to generated traffic. The reappraisal sensitivity analysis indicated that the base case EIRR would be reduced to 12% and the economic present value to zero if the road subprojects benefits were reduced by 15% or the project costs increased by 22%, suggesting that the project is not robust. It is observed that the most likely cause for reduced benefits relates to the failure to provide regular maintenance. This suggests that project results could be problematic if adequate maintenance activities are not adhered to over a prolonged period, such that the economic returns could be reduced to unacceptable levels. Consequent ADB funding to road sector projects has increasingly focussed on maintenance funding, with limited results.

D. Preliminary Assessment of Sustainability

36. Sustainability of the upgraded and rehabilitated roads is less likely, particularly the rehabilitated gravel roads. Factors likely to impact on the sustainability of the road subprojects are a reflection of issues that have been present throughout the implementation of the project civil works. The continued availability of government funding for road maintenance is expected to be one of the main factors determining sustainability. Other factors impacting on sustainability will be the: (i) ability and capacity of local contractors to undertake maintenance in these remote highland locations; (ii) impact of torrential rains that can last 6 or 7 months in this mountainous and geologically unstable region (roadside landslips and road subsidence being a recurring problem already); and (iii) ability and capacity of oversight agency to contract and supervise maintenance activities. Follow-up actions to enhance the likelihood of sustainability requires continuing dialogue between ADB and the government on the adequate government provisioning of road maintenance funds, including devolution of responsibility through provincial government funding. Continuing action to strengthen government supervisory skills for road maintenance and contractor management, as well as working to increase local contractor skills and capacity through ADB’s ongoing road project lending in the highlands region19 should also add to the likelihood of improved sustainability potential.

E. Impact

37. Observations suggest there have been positive social and economic benefits and impacts of the road subprojects, though no formal assessment had been undertaken. Rural communities’ access to markets and community services has improved. Roadside vendors have likely improved their incomes and community producers have enhanced access to market vendors, resulting in reduced rural poverty. Gender impacts were positive, though unquantified, with participation of rural community women in training programs and construction/maintenance workforce. There were no resettlement impacts in the project. Land and producer compensation payments were an ongoing issue during the civil works stages of most road subprojects, caused by insufficient prior consultation with affected people and rent seeking by some affected parties. These disputes related to materials quarry sites and the existing road alignment20. There were no significant environmental impacts associated with the road subprojects. Each road subproject had an initial environmental evaluation and environmental management plans (EMP) were included in the bidding documents and contracts. To ensure monitoring and compliance with the EMP, HRMG engaged an environment officer since February 2003, who was responsible to monitor and ensure compliance with all environmental aspects of the project.

19 ADB. 2010. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Papua New Guinea for the Highlands Region Road Infrastructure Improvement Program. Manila. 20 There was limited civil works undertaken outside the existing road alignments of the road subprojects.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

38. The project was rated partly successful based on a review of the relevance, effectiveness, efficiency and sustainability. Appendix 13 includes the quantitative assessment of the project’s performance to determine the project rating.

39. The government and DOW encountered cost escalations in all project components, and there was a small reallocation from civil works category for funding RAMS21. At appraisal, civil works project cost allocation was $106.7 million (63% of total project costs); while at completion the sum was $139.2 million, a higher 83% of final project costs. The L1709 appraisal cost estimate of $8.6 million for the Implementation Consultants was exceeded with an initial contract valued at $9.3 million, which rose to $14.3 million by the completion of L1709, funded through reallocation of funds from the Design and Supervision consultant22 allocation of $6.0 million. The Implementation Consultants were engaged to continue during implementation of L2242/2243, involving a further allocation to this component of $3.1 million at L2242/2243 appraisal. Compared with the appraisal allocation to Implementation Consultants of $11.7 million, the final cost at completion was $19.2 million, with the excess funded through reallocating funds earmarked for the Engineering Design and Supervision Consultants.

B. Lessons Learned

40. The lessons learned from this project were mostly cited in the L1709 appraisal itself23, and the mitigation mechanisms identified at Appraisal was not diligently applied.

a. The initial delays due to the lack of consistent and timely project review and oversight from ADB during the first 3 years of the project could not be corrected for a long period, during which time civil works progress fell behind completion targets and disbursement was constantly below expectations. In order to mitigate this, frequent review and close supervision and closely monitoring for in-country procurement processes will be required

b. Expedite Withdrawal Application processing by reducing processing time and involving ADB in checking the claim before the Engineer issues the payment certificate. One way of overcoming this issue is to ensure that counterpart funding allocation into the project account needs to be made as conditions for ADB’s disbursement.

c. Government counterpart funding for similar projects needs to be secured upfront, at least for the initial years with firmer guarantees for subsequent years, and paid into a separate project account. Subprojects need to be duly appraised, estimates

21 The allocation from civil works to RAMS institutional support in February 2002 of $1.1 million and $1.4 million was disbursed under L1709, which funding diversion was not fully justified by ADB. This reallocation had little impact on the efficiency and contribution of RAMS to the improvement of road maintenance in PNG. 22 The Design and Supervision Consultants were not eventually engaged, the related work being transferred to the Implementation Consultants and HRMG. 23 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Papua New Guinea for the Road Maintenance and Upgrading (Sector) Project. Manila. (Loan 1709-PNG, approved on 16 November). Table 1, pages 11-12.

prepared and approved, at least prior to Loan Effectiveness. Subproject preparations must reach 90% completion at the time of PPTA and 100% prior to Loan Effectiveness. This could be made as Effectiveness criteria

d. A rigorous assessment of an EA’s capacity to undertake technical, financial, economic, safeguards and governance evaluation of subprojects needs to be conducted during project formulation. PPTA report is to include a section or appendix on the EA capacity assessment and RRP is to propose measures to gap the capacity constraints

e. To facilitate project implementation, EAs need to encourage and apply advanced procurement where possible to engage consultants and initiate procurement activities for subproject contracts early to minimize delays which otherwise result in price escalations. Advance action for procurement and consultant recruitment is made compulsory with the assistance of ADB staff in guiding the EA’s staff.

f. To ensure efficient contractor performance, local contractor ability and capacity needs to be assessed in advance to determine appropriate contract packaging and apply single step procurement procedures. PPTA report shall include a section or appendix on the local contracting and consultant capacity assessment and RRP is to propose measures to gap the capacity constraints

g. Most importantly, the government, DOW and the development partners need to agree on adequate levels of maintenance funding necessary for the sector and ensure that they are provided into a separate account at the beginning of the year to implement a properly designed maintenance program. The amount to be committed by the Government/DOW needs to be clearly mentioned in the RRP and covenanted in the Loan Agreement.

h. To avoid implementation delays, project management units need to be established in advance, with appropriate personnel and advance capacity training provided to such personnel. Establishment of PMU and the engagement at least 90% of the PMU full time staff is made as condition for loan effectiveness.

41. Separating the engineering consultant roles between (i) design and supervision and (ii) implementation support needs to be carefully assessed during project design. When such division of responsibility is included in the project design, the design and supervision consultants need to be appointed first to avoid the project performance problems discussed in paragraph 20.

42. All civil works project loans need to be delegated to ADB’s country resident mission at the earliest date, to ensure closer monitoring, so that where necessary, monthly review meetings can be held with EAs to monitor performance against monthly agreed targets set at prior monthly meetings. This monthly monitoring approach should be mandatory for projects experiencing significant implementation and disbursement delays.

C. Recommendations

1. Project Related

43. Future Monitoring. The DOWs is encouraged to conduct annual sample surveys of all roads to provide continuing project impact data that must be integrated into RAMS. This survey monitoring is to incorporate an analysis of periodic maintenance activities and maintenance requirements.

44. Further Action or Follow-Up. Regular and close follow up on the status and completion of Government PCR as well as all project audit requirements is required especially at the country level. ADB processing missions of subsequent or connected future projects need to check the status of previous government PCR completion status thoroughly to ensure that the government complies with these requirements and to ensure that the government too learns

45. Additional Assistance. No further assistance is required.

46. Timing of the Project Performance Evaluation Report. The most appropriate timing of a project performance evaluation report would be 2 years after the loan closure.

2. General

47. The absence of an effective benefit and monitoring evaluation system, including the collection of detailed information on project performance variables should be remedied in future projects of this nature, as this would form the basis for more effective EA PCR reporting.

48. Covenants are considered adequate for the existing loans. Future projects‘ covenants should incorporate a requirement for the allocation of an appropriate level of budgetary resources to maintain the project roads for a specified period of, say, at least 5 years after project completion that should be reported to the DOW and ADB. Such requirements should incorporate allocations for routine maintenance, emergency repairs in an increasingly volatile climate, and periodic maintenance.

49. The scheduling of an ADB procurement mission at or close to the ADB inception mission, to facilitate the procurement process and provide early guidance on effective and efficient procurement of consultants and civil works, should be considered.

50. An actively functioning project steering committee needs to be made a mandatory requirement throughout the project to provide overall direction and policy guidance. With the overall direction and policy firmly established, approval of subprojects can be devolved to HRMG to shorten approval time for subprojects and hence minimize delays.

51. While there is evidence that consequent road project processing and implementation by ADB has improved considerably, future PNG road projects need to improve further and incorporate the lessons learned as outlined in paragraph 40-42 above. In particular: (i) road subprojects should be identified, evaluated, designed and be procurement ready at the time of loan approval; advance procurement action should apply; (ii) government counterpart funds should be provided to the executing agency prior to contract award; (iii) implementation arrangements and structures should be established and in place before loan effectiveness; (iv) similar projects should be delegated to PNRM early.

16 Appendix 1 Road Road e and ssumptions and Risks and ssumptions Effective project and maintenance implementation (i) Counterpart funds (ii) Sustained personnel in the Highlands Region Maintenance Group (HRMG) (iii) Adoption of Road Asset Management System (RAMS) (iv) Continued allocation of road maintenance funds (v) Adoption of road user charges and road fund

Goal Level A conditionsFavorable weather Favorable international commodity prices Agricultural services delivered Highlands Highway rehabilitated and maintained Adequate health and education services in city centers chievements No baseline data or benefit impact monitoring was undertaken. Observations suggest some positive changes against these targets. 252 kilometers of road constructed/rehabilitated. A No socioeconomic impact study done to assess, collect and record data on the targets. Observations suggest increased economic activity through better access for rural communities to markets, increasedtown roadside market stalls and wholesale buyer access into rural production areas. Women observed involved in road construction, maintenance and roadside stalls selling local produce. accessCommunity was

25 PROJECT FRAMEWORK to the Board of Directors: Proposed Loan to Papua New Guinea for the Road Maintenanc Increased trading activity for villagers in the influencecorridors of Increased freight traffic Increased visits to health facilities in major town villagerscenters by in the influence,corridors of women by particularly Improved income and health indicators Increased school Enrolment

Revised Performance Targets Manila (Loans 1709-PNG, for $53 million, approved 29 June 2006).

Original Performance Targets Restoration of the Highlands road network and establishment of a sustainable road maintenance and operation (i) Reduction of travel times (ii) Reduction of vehicle operating costs (iii) Reliable passenger transport (iv) Reduction of road closures (v) Increase in coffee production (vi) Reduction of freight rates (vii) Improved road safety

Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Loans to Papua New Guinea for the Report and Recommendation of the President Maintenance and Upgrading(Sector) Project. ADB.1999. ADB.2006. Upgrading(Sector) Project. Manila (Loan 1709-PNG, for $63 million, approved 16November 1999). Design Summary Goal Improve road infrastructure enabling it to contribute economic development of Papua New Guinea (PNG) and social integration of communities to the mainstream of the economy. Impact Increased economic andactivity social improvement

24 25 Appendix 1 17 ssumptions and Risks and ssumptions Timely (delay in) project implementation Timely (delayed) submission of subproject profiles (delayed) Timely implementation of detailed engineering work Effective application of the Bank's procurement guidelines Timely award of contracts Effective supervision of construction and maintenance contracts Quality and availability of counterpart staff

Local business sector and communities respond to improved road conditions Purpose to Goal A chievements A travel shorter improved with times and improved vehicle access. 252 kilometers of roads constructed/rehabilitated and in use, thus improving the Highlands region road network. Road maintenance operations improved through HRMG capacity building, but RAMS data input has not been maintained and use as a road maintenance planning tool has been limited. Use of timely and preemptive maintenance has not yet been achieved. Achievements against performance targets cannot be assessed due to unavailability of required data. Significant training and capacity building occurred, including programs rural with communities and women.

No study done and no data available to confirm performance against targets. Reduction in travel times have been observed. Some changes in livelihood patterns have been observed through better market access, roadside market stall activity and wholesale produce buyers improved access to rural producers. rmal transport 25 in info Growth services Change in farm gate prices Reduction in travel time Change in livelihood Revised Performance Targets Patterns

24 Targets Road upgrading, rehabilitation, and maintenance in five Highlands provinces: (i) Road roughness improvement (ii) Vehicle operating cost (VOC) savings (iii) Travel time savings Sustainable and functioning road maintenance system through HRMG: (i) Upgraded engineering skills (ii) Upgraded project/contract management skills (iii) Upgraded planning skills (iv) Upgraded fund/financial administration skills (v) Use of timely and preemptive maintenance methodologies (vi) Efficient use and updating of RAMS

) establishment of an effective road maintenance operation through HRMG. Design Summary Original Performance Purpose A sustainable and effective road network maintenance operation in the Highlands Region through (i) improvement of road conditions, and (ii Outcome Improved rural access to market centers

18 Appendix 1 ssumptions and Risks and ssumptions

Timely (delayed) preparation of terms reference and engagement of detailed design consultants Timely mobilization of consultants and contractors in accordance the Bank's with procurement guidelines Efficient contract and project management A No interruptions from force majeure Timely provision of counterpartfunds Crime under control staff turnover in Low international consulting team and Highlands Region by Government by chievements and other loans/donor grants. establishedRAMS was by DoW its used for maintenance planning has been limited by lack of road input data updating. A 162.2km of roads upgraded 89.8km of roads rehabilitated HRMG established, significant capacity building delivered and responsiblewas for overseeing implementation of the project. staff Sustainability limits by movements out of HRMG, though ongoing capacity build occurring other road projectwith activities funded No information available to doneconfirm that tests by were DOW. No data collected. No data collected.

25 1.1 Reduced roughness on 270 kilometre (km) end roads to 6 m/km by 2009 1.2 Reduced vehicle operating cost starting in 2010 1.3 Increased frequency of public transport Revised Performance Targets

24 Targets 220 km of upgraded roads 450 km of rehabilitated roads Annual routine and periodic road maintenance preempting road failures requiring: (i) detailed designs and supervision (ii) adoption of RAMS for prioritization of road maintenance works (iii) Strengthened and independently functioning effective HRMG with maintenance planning, management, technologies, skills, and the links with private sector contracts y y rehabilitation, and resurfacing subprojects in the provinces of Eastern Highlands Enga, Southern Highlands, Simbu, and Western Highlands selected in accordance with agreed criteria on the works national and provincial roads selected according to RAMS engineering design and construction supervision project implementation and establishment of road maintenance operation through HRMG detailed maintenance Design Summar Outputs upgrading, (i ) road Original Performance (ii) (iii) of (iv) strengthening 1. Improved road conditions for villagers and businessmen to access market opportunities, social services, and imported daily necessities 2. Baseline data and performance monitoring and evaluation system

Appendix 1 19 ssumptions and Risks and ssumptions A Maintenance Group Timely (delayed) selection of consultants for design Effective procurement process Timely (delayed) award of contracts civil works Sufficient supervision of works (delayed) Timely constructions Construction practices minimize interruption of traffic Use of appropriate (inappropriate) construction methodologies and materials and mitigation of environmental impact during construction chievements A No data collected. Consultant recruited for baseline data collection and performance monitoring but no report was apparently submitted. No data available. not Socioeconomic study was done. Total actual contracts award $155.6 under civil works was million. Totalaward contract under consultancy services $19.2 was million. Government total commitment isfor civil $53.34 million.works No Government contribution for Consultancy Services and Contingencies. No separate maintenance budget established for the five provinces. DoW maintained a centralized project trust account at DoW Headquarters. establishedHRMG was and functional. It comprises Consultants and DoW Staff seconded to the project. HRMG provided supervision oversight

25 services 1.4 Imported foodstuffs and household consumables more reliably available 2.1 Consultant recruited and fielded from 2007 to 2010 2.2 Baseline data for the 11 roads 3.1 Socioeconomic impact assessment results ADB: $18 million ADF loan $ 98 million OCR loan; • ($42.58 Civil million)works • Consulting services ($3.21 million) • Contingencies ($7.21 million) Government: $25.07 million • Civil Works • Consulting services • Contingencies • Financial charges on ADB loans Revised Performance Targets

24 Original Performance Targets Award of consultingAward services contract in total estimated value of $6.0 million toprepare engineering designs for and works supervise under the works Project of civil works Award contracts in a total amount of $77.4 million for road rehabilitation, and road upgrading works Undertaking civil in works total estimated value of K15 million ($5.5million) for road maintenance Award consulting services contract, estimated value of $8.5 million to assist in project implementation and to establish an effective maintenance operation Design Summary for the Project established 3.Socioeconomic impactsof the Project assessed Inputs Detailed engineering for upgrading and rehabilitation subprojects Construction supervision for upgrading and rehabilitation subproject Civil for road works upgrading 220 km Civil for road works rehabilitation of 450 km for Civil works maintenance of the roads in the Highlands Region implementing the maintenance budget allocated to each of the five provinces under the proposed Project

20 Appendix 1 ssumptions and Risks and ssumptions A chievements A and worked with DoW providingDoW with and worked technical advice on all subprojects implemented.

25 Revised Performance Targets

24 Original Performance Targets

Design Summary Technical assistance to strengthen project implementation and establish a sustainable and effective maintenance management system through HRMG

Appendix 2 21

0% 0% 0% 71% 74% 156% 162% 141% 176% 125% 124% 148% 158% 131% 185% 133% 207% 342% 203% 186% 735% 127% 137% 262% 116% 198% 147% 195% Actual/ Estimate Cost (%)

0% 0% 0% 0% 0% 0% 50% 19% 100% 100% 153% 100% 100% 100% 100% 100% 100% 103% 100% 100% 100% 112% 100% 101% 100% 100% 100% 102% 100% Accomplishment

8.8 0.0 9.3 0.0 0.0 0.0 8.6 0.0 0.0 7.0 10.5 100% 33.8 15.5 33.5 70.2 18.8 29.9 21.5 10.0 15.6 12.5 15.6 22.0 10.4 15.6 11.2 (km) (%) 182.3 112.1

1.53 3.55 1.27 1.17 5.33 16.3 8.27 10.3 6.61 4.43 5.25 1.91 3.31 3.43 6.00 5.65 0.12 8.68 5.41 3.57 0.00 5.63 1.74 2.15 Cost 58.18 14.52 41.88 13.86 10.02 10.64 Actual ($million) ($million) 3.12 8.94 7.65 0.55 3.01 8.87 3.71 0.39 1.74 0.00 0.00 2.20 0.00 2.15 0.00 1.74 32.53 24.88 27.39 31.28 Actual Amount ($million) ($million) Implemented Initial Contract Initial Contract

3.13 8.24 0.17 0.94 4.30 9.39 6.30 4.97 0.56 3.24 31.28 6.59 2.53 4.64 4.64 7.88 3.23 3.13 3.05 0.00 4.06 2.73 0.00 3.83 3.07 0.00 1.10 Cost 37.19 26.55 10.63 Estimate ($million) ($million)

5.77 0.12 7.44 3.48 3.01 6.57 0.39 2.27 1.77 3.25 3.23 2.19 3.05 6.30 0.00 6.30 4.06 0.00 2.73 3.83 2.15 0.00 1.10 ($million) ($million) Allocation Subproject

8.8 0.65 8.3 8.5 7.0 (30) 10.5 2.19 33.8 29.9 15.5 33.5 10.0 31.2 50.0 3.25 81.2 5.52 21.5 12.5 18.8 25.0 10.0 25.0 10.4 22.0 11.0 15.6 15.6 (km) (53.2) Target Subproject SUMMARY OF PROJECT ROAD SUBPROJECTS

8.3 8.5 7.0 670 182.3 26.03 220 112.1 18.59 450 70.2 12.5 10.0 10.4 22.0 11.0 (km) Target Appraisal

EH EH EH EH EH EH SH SH SH SH SH WH WH WH WH WH WH WH Enga Enga Enga Simbu Simbu Simbu Simbu Province Oliguti - Lufa Stage 2 Contract 1 Oliguti - Lufa Contract Stage 1 Chauve - Move Loan No 1709 - Started, Not Completed, Transferred to Government Road Upgrade Okapacontract) Nupuru - (original Oliguti - Lufa Stage 2 Contract 2 Liagam - Kandep Kundiawa - Goro Road Rehabilitation Korifegu - Nupuru Total Mt Ambra - Kotna Kotna - Banz Goro - Gumine Road Section Loan No 1709 - Roads Completed Road Upgrade Ogelbeng - Mt Ambra Kisenapoi - Ialibu A Original Contract Kisenapoi - Ialibu B Road Rehabilitation Mendi - Nipa Mendi - Nembi Bridge Laiagam2A – Laiagam 2B Nembi Bridge - Nipa Kindeng – Kondopina Ialibu–Pangia SH Loans No 2242/2243 Road Upgrade Goroka – Lahame Banz - Dona Banz – Karameng Korinige – Kerowagi Karameng – Dona Lame Bridge – Laiagam 2A

22 Appendix 2

80% 311% 225% 311% 165%

0% 0% 108% 0% 0% 0% 75% 92% 41% 102% 216% 100% 101% 100% 100% 102% 100% 100% 101% 100% 100% 100% 100% 100% 100% 100%

0.0 2.8 0.0 0.0 2.0 0.0 0.0 4.0 8.2 5.0 8.6 17.5 10.5 91.3 11.6 15.0 94.9 21.8 17.5 20.5 13.5 116.7 108.8

4.90 15.0 8.53 2.73 0.00 1.96 2.32 1.75 9.74 1.21 5.26 5.61 9.06 9.96 2.84 1.84 3.42 8.53 1.97 8.07 4.56 47.78 60.96 52.42 37.82

0.00 0.00 0.00 0.00 2.32 2.07 2.32 2.07 17.78 11.07 15.71

0.00 2.74 3.42 9.04 0.00 0.00 2.44 3.18 2.74 27.04 24.30

0.00 2.74 2.93 0.86 0.00 1.93 3.50 2.32 1.21 3.30 3.30 1.15 5.64 0.92 3.50 2.01 1.84 0.00 0.00 0.00 8.07 2.74 33.11 33.34 30.60 29.62 (6.75) (5.28)

8.3 2.8 2.0 4.0 5.0 8.2 8.6 27.4 10.5 15.0 15.0 12.3 11.6 26.4 31.5 20.5 13.5 17.3 156.5 (47.5) (34.0) (44.3)

8.3 2.8 2.0 4.0 5.0 17.3 89.7 12.3 66.1 36.5 53.3 10.5 15.0 15.0 12.3 11.6 31.5 20.5 13.5 17.3 107.0 107.0 103.2 103.2 (44.3) (47.5) (51.0) (34.0)

EH EH EH EH SH EH EH EH WH WH WH WH WH WH WH Enga Enga Enga Enga Enga Enga Enga Kamaliki – Bekuvia Loan No 2242/2243 - Started, Not Completed, Transferred to Completed Not Government, Road Rehabilitation Raipinka - Okapa Station road Raipinka-Okapa back Okapa back road-Okapa station Mt Hagen - Kotna Road Rehabilitation Kamaliki – Move Seven Corners – Kagua Source: Project Implementation Unit. Department of Works Wabang Town Roads Penga - Kotna Station Separately Funded by Government Government by Funded Separately Road Upgrade contracts)Okapa (2 Nupuru - 1 Okapa Package Nupuru - 2 Okapa Package Nupuru - Mt Hagen - Baiyer Mt Hagen - Baiyer (3 contracts) Mt Hagen - Baiyer 2 Notre Dame School-Bombolopa Bridge WH = Western Highlands, EH = Eastern Highlands, SH = Southern Highlands, km = kilometres Wabang - Meriamanda Wabang - Warumanda Meriamanda - Kompiam 1A Mt Hagen - Notre Dame School Road Rehabilitation Kandep Station Roads Meriamanda - Kompiam (2 contracts) Meriamanda - Kompiam 1B Total 139.7

Appendix 3 23

SUMMARY OF TRAININGS COMPLETED

Training Subject Location Organizations Loan 1709 01 August 2001 Oracle PL/SPL Goroka / Mt Hagen IT Division of DOWT 01 December 2001 Microsoft Project 2000 Mt Hagen Staff from 5 provinces 01 February 2002 Oracle RDBMS Vers 7.34 Mt Hagen IT Division of DOWT 01 December 2002 RAMS and performance based contracting Mt Hagen and Goroka Staff from 5 provinces 01 February 2003 RAMS data surveys and inputs Mt Hagen, Wabag, Staff from 5 provinces Goroka and Kundiawa 01 March 2003 Community Based Contracts Wabag Staff from 5 provinces May/June 2003 Use of HDM4 Port Moresby HRMG Survey Manager 01 June 2003 MSExcel Basics Mt Hagen Staff from 5 provinces 01 June 2003 Road Maintenance Mt Hagen 01 June 2003 Contract Administration Goroka Staff from 5 provinces 01 July 2003 Routine Maintenance basics and Maintenance Goroka Staff from 5 provinces Contract 01 July 2003 MS Word Basics Mt Hagen Staff from 5 provinces 01 September 2003 Project and Quality Management Goroka Staff from 5 provinces 01 September 2003 Financial Management Mt Hagen and Goroka 01 December 2003 Environmental Management Mt Hagen Staff from 5 provinces 01 December 2003 Quality Control on Construction Materials Mt Hagen Staff from 5 provinces January/February 2004 RAMS Data and Surveys Goroka Staff from 5 provinces 01 February 2004 MS Excel Advanced Mt Hagen Staff from 5 provinces 01 February 2004 Site Supervision of Works Wabag 01 March 2004 Road Maintenance II Mt Hagen Staff from 5 provinces 01 March 2004 Project and Quality Management Goroka, Mt Hagen and Staff from 5 provinces Mendi 01 April 2004 Quality Control on Construction Materials Mt Hagen Staff from 5 provinces 01 May 2004 Basic Surveying Mt Hagen Staff from 5 provinces 01 May 2004 Basic Estimates Wabag Staff from 5 provinces 01 May 2004 Structural Design and Quality of Materials Mt Hagen Staff from 5 provinces May/June 2004 Prequalification Documents and Tender Mt Hagen and Goroka Staff from 5 provinces Procedures 01 July 2004 Construction Supervision Mt Hagen Staff from 5 provinces 01 July 2004 Quantity Surveys Mt Hagen Staff from 5 provinces 01 July 2004 Basic Cost Estimate Wabag Staff from 5 provinces 01 September 2004 Environmental Management and Monitoring Plan Mt Hagen Staff from 5 provinces 01 September 2004 Email System and Internet Overview Mt Hagen Staff from 5 provinces 01 September 2004 Technical Refresher Course: Culverts and Goroka Staff from 5 provinces Drainage 01 December 2004 Quality Control on Construction Materials Kundiawa DOW Simbu staff 01 December 2004 Email System and Internet Overview Mt Hagen DOW WHP staff 01 December 2004 Analysis and Sample of Bidding Documents Mendi DOW SHP staff 01 March 2005 Slope Stability Mt Hagen 01 March 2005 MSExcel Advanced Mendi 01 April 2005 Construction Supervision Kisenapoi 01 April 2005 Technical Refresher Course: Sealing Goroka 01 May 2005 Construction Supervision Mt Hagen 01 May 2005 Surveying During Construction Oliguti 01 June 2005 Prequalification Documents and Tender Madang Procedures 01 June 2005 Financial Management Mt Hagen 01 July 2005 Quantity Surveys Wabag 01 July 2005 Construction Supervision Madang 01 August 2005 Quality Control on Construction Materials Madang 01 August 2005 Communication Skills Mt Hagen 01 September 2005 MS Access Mt Hagen 01 September 2005 Analysis and Sample of Bidding International Madang Procedures Loans 2242/2243 Not Provided

Source: Project Implementation Unit. Department of Works

24 Appendix 4

0.00 9.20 19.2 1.40 0.00 Total 167.6 19.16 158.4 36.25 101.57 139.23

6.9 58.2 0.00 58.2 0.42 6.94 0.00 38.32 12.49 51.23 Local

Completion All LoansCompletion All 9.20 0.00 12.2 0.98 Actual Expenditures at 109.4 63.25 100.2 23.77

4.8 73.8 0.00 73.8 0.00 4.82 12.23 0.00 0.00 52.42 16.52 68.95 88.00

2.6 0.00 2.63 0.00 0.00 24.64 32.40 Local Total Foreign

2.2 38.7 35.0 38.7 35.0 0.00 8.76 7.77 27.78 Actual Expenditures at Completion L2242/2243

93.8 9.20 0.00 14.3 84.6 1.40 0.00 0.00 Total Foreign 49.14 14.35 2.18 19.73 70.28 36.54

0.00 4.30 4.72 0.00 13.68 18.82 Local

Completion L1709 70.7 23.1 10.0 4.3 61.5 23.1 0.98 0.42 35.47 15.01 Actual Expenditures at Foreign

2.4 0.0 17.1 9.20 12.9 0.00 11.7 10.04 34.7 58.1 10.0 0.00 Total 168.7 143.8 106.7 51.46

2.4 0.1 7.8 7.8 0.8 8.6 0.0 1.5 0.9 4.6 58.0 56.8 18.9 41.0 PROJECT COST Local Loans Appraisal Appraisal Loans

at Supplementary Supplementary at 0.0 5.1 0.0 5.4 87.1 11.0 16.1 39.3 65.6 110.6 RevisedEstimates Cost Foreign

2.2 6.0 8.6 90.6 12.7 17.1 70.2 14.5 18.6 34.8 53.4

0.9 7.8 0.8 1.5 0.7 11.1 21.3 Approval after Loan 1709

0.0 2.2 5.1 7.5 7.8 57.6 33.0 45.0 25.2 12.8 1.7 24.6 10.2 32.1 RevisedEstimates Cost Foreign Local Total

2.2 6.0 8.6 94.2 12.7 14.5 27.4 50.0 77.4 Total 114.6

0.9 7.8 0.8 1.5 0.7 31.2 Appraisal

5.1 7.8 0.0 2.2 71.8 42.9 59.1 35.1 12.8 1.7 11.2 16.2 12.7 46.2 35.0 15.0 Initial Cost Estimates at Foreign Local

s Base Cost including Contingencies Engineering Design and Construction Supervision Financial Auditing Contingencies Source Upgrading WorksCivil Road Road Asset Management, including Rehabilitation Land Acquisition Interest during Construction Service Consulting Service HQ RAMS Extension Support to Implementation and Highlands Region Maintenance Group Training and Stakeholder Relations Training and Stakeholder Relations Total Community Community Development Appendix 5 25 n.p. n.p. n.p. 19.2 Total 167.6 101.6 139.2 158.4 tary 0.0 n.p. n.p. 57.0 57.0 Gov. 0.0 n.p. 0.0 0.0 0.0 n.p. 0.0 n.p. 19.2 ADB Completion All LoansCompletion All 110.8 101.6 Actual Expenditures at 4.8 19.2 0.0 4.8 n.p. n.p. n.p. n.p. 16.5 18.6 17.9 36.3 Total

6.7 0.0 n.p. Gov. 0.0 n.p. 0.0 0.0 n.p. 0.0 n.p. 4.8 0.0 n.p. ADB Actual Expenditures at apua Guinea for theNew Road Maintenance and Completion L2242/2243 n.p. n.p. n.p. n.p. 14.3 4.8 14.3 Total

the President to the Board of Directors: Proposed Supplemen 0.0 n.p. 11.2 19.7 10.1 Gov.

Completion L1709 9.2 0.0 0.0 0.0 n.p. 1.4 0.0 0.0 n.p. 0.0 0.0 0.0 n.p. 8.5 0.0 n.p. 59.2 34.5 93.7 51.6 22.4 73.8 35.7 34.5 70.2 46.8 22.4 68.9 82.5 57.0 14.3 25.8 23.3 49.1 36.7 15.7 52.4 62.5 39.0 14.3 50.0 34.5 84.5 51.6 22.4 73.8 ADB Actual Expenditures at

2.4 1.5 0.1 7.8 0.9 17.1 12.9 10.0 11.7 34.7 58.1 48.5 Total 168.7 106.7 143.8

c ADB memo: Request for Major Change in Implementation Arrangements (Increase in ADB

b 2.4 1.5 0.1 7.8 2.8 0.8 7.8 8.6 0.9 52.7 10.8 15.9 40.6 Gov. Appraisal ($ million) million) ($

0.0 5.1 7.2 17.1 80.0 26.7 11.0 16.1 47.4 32.6 ADB 116.0 103.3 RevisedEstimates Cost at Supplementary Loans

6.0 0.7 90.7 12.7 18.6 34.8 70.2 Total

1.5 7.8 0.9 9.9 6.1 0.7 27.7 19.9 Gov. Approval after Loan 1709

0.0 2.2 5.1 7.8 0.8 8.6 8.7 63.0 12.7 37.4 16.0 53.4 12.9 1.7 14.6 50.3 28.7 ADB APPRAISAL AND ACTUAL PROJECT EXPENDITURES RevisedEstimates Cost

ADB. 2006. Report and Recommendations Report and Recommendation of c

0.7 12.7 27.4 50.0 Total 114.7

enance and Upgrading (Sector) Project 7.8 1.5 2.2 0.7 51.7 21.3 Gov. Appraisal

5.1 0.9 6.0 7.8 0.8 8.6 0.0 8.7 18.7 63.0 12.7 37.4 40.0 77.4 12.9 1.7 14.6 28.7 50.3 43.9 94.2 ADB Initial Cost Estimates at

ADB. 1999. Report and Recommendations Report and Recommendation of the President to the Board of Directors: Proposed Loan to P a Asian Development Bank. n.p.= not provided : Total ADB = ADB Training and Stakeholder Relations Loan to Papua New Guinea: Road Maint Guinea: RoadPapua New to Loan Upgrading (Sector) Project. Manila (Loan 1709-PNG, for $63 million, approved 16 November 1999); Interest during Construction Road Upgrading WorksCivil Road Notes Community Development Community Stakeholder Relations Training and Stakeholder Source Loan Share of Project Costs), 19 September 2003; Consulting Services Engineering Design and Construction Supervision Support to Implementation and Highlands Region Maintenance Group Financial Auditing Contingencies Road Asset Management, including Rehabilitation HQ RAMS Extension Land Acquisition Base Cost including Contingencies Land 26 Appendix 6

3,819,081

Cancellations

1,421,229 1,974,034 4,910,083 7,855,125 All LoansAll 97,103,080 81,979,042 11,506,524 18,720,265 22,886,065 32,740,754 45,599,064 60,763,259 109,013,032

0 0 0 0 0 0 0 Loans 558,711 3,244,653 5,490,766 2242/2243 15,124,038 13,704,389 13,503,993 Actual Disbursement

0 0 552,806 1,421,229 2,936,049 2,945,042 3,651,399 7,213,740 4,165,800 9,295,979 9,613,656 9,673,429 7,711,790 Loan 1709

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2,011 2,012 Actual 900,000 Extension After LoanAfter 13,300,000 19,500,000 25,700,000 31,900,000 38,100,000 44,405,000 85,981,000 114,807,000 ($'000)

At Cumulative Estimated 1,485,000 Disbursement All LoansDisbursement All Appraisal Appraisal 11,737,500 7,100,000 21,990,000 32,242,500 42,495,000 52,747,500 63,000,000 63,300,000 116,000,000 116,000,000 0 0 0 0 0 0 0 105,000 4,006,000 72,500,000 54,611,000 6,050,000 86,500,000 66,861,000 Extension After LoanAfter 15,124,000 116,000,000101,105,000 13,702,000 12,820,000 PROJECTED AND ACTUAL DISBURSEMENT 2242/2243 Estimated

At Disbursement Loans 300,000 9,200,000 Appraisal Appraisal 14,000,000 29,500,000 900,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 Extension After LoanAfter Loan 1709 0

At Estimated Disbursement Appraisal Appraisal 10,252,500 6,200,000 Year 2001 2011 2000 1,485,000 2002 10,252,500 2012 2003 10,252,500 2004 10,252,500 2005 10,252,500 2006 10,252,500 2007 6,200,000 2008 2009 2010 6,300,000 Estimated

Note: L2242/43 disbursements (Actual) as at 02 Nov 12. Appendix 7 27

CHRONOLOGY OF MAIN EVENTS

Year Date Event 1999 13-29 April Fact Finding Mission 28 June – 9 July Appraisal Mission 13-20 September Loan Negotiations

16 November ADB Loan 1709 Approval 17 November ADB Loan 1709 Signing

2000 15 February ADB Loan 1709 Effectiveness 4- 11 July Inception Mission July Implementation Consultant contract negotiations – contract value $9.3 million exceeded original allocation of $7.8 million, funded by transfer of $1.5 million from design and supervision consultancy services allocation (Director OPO approved 21 July 2000) 11 July Implementation Consultant contract approved by National Executive Council End August Implementation Consultants advised of appointment 27 October First L1709 subproject (Ogulbeng–Mt Abra, WHP) approved by ADB November Government engages Implementation Consultants

2001 January Implementation Consultants Chief Implementation Consultant mobilized 5 February Implementation Consultants Financial Administration Advisor mobilized 15 – 26 March Implementation Review Mission 9 April Director OPO approved Single Stage-Two Envelope Bidding Procedure as alternative to pre-qualification of contractors for civil works 6 June First L1709 subproject (Ogulbeng-Mt Abra, WHP) Contract approved by ADB 11 June Implementation Consultants Enga Province Advisor/Trainer mobilized 19 July Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) approved by ADB September First L1709 subproject (Ogulbeng-Mt Abra WHP) construction started 21 September Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) approved 26 by ADB October First L1709 subproject (Ogulbeng-Mt Abra, WHP) contract awarded 14 November Proposed Fourth L1709 subproject (Wabag-Kompiam Road, Enga Province) 27 subproject approved by ADB 26 November Reallocation of road civil works funds to extension of RAMS unit operational funding, as fifth subproject approval by ADB Late in year Effective mobilization of Implementation Consultants 7 December Sixth L1709 subproject (Kundiawa-Goro, Simbu Province) approved by ADB 2002 6 January Implementation Consultants Western Highlands Province Advisor/ Trainer mobilized 7 February Management approved the direct selection of consultants under RAMS subproject to complete the RAMS cycle and train counterpart staff February ADB agreement to appoint International consultant for detailed design and construction supervision 28 February Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) contract approved by ADB 10 May Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) contract signed 30 July EOI advertised for Design & Supervision Consultants August Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) construction started 28 9 August Sixth L1709 subproject (Kundiawa–Goro, Simbu Province) contract signed

26 Due to significant subproject cost (K4.6 million to K10.0 million EA submitted a revised economic evaluation 27 Contract was awarded but not approved by ADB as ADB Procurement Guidelines were not followed, and subproject was treated as a misprocured and completed using Government funds. Cancellation of allocation this subproject finalized on 19 September 2003.

28 Appendix 7

Year Date Event 13 August Seventh L1709 subproject (Mt Ambra–Kotna, WHP) approved by ADB29 13 August Eighth L1709 subproject (Miunde Bridge-Rabia Junction, WHP) approved by ADB30 14 August Implementation Consultants Southern Highlands Province Advisor/ Trainer mobilized September Sixth L1709 subproject (Kundiawa–Goro, Simbu Province) construction started 9 September First L1709 subproject (Ogulbeng–Mt Abra, WHP) completed after extension from 19 July 2002 30 September Implementation Consultants Chief Implementation Consultant withdrawn from Project 14 – 31 October Review Mission 4 November Implementation Consultants Eastern Highlands Province Advisor/ Trainer mobilized 2003 19 February Implementation Consultants Simbu Province Advisor/Trainer mobilized 31 March – 11 April Mid-Term Review Mission March Reallocation of $1.1 million31 of ADB Loan to RAMS support costs from Road Asset Management and Rehabilitation civil works original Loan allocation May Project Management Financial System operational32 June Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) revised completion date 19 September VP (02) approved revision of cost sharing ratio under civil works component from 48% to 70%, with no change of Loan amount reducing Project cost from $115 million to $90 million; due to lack of Government counter funding October L1709 Wabag–Meriamanda (5.5km) road subproject government funded completed October L1709 Wabag–Meriamanda (5.0km) road subproject government funded completed 28 October – 12 Review Mission November December Sixth L1709 subproject (Kundiawa–Goro, Simbu Province) completion33 2004 23 January Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) contract approved 11 March Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) revised economic evaluation approved by ADB34 April RAMS support costs reallocation of ADB Loan increased to $1.44 million, also from Road Asset Management and Rehabilitation civil works original Loan

28 ADB required revision of original Technical Evaluation Committee report, submitted with signed contract, to be revised including a remedial plan due to drastic cutting of essential items (e.g. excavation and drainage) in the bill of quantities; involving a contract variation and need to resubmit economic appraisal. Subproject included negotiated reduced scope from 10km seal to 5km seal and 5,5km rehabilitation, involving original bid price of K5.49 million to K3.75 million. 29 Due to significant subproject cost (K4.6 million to K10.0 million EA submitted a revised economic evaluation 30 ADB approved implementation this subproject under LCB with four packages, but subproject was rescoped and repackaged as an ICB contract, which was then implemented with full Government funding; so was not included as a subproject under L1709. 31 Contract issued to RAMS was a higher $1.13 million 32 Development extended since commencement of the Implementation Consultants Financial Administration Advisor in February 2001, though further enhancements were identified during the November Review Mission, relating to the need to organize by specific contracts issued and separately identify by source of funds – ADB, National Government, Provincial Government, etc. 33 Originally scheduled for completion in June 2003, delays due to slow work of contractor and delayed location, testing and approval of materials for road base. Sealing of the 5.5km gravel road section portion of this subproject was completed with Government own funds. 34 Due to significant subproject cost (K4.6 million to K10.0 million EA submitted a revised economic evaluation

Appendix 7 29

Year Date Event allocation 22 April – 3 May Review Mission 19 May Director PAHQ Area A approved Implementation Consultants contract extension from 375 person-months to 381 person-months, involving reallocation of $0.5 million from the design and supervision consultancy services allocation. 19 May Director PAHQ Area A approved deleting allocation approved for Eighth 35 L1709 subproject (Miunde Bridge-Rabia Junction, WHP) May Award of contract with international consultant for detailed design and construction supervision was deferred till October 2004 Review Mission, due to only 2 remaining subprojects requiring design. June L1709 Mt Hagen–Kuta road subproject government funded completed 11 June Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) contract awarded August Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) construction commenced 22 September Contract signed for seventh L1709 subproject (Mt Ambra–Kotna, WHP). 9 – 22 November Review Mission November Engagement of international consultant for detailed design and construction supervision cancelled by ADB and Implementation Consultants assisted subproject supervision 20 December OIC PARD approved Implementation Consultants contract extension of additional 148 person-months36, involving reallocation of $2.9 million from the design and supervision consultancy services allocation. 20 December OIC PARD approved extension of Loan closing date from 30 June 2006 to 30 June 2008 2005 12 – 20 April Review Mission May Second L1709 subproject (Oliguti-Lufa Contract 1, EHP) completed August ADB approved the subdivision of L1709 Liagam-Kandep road improvement subproject (54.25km) into 3 sections after unsuccessful bidding for the whole road section and in anticipation that smaller contractors would be able to bid since the area had security problems that may be more manageable in smaller contracts. 13 September L1709 Mendi-Nipa rehabilitation road subproject contract signed. 13 September L1709 Korifegu – Nupuru road subproject contract signed. 13 September L1709 Oliguti-Lufa 2 rehabilitation road subproject contract signed. 29 September L1709 Kotna-Banz road upgrading subproject approved by ADB. 29 September L1709 Nipa-Margarita road upgrading subproject, financed under Government funds, approved by ADB. 7 – 21 November Review Mission 31 December RRP for Loan 1709 Estimated Project Completion Date 2006 22 January – 8 Environmental Safeguard Policy Implementation Review Mission February April Third L1709 subproject (Kisenapoi-Ialibu A Original Contract, SHP) contractor (Carson Pratt) pulled out of contract due to unsettled claims 20 – 25 April Review Mission 19 May L1709 Kaipau-Kandep package of Laiagam-Kandep road rehabilitation

35 ADB approved implementation this subproject under LCB with four packages, but subproject was rescoped and repackaged as an ICB contract, which was then implemented with full Government funding; so was not included as a subproject under L1709. 36 Implementation Consultants would undertake design and supervision of additional subprojects. This was dependent on the Government’s ability to fund the additional subprojects. All but one of these subprojects has been completed and the remaining subproject is currently ongoing in November 2012. The expected completion of all these additional subprojects by June 2008 was not achieved.

30 Appendix 7

Year Date Event subproject awarded to Wabag Constructions 29 June ADB Loan 2242 and Loan 2243 Approval 30 June First Closing Date ADB Loan 1709 Extension of Implementation Consultants services from 375 to 565 man- months until end June 2009 21 July L1709 Wabag-Warumanda road upgrading subproject contract awarded August L1709 Kotna-Banz road upgrading subproject commenced September Government funded L1709 Wabag-Warumanda road subproject commencement 13 September ADB Loan 2242 and Loan 2243 Signing 9 November ADB Loan 2242 and Loan 2243 Effectiveness November Procurement of civil works commenced on Loan2242/2243 subprojects November Seventh L1709 subproject (Mt Ambra–Kotna, WHP) completed 10-24 November Procurement Review Mission 28 November – 13 Review Mission December

2007 9 January L1709 Goro-Gumine road upgrading subproject contract signed 11 April L1709 Korifegu–Nupuru road subproject government funded contract awarded. 26 April L1709 Nupuru-Okapa road rehabilitation government funded subproject contract terminated with CMC di Ravenna and subdivided into 2 packages May Implementation Consultants contract for L2242/2243 signed with Renardet S.A. the L1709 Implementation Consultants, to save time and money and permit continuity in implementation, design and supervision support. May L1709 Penga–Kotna road subproject government funded contract completed. May L1709 Korifegu–Nupuru road subproject government funded civil works commenced 14 May Work commenced on L2242/2243 Korinige-Kerowagi road upgrade subproject 23 May L1709 Oliguti-Lufa 2 upgrading contract terminated with CMC di Ravenna Early June L1709 Kaipau-Kandep section of Liagam-Kandep road improvement subproject contract terminated due to lack of progress June L1709 Oliguti-Lufa 2 upgrading contract re-awarded to MMK Transport 18 June DG PARD approved subdivision of L1709 Mt Hagen-Baiyer road improvement subproject civil works into 3 packages; re-bid and change procurement method from ICB to NCB on Package 1 and re-bid Packages 2 and 3 through ICB. 26 June – 5 July Review Mission 3 July Contract signed for L2242/2243 Korinige-Kerowagi road upgrade subproject 11 July L1709 Kaipau-Kandep package of Laiagam-Kandep road rehabilitation subproject awarded to Wabag Constructions terminated and re-awarded to Raibro Constructions. 13 July Third L1709 subproject (Kisenapoi-Ialibu Replacement Contract, SHP) awarded to ASI Holdings 26 July OIC Director Area B approved DOW’s proposal to sign sub-contract for L1709 Oliguti-Lufa 2 road subproject under single source selection process. August Contractor mobilized for L2242/2243 Korinige-Kerowagi road upgrade subproject 23 – 27 August Review Mission 29 August Government announced new Cabinet with Minister of Transport also assuming responsibility as Minister of Works, leading to a change in Secretary to DOW; involving cessation and disruption in the subproject implementation approval process. 11 September OIC PARD approved second extension of Loan 1709 closing date from 30

Appendix 7 31

Year Date Event June 2008 to 30 June 2010 11 September OIC PARD approved reallocation loan proceeds by cancellation ADB financed L1709 Mt Hagen-Baiyer subproject and transfer to Kotna-Banz subproject for $6.573 million. 13 September Implementation Consultants fielded transport economist to review design and monitoring framework, collect baseline data and establish the socioeconomic impact monitoring system37 27 September L1709 Nupuru-Okapa road rehabilitation government funded subproject contract subdivided into 2 packages after termination with CMC di Ravenna and awarded to Shorncliffe October L1709 Nupuru-Okapa road rehabilitation government funded subproject 2 packages contracts re-awarded to Shorncliffe 13 December Contract signed for L2242/2243 7 Corners-Kagua road rehabilitation subproject 19 December Contract signed for L2242/2243 Kindeng-Kondopina road upgrade subproject 2008 1 February Work commenced on L2242/2243 Kindeng-Kondopina road upgrade 38 subproject 19 February Contract awarded for L2242/2243 Banz Town-Karameng road upgrade subproject 13 March Contractor given site access to L2242/2243 Banz Town-Karameng road upgrade subproject 26 March – 3 April Review Mission May L1709 Chauve-Move road improvement subproject completed 30 June Second Closing Date ADB Loan 1709 28 August L1709 Oliguti-Lufa II upgrading contract re-awarded to MMK Transport completed 1 October Contract signed for L2242/2243 Ialibu-Pangia rehabilitation subproject

2009 12 January Delegation of loans administration transferred to PNRM 22 January – 8 Review Mission February 14 April Contract signed for L2242/2243 Kamaliki-Bekuvia rehabilitation subproject 14 April Contract signed for L2242/2243 Bekuvia Bridge-Move Road rehabilitation subproject

7 May EA terminates L2242/2243 Seven Corners-Kagua road rehabilitation subproject contract 28 May OIC PARD approved reallocation of loan funds for civil works to extend consultancy services, an increase of $1.65 million to cover increase of 148 person months and price escalations. 30 May Third L1709 subproject (Kisenapoi-Ialibu Replacement Contract, SHP) with ASI Holdings completed June L1709 Wabag–Warumanda (11.6km) road subproject government funded completed 19 – 22 October Project Administration Review Mission 23 December Contract signed for L2242/2243 Lame-Laiagam road upgrade subproject (2 packages) 31 December RRP for Supplementary Loans 2242 and 2243 Estimated Project Completion Date 2010 25 January CD, PNRM approved extension of L2242/2243 by 2 years to 30 June 2012

37 Fieldwork was to continue until April 2008, though there is no documentation of this work having achieved the assignment objectives. 38 Contract endorsed by ADB on 1 June 2007, approved by NEC in December 2007, Contract signed 19 December 2007 and work commenced 1 February 2008 – an elapsed period of 8 months.

32 Appendix 7

Year Date Event February L1709 Korifegu–Nupuru road subproject completed February L1709 Mt Hagen–Notre Dame road subproject government funded completed. 11 – 12 February Review Mission 24 March Completion of for L2242/2243 Kindeng–Kondopina road improvement subproject 22 – 31 March Review Mission 10 June Completion of for L2242/2243 Korinige–Kerowagi road improvement subproject 28 June – 6 July Review Mission 30 June Third and Final Closing Date ADB Loan 1709 30 June First Closing Date ADB Loan 2242 and Loan 2243 July L1709 Kaipau-Kandep package of Laiagam-Kandep road rehabilitation subproject completed by Raibro Constructions. August Completion of for L2242/2243 Banz–Karameng road improvement subproject October Due to price escalations, 5 L2242/2243 subprojects were transferred to HRRIIP for financing (134.4km) 4 November Contract awarded for L2242/2243 Rypinka-Okapa road rehabilitation subproject (2 packages) 6 – 10 November Special Review Mission 10 November Partial cancellation of $3.82 million unused funds from L1709 10 November ADB Loan 1709 Closed 25 November Contract awarded for L2242/2243 Kerowangi-Dona road rehabilitation subproject 25 November Contract signed for L2242/2243 Okapa Backroad Junction-Okapa Station rehabilitation subproject 20 December ADB approve extension of project management and supervision consultancy services to 30 June 2012 31 December Government PCR for L1709 due 2011 24 – 28 January Specific Consultation Mission 10 – 15 April Specific Consultation Mission 10 – 13 May Specific Consultation Mission 26 April Government PCR for L1709 delivered to ADB

9 – 12 July Specific Consultation Mission 24 – 29 October Review Mission

2012 31 January – 8 Review Mission February 30 June Second and Final Closing Date ADB Loan 2242 and Loan 2243

31 December Government PCR for L2242/2243 due, but not delivered

Appendix 8 33 2012 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Extension L2243/2243 Q4 2010 Q3 Q4 Q1 Q2 Q3 2009 Second L1709 Extension 2008

Q1 Q2 Q3 Q4 Q1 Q2 Q4 2007 First Extension L1709 Extension First 2006 Original Implementatation Time Frame L2242/2243 Frame Time Implementatation Original 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 2004 PROJECT IMPLEMENTATION SCHEDULE 2003 Q2 Q3 Q4 Q1 Q2 2002 Original Implementatation Time Frame L1709 Frame Time Implementatation Original Q1 Q2 Q3 Q4 Q1 2001

2000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Type of Activity Activity Type of Schedule Loan 1709 Implementation 2010 DCWI of allocation and Approval budget Selection of HRMG advisory consultant site on team Adviser supervision and design of Selection consultants and training maintenance Road implementation I projects Tranche Ambra) Mt. - (Ogelbeng identifiesHRMG projects and reviews design Subprojects documentation proposals project of approval Bank implementation Project 2 projects Tranche A Kisenapoi-Ialibu 1, Contract (Oliguti-Lufa Wabag-Kompiam, Contract, Original Kundiawa-Goro) identifiesHRMG projects and reviews design Subprojects documentation proposals project of approval Bank implementation Project 3 projects Tranch Bridge-Rabia Miunde Ambra–Kotna, (Mt Junction) identifiesHRMG projects and reviews design Subprojects documentation proposals project of approval Bank implementation Project 4 projects Tranche Oliguti-Lufa – Nupuru, Korifegu (Mendi-Nipa, Nipa-Magarima) Kotna-Banz, 2, identifiesHRMG projects and reviews design Subprojects documentation proposals project of approval Bank implementation Project 5 projects Tranche Wanbag-Warumanda, (Kaipau-Kandep, 2) Oliguti-Lufa Goro-Gumine, identifiesHRMG projects and reviews design Subprojects documentation proposals project of approval Bank implementation Project 34 Appendix 8 2012 Q3 Q4 Q1 Q2 Q3 Q4 2011 Extension L2243/2243 Extension 2010 2009 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Second Extension L1709 Second Extension 2008 2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 First Extension L1709 Extension First 2006 Original Implementatation Time Frame L2242/2243 Frame Time Implementatation Original 2005 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2003 2002 Original Implementatation Time Frame L1709 Frame Time Implementatation Original 2001

2000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Type of Activity Activity Type of Schedule Loan 1709 Implementation Services Consulting Bidding and Design Engineering Documents 2 1 and Raipinka--Okapa 1. Goroka--Lahame 2. 2 1 and Kamaliki--Move 3. Kindeng--Kondopina 4. 2 1 and Banz--Dona 5. Gewa--Gembogl 6. Kerowagi--Dona 7. Korinige--Kerowagi 8. 2 1 and Lame--Laiagam 9. 2 1 and 10.Ialibu--Kagua 11.Ialibu--Pangia Implementation Loans 2242/2243 Schedule Civil Works Process Bidding 2 1 and Raipinka--Okapa 1. Goroka--Lahame 2. 2 1 and Kamaliki--Move 3. Kindeng--Kondopina 4. 2 1 and Banz--Dona 5. Gewa--Gembogl 6. implemented) (not Kerowagi--Dona 7. implemented not Korinige--Kerowagi 8. 2 and 1 --Laiagam Lame 9. 2 1 and 10.Ialibu--Kagua 11.Ialibu--Pangia Appendix 8 35 2012 Q4 Q1 Q2 Q3 Q4 2011 Extension L2243/2243 Extension Q3 Q4 Q1 Q2 Q3 2010 2009 Q2 Q3 Q4 Q1 Q2 Second Extension L1709 SecondExtension 2008 Q1 Q2 Q3 Q4 Q1 2007 First Extension L1709 Extension First Q4 Q1 Q2 Q3 Q4 2006 Original Implementatation Time Frame L2242/2243 Frame Time Implementatation Original Q3 Q4 Q1 Q2 Q3 2005 2004 Q2 Q3 Q4 Q1 Q2 2003 Q1 Q2 Q3 Q4 Q1 2002 Original Implementatation Time Frame L1709 Frame Time Implementatation Original Q2 Q3 Q4 2001

Q4 Q1 Q2 Q3 Q4 Q1 2000 Q1 Q2 Q3

Construction Construction 2 and 1 Raipinka--Okapa 1. Goroka--Lahame 2. 2 1 and Kamaliki--Move 3. Kindeng--Kondopina 4. 2 1 and Banz--Dona 5. Gewa--Gembogl 6. implemented0 not Kerowagi--Dona 7. implemented0 not Korinige--Kerowagi 8. 2 1 and Lame--Laiagam 9. 2 1 and 10.Ialibu--Kagua implemented not 11.Lalibu--Pangia Supervision Construction Monitoring Socioeconomic 36 Appendix 9

PROJECT MANAGEMENT FRAMEWORK FRAMEWORK MANAGEMENT PROJECT

Appendix 10 37

STATUS OF COMPLIANCE WITH LOAN COVENANTS

LOAN 1709-PNG (OCR): ROAD MAINTENANCE AND UPGRADING (SECTOR) PROJECT

Reference Covenant in Loan Status of Compliance Agreement The borrower shall cause the Project to be carried out with Art IV. 4.01 Partial Compliance. due diligence and in conformity with the sound administration, financial, engineering, environmental and Every effort made to conform to road asset management and maintenance practices. ADB procedures and guidelines

within the framework of PNG

legislation. HRMG set up to manage administration, financial,

engineering and environmental

matters. RAMS referred to for works planning.

Although every effort was made by HRMG, PSC and DOW to

follow sound practices, there were some shortcomings. The borrower shall make available, promptly as needed, Art IV. 4.02 Partial Compliance. the funds, facilities, services and other resources which are required, in addition to the proceeds of the Loan, for Trust account opened at BSP Port carrying out of the Project and for the operation and Moresby Branch with sub- ledgers maintenance of the Project facilities. for each sub-project. GoPNG funds were less than adequate to support the Project in its entirety. In the carrying out of the Project and operation of the Art IV. 4.03 (a) Complied. Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this See below [Ref 5.01 (a) and (b) Loan Agreement. and 5.02] The borrower shall cause the Project to be carried out in Art IV. 4.03 (b) Complied. accordance with plans, design standards, specifications, work schedules and construction methods acceptable to All plans, design standards, the Borrower and the Bank. specifications, works schedules and construction methods were approved by the DOW and the ADB prior to implementation. The borrower shall ensure that the activities of its Art IV. 4.04 Complied. departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are The HRMG met on a monthly conducted in accordance with sound administrative policies basis initially, later bi-monthly, to and procedures. monitor progress, performance and adherence to administrative policies and procedures. The ADB "Manual of Procedures for Project Administration and Management" used as guideline. The borrower shall make arrangements satisfactory to the Art IV. 4.05 (a) Complied. Bank for insurance of the equipment and materials to be financed out of the proceeds of the Loan to such extent and Vehicles purchased under the against risks and in such amounts as shall be consistent Project were insured for third with sound practice. party, fire and theft while used by the TA consultants. Computers and vehicles purchased for or after hand over to the Government were not insured in common with general Government practice.

38 Appendix 10

Reference Covenant in Loan Status of Compliance Agreement Without limiting the generality of the foregoing, the Art IV. 4.05 (b) Complied. Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out See above Art IV.4.05 (a) of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods. The borrower shall maintain, or cause to be maintained, Art IV. 4.06 (a) Complied. records and accounts adequate to identify the goods and services financed out of the proceeds of the Loan, to Complied but pending signature of disclose the use thereof in the Project, to record the Auditor General for 2009 accounts progress of the Project and of each Sub-project (including and preparation and signature of the cost thereof) and to reflect, in accordance with Auditor General for 2010 consistently maintained sound accounting principles, the accounts. operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and Audited accounts have been operation of the Project facilities, or any part thereof. prepared and submitted on an annual basis up to year 2008, that for year 2009 is awaiting signature by the Auditor General and that for 2010 is in preparation.

The Borrower shall (i) maintain, or cause to be maintained, Art IV. 4.06 (b) Partially Complied. separate accounts for the Project reflecting, inter alia, the accounts for each subproject financed out of the proceeds See Art 4.02 above. of the Loan; (ii) have such accounts and related financial statements Complied. audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors Accounts for each year 2001-2005 whose qualifications, experience and terms of reference were prepared by Kiddie are acceptable to the Bank; Associates, PO Box 198, Port Moresby and for 2006-2010 by HLB New Guinea PO Box 32 Port (iii) furnish to the Bank, as soon as available but in any Partially Complied. event not later than nine (9) months after the end of each related fiscal year, certified copies of the report of the Audited accounts have been auditors relating thereto (including the auditors' opinion on submitted to ADB for years 2001- the use of the Loan proceeds and compliance with the 2008; that for 2009 is awaiting covenants of the Loan Agreement) , all in the English signature of the Auditor General language; and that for 2010 is in preparation. (iv) furnish to the Bank such other information concerning Complied. such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably DOW has responded to ADB request. requests and resolved all issues except submission of the audited accounts for year 2009 and finalization and audit of the year 2010 Project accounts.

Appendix 10 39

Reference Covenant in Loan Status of Compliance Agreement The Borrower shall furnish, or cause to be furnished, to the Art IV. 4.07 (a) Complied. Bank all such reports and information as the Bank shall reasonably request concerning; DOW has responded to ADB requests and resolved all issues (i) the Loan, and the expenditure of the proceeds and except submission of the audited maintenance of the service thereof; accounts for year 2009 and finalization and audit of the year 2010 Project accounts. In addition DOW provided data and extended full cooperation to the team appointed by ADB to conduct the "Project Procurement Related Audit" during November / December 2005. (ii) the goods and services financed out of the proceeds of Complied. the Loan; (iii) the Project and each Sub-project; Complied. (iv) the administration, operations and financial condition in Complied. the territory of the Borrower and the international balance- of payments position of the Borrower, and (v) any other matters relating to the purposes of the Loan. Complied. Without limiting the generality of the foregoing, the Art IV. 4.07 (b) Complied. Borrower shall furnish, or cause to be furnished, to the Bank, quarterly reports on the carrying out of the Project, The quarterly reports of the including the progress of each Sub-project, and on the Implementation Consultant, and operation and management of the Project facilities. Such the Road Asset Management reports shall be submitted in such form and in such detail Consultant, contained the details and within such a period as the Bank shall reasonably required by the ADB and were request, and shall indicate, among other things, progress therefore adopted by DOW in lieu made and problems encountered during the quarter under of separate GoPNG reports. review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. Promptly after physical completion of the Project, but in any Art IV. 4.07 (c) Complied. event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes The Borrower shall enable the Bank’s representative to Art IV. 4.08 Complied. inspect the Project (including each Subproject), the works and goods financed out of the proceeds of the loan, and DOW enabled all ADB Review any relevant records and documents. Missions to make site visits in accordance with such requests. The Borrower shall ensure that the Project facilities are Art IV. 4.09 Partly Complied. operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, GoPNG was unable to fund all and road asset management and maintenance practices. emerging repair and maintenance works on the roads included in the upgrading and rehabilitation programs under the Loan.

40 Appendix 10

Reference Covenant in Loan Status of Compliance Agreement It is the mutual intention of the Borrower and the Bank that Art IV. 4.10 (a) Complied. no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the No lien was created on any assets assets of the Borrower. To that end, the Borrower of the Borrower as security for any undertakes (i) that, except as the Bank may otherwise external debt. agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan; and (ii) that the Borrower, in creating or permitting the creation of any such lien, will make express provision to that effect. The provisions of paragraph (a) of this Section shall not Art IV. 4.10 (b) Complied. apply to (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. The term "assets of the Borrower" as used in paragraph (a) Art IV. 4.10 (c) Complied of this Section includes assets of any political subdivision or any agency of the Borrower and assets of any such political subdivision, including the Bank of Papua New Guinea and any other institution performing the functions of a central bank for the Borrower. The PSC shall have been established by the Borrower, in a Art V. 5.01 (a) Complied. manner satisfactory to the Bank, comprising: (i) six members representing departments and agencies Project Steering Committee concerned of the Borrower; (ii) six members including the established with required chairperson of the PSC representing private business and membership and chaired by commercial interests in the Highlands Region. private sector representative. The Borrower shall have: (i) established the HRMG in a Art V. 5.01 (b) Complied. manner satisfactory to the Bank; (ii) appointed full-time HRMG established and staff staff, with qualifications and experience satisfactory to the appointed in accordance with Bank, to positions within HRMG as follows; (1) DOWDOW Article IV. 5.01 (b). During the First Secretary (Operations) as HRMG Project Manager, (2) course of the Project, the position DOW Assistant Secretary (Maintenance) as HRMG of DOW Assistant Secretary Maintenance Manager; and (3) existing DOW Provincial (Maintenance) disestablished Works Managers as corresponding HRMG Provincial because it proved ineffective and Project Implementation Managers; and (iii) established the therefore surplus to requirements. position of, and appointed a full-time member, as HRMG The ADB was informed and Project Field Manager at Mt Hagen, in a manner, and with understood to accept that the experience and qualifications, satisfactory to the Bank. position on HRMG was no longer required A date ninety (90) days after the date of this Loan Art V. 5.02 Complied. Agreement is specified for the effectiveness of the Loan Date of Loan Agreement: 16 Agreement for the purposes of Section 9.04 of the Loan November 1999, Date of Regulations. Effectiveness: 15 February 2000 Each civil works contract estimated to cost the equivalent Schedule 3 Complied. of $1.0 million or more shall be awarded on the basis of Para 4 (a) All works of value > $1 million ICB. Bidders for such works contracts shall be prequalified awarded on basis of ICB. Bids for before bidding. initial sub-projects invited on basis of post-qualification procedure with ADB agreement.

Appendix 10 41

Reference Covenant in Loan Status of Compliance Agreement For contracts to be awarded on the basis of international Schedule 3 Complied. competitive bidding, there shall be submitted to the Bank, Para 4 (b) as soon as possible, and in any event not later than 90 Apart from the notices for the first days before the issuance of either the first prequalification works contracts to be awarded, invitation or the first invitation to bid for the Project, a and for which post-qualification General Procurement Notice (which the Bank will arrange was accepted by the ADB, the to publish separately) in such form and detail and procedures were followed. containing such information as the Bank shall reasonably request. The Bank shall be provided the necessary information to update such General Procurement Notice annually as long as any goods and works remain to be procured on the basis of international competitive bidding. For contracts to be awarded on the basis of international Schedule 3 Complied. competitive bidding, procurement actions shall be subject Para 4 (c) to review by the Bank in accordance with the procedures set forth in Chapter IV of the Guidelines for Procurement. Each draft prequalification invitation and each draft invitation to bid, to be submitted to the Bank for approval under such procedures, shall reach the Bank at least 42 days before it is issued and shall contain such information as the Bank shall reasonably request to enable the Bank to arrange for the separate publication of such invitation. Each civil works contract estimated to cost less than the Schedule 3 Complied. equivalent of $1.0 million may be awarded under LCB in Para 5 accordance with the Borrower's standard procurement procedures and acceptable to the Bank. Prequalification, selection and engagement of contractors shall be subject to the approval of the Bank. As soon as the bids have been evaluated, the proposal for award of contract shall be submitted to the Bank for approval with the following documents: i. an account of the public opening of bids; ii. a summary and evaluation of the bids; iii. the proposal for award; and iv. a draft contract or a draft letter of acceptance. Promptly after each contract is awarded, the Bank shall be furnished with three copies of the contract as executed. No withdrawals from the Loan Account shall be made in Schedule 3 Complied. respect of any local taxes. Para 6 Imprest Account: Except as the Bank may otherwise Schedule 3 Complied. agree, the Borrower shall establish immediately after the Para 9 (a) effective Date, an imprest account at the Papua New Imprest account opened and guinea Banking Corporation. The imprest account shall be $ 300,000 deposited and fully established, managed, replenished and liquidated in liquidated on project completion. accordance with the Bank’s “Loan Disbursement Handbook” dated June 1996, as amended from time to time (Handbook), and detailed arrangements agreed upon between the Borrower and the Bank. The initial amount to be deposited into the imprest account shall not exceed the equivalent of $300,000. The statement of expenditures (SOE) procedure may be Schedule 3 Complied. used for reimbursement of eligible expenditures and to Para 9 (b) liquidate advances provided into the imprest account, in No payment made or liquidated accordance with the Bank’s Handbook, as amended from under the SOE procedure time to time and detailed arrangements agreed upon exceeded $100,000. between the Borrower and the Bank. Any individual payment to be reimbursed or liquidated under the SOE procedure shall not exceed the equivalent of $100,000.

42 Appendix 10

Reference Covenant in Loan Status of Compliance Agreement The invitation to submit proposals for consultancy services Schedule 4 Complied. shall be approved by the Bank before they are issued. For Para 3 (a) this purpose, three copies of the draft invitation to submit proposals, a list of consultants to be invited, the proposed criteria for evaluation of proposals and other related documents shall be submitted to the Bank. A period of at least sixty (60) days shall be allowed for submission of proposals. A copy of the final invitation as issued, together with all related documents, shall be furnished to the Bank for information promptly after issuance. A draft contract with consultants shall be furnished to the Schedule 4 Complied. Bank for approval sufficiently before the commencement of Para 3 (b) evaluation of proposals. After the proposals received have been evaluated and Schedule 4 Complied. before negotiations are started with the consultants Para 3 (c) selected for negotiations, approval of the Bank shall be obtained to the selection made. For this purpose, the Bank shall, promptly after the evaluation of proposals, be furnished with three copies of (i) an evaluation of the proposals (together with one set of each proposal not previously furnished to the Bank); and (ii) justification for the selection. After the conclusion of negotiations but before the signing Schedule 4 Complied. of the contract, the Bank shall be furnished with: (i) the Para 3 (d) contract as negotiated for approval, and (ii) the evaluation of the proposals. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to the Bank for prior approval. Domestic consultants shall be selected and engaged for Schedule 4 Complied. purposes of part of the services contemplated under Para 4 paragraph (1)(a) in accordance with procedures acceptable to the Bank, and the selection and engagement of the consultants shall be subject to the approval of the Bank with regard to their competence and experience for carrying out the assignment. The Borrower shall ensure that the consulting services Schedule 4 provided do not violate or infringe any industrial property or Para 5 (a) intellectual property right or claim of any third party; and All goods and services provided or used by the consultants Schedule 4 Complied. (including without limitation all computer hardware, Para 5 (b) software and systems) are designed to be used prior to, All equipment and computers during and after the calendar year 2000 AD (Year 2000) purchased for and used by the and that (i) neither the performance nor the functionality of consultant purchased after 1 such goods and services shall be affected by dates prior to, January 2000 and Y2000 during and after the Year 2000, and (ii) such goods and compliant. services, and the logic included therein, will operate during each such time period without error relating to date data, specifically including any error relating to, or to the production of, date data which represent or reference different centuries or more than one century and the correct treatment of the Year 2000 as a leap year.

Appendix 10 43

Reference Covenant in Loan Status of Compliance Agreement As the EA, DOW shall be responsible for overall Schedule 5 Complied. coordination and supervision of Project activities. The DOW Para 1 FAS (Operations), as Project Manager, shall direct and DOW FAS (Operations) appointed supervise HRMG in all operational matters and the DOW as Project Manager. DOW FAS FAS (Design and Major Projects) shall be responsible for (Design and Major Projects) oversight of Project activities and donor coordination. assigned responsibility for oversight of Project activities and donor coordination. HRMG shall be responsible for implementation of the Schedule 5 Complied. Project. The Borrower shall ensure that, during Project Para 2 implementation, any necessary changes to the personal All staff changes in HRMG made appointed to the positions of Project Manager, Project promptly and ADB advised. With Maintenance Manager, Project Field Manager, and the disestablishment of the Provincial Project Implementation Managers, as referred to position of FAS (Maintenance) in in Section 5.01 (b)(ii) of this Loan Agreement, shall occur, DOW, position of ADB Project provided that DOW shall (a) obtain the Bank’s prior written Coordinator created in DOW and concurrence; and (b) ensure timely assignment of new staff ADB approval requested and to such positions with experience and qualifications received. acceptable to the Bank. The Borrower shall ensure that HRMG: (a) is provided with adequate resources and HRMG provided with adequate suitable staff during the period of Project implementation; funds for Project management and and (b) shall develop, inter alia, pilot methods and full liaison with RAMS maintained procedures to ensure that the outputs of RAMS are applied for preparing road maintenance effectively and efficiently, improving maintenance works plans and budget proposals. and road sector financial management and reporting. Project Steering Committee: The PSC shall meet at least Schedule 5 Complied. once each quarter in order to inter alia: (i) monitor, guide Para 3 and facilitate Project implementation; (ii) identify and 23 Meetings held over the mitigate constraints to Project implementation and effective loan period. One member recommended appropriate remedial measures; (iii) facilitate represented in bid evaluation community liaison through appropriate consultations to committees and in public ensure effective civil works; (iv) participate as an observer openings. Sub-committee chaired in bid evaluation committees and in public openings; (v) by the Provincial Administrator establish ad hoc provincial sub-committees, as necessary, appointed in each province. to mitigate community relations and to advise the Project Manager on significant Project implementation issues. Within three months of the Effective Date, a road Schedule 5 Not Complied. maintenance trust account for each province within the Para 4 (a) Highlands Region, to be operated in accordance with Road maintenance account in arrangements satisfactory to the Bank, and deposits each province deemed therein each year in total not less than 15 million kina In unmanageable. GoPNG 1999 prices (i.e. three million kina for each province within determined that one central the Highlands Region) in quarterly payments, adjusted in account with separate provincial each year for annual inflation, in the following minimum ledgers better is more ideal with amounts for each such quarterly installment: First Quarter- less risk of errors and misuse. 20 percent; Second Quarter-30 percent; Third Quarter-30 percent; and Fourth Quarter-20 percent. Prior to each Subproject approval by the Bank, a separate Schedule 5 Complied. Road maintenance bank account for the purposes of such Subproject, to be Para 4 (b) account in each province deemed opened in accordance with arrangements satisfactory to unmanageable. GoPNG the Bank, in which connection the Borrower shall ensure determined that one central that account with separate provincial ledgers better is more ideal with less risk of errors and misuse. (i) the required counterpart funds for the relevant Partially Complied. Subproject are deposited into such account on a timely GoPNG counterpart funds were basis; and received but subject to delays.

44 Appendix 10

Reference Covenant in Loan Status of Compliance Agreement (ii) evidence of such deposits, satisfactory to the Bank, is Complied. submitted to the Bank as part of the relevant Sub project ADB advised of deposit of GoPNG feasibility documentation. counterpart funds The Borrower shall ensure timely submission to its National Schedule 5 Not Complied. Parliament of a budgetary appropriation request for each Para 5 fiscal year during the period of Project implementation for Budget appropriation requests purposes of road maintenance in an amount of not less submitted according to than K 70 million in 1999 prices, adjusted in each fiscal Government timetable. However, year for annual inflation, in order to fund required amounts in final budget expenditures for the road network detailed in the National appropriation approved by Road Maintenance Plan prepared under the RAMS. Parliament were less than K 70 Road Sector Cost Recovery Policy and Road Fund Bill: Schedule 5 Complied. By 31 Dec, 2000, the Borrower shall submit to its National Para 6 Parliament, taking into account the recommendations made National Roads Authority Act under the Cost Recovery TA: (a) a draft Road Sector Cost gazetted in April 2004 which Recovery Bill, which shall require, inter alia, total cost permits the NRA to establish and recovery for road maintenance and operations in operate a road fund to be funded accordance with a timetable acceptable to the Bank. primarily from road user charges. Road Asset Management Systems (RAMS): Within 12 Schedule 5 Partially Complied. months of the Effective Date, the Borrower shall fully Para 7 implement, update and utilize the RAMS to maintain a TA appointed to assist national road inventory and condition database, in a implementation, updating and manner satisfactory to the Bank, in order to identify utilization of RAMS. In practice, prioritized road maintenance and rehabilitation works RAMS database not updated with schedules and to guide the allocation of road maintenance adequate regularity because of funding. lack of adequate funds and inadequate liaison with provincial DOW and foreign donor and Road Sector Improvements: By 31 Dec, 2000, the Schedule 5 Complied. Borrower shall (a) taking into account the Para 8 recommendations made under the Cost Recovery TA (i) Effective axle-load testing not fully implement, by outsourcing or otherwise, effective axle- practical because of equipment, load testing and control; and (ii) establish and commence staff training and associated implementation of an appropriate scale of fines to deter security requirements. The axle-overloading; and (b) complete installation of an alternative of visual surveys of operational weigh bridge in Lae in accordance with traffic would not be an effective arrangements satisfactory to the Bank. means of load control. Establishment and operation of weigh station at Lae determined to be the responsibility of NRA which set up weigh station and have out- sourced operations since 2010. Land Acquisition for Sub-projects: In the event land Schedule 5 Complied. acquisition is required for a Sub-project, the Borrower shall Para 9 ensure that (a) the relevant land acquisition, and any Land-use rights obtained in resettlement incident thereto, is carried out in accordance advance of procurement. However with applicable guidelines of the Borrower and the Bank's post-agreement compensations policy on Involuntary Resettlement: and (b) all land (and issues arose with some projects rights on land) required for a particular Sub-project shall be as a result of misunderstandings acquired or otherwise made available, and related and unjustifiable claims for compensation issues resolved, in a manner satisfactory to compensation which disrupted the Bank prior to submission of the relevant Subproject to implementation of some civil the Bank for approval. works sub-projects

Appendix 10 45

Reference Covenant in Loan Status of Compliance Agreement The Borrower shall ensure that each Subproject to be Schedule 5 Complied. financed out of the proceeds of the Loan shall be submitted Para 10 to the Bank for approval in accordance with detailed criteria and procedures to be agreed between the Borrower and the Bank, including those specified in paragraphs 11 and 12 of this Schedule. Each Sub-project shall be eligible for financing under the Schedule 5 Complied. Loan provided documentary evidence is submitted, Para 11 satisfactory to the Bank, confirming, inter alia: (a) The social need and economic viability of the relevant Complied. Subproject; (b) The high development priority assigned to such Complied. Subproject by the Borrower; (c) An economic rate of return for such Subproject of not Complied. less than 12 percent; (d) Satisfactory resolution of all land acquisition arising out Complied. of, or in connection with, such Subproject, including completion of all landowner consultation, land acquisition, resettlement and compensation formalities in accordance with applicable Borrower and Bank policies and guidelines; (e) That civil works contemplated under such Subproject Complied. have no significant adverse effect on the environment and will not result in any relocation of households; (f) That all environmental and social issues have been Complied. resolved in accordance with applicable Borrower and Bank policies and guidelines; and (g) Deposit by the Borrower into the relevant Subproject Not Complied. Full counterpart account of the full amount of required counterpart funds funding not deposited at time of necessary for proper implementation of such Subproject. submission of sub-project evaluation reports. (a) Each Subproject shall be submitted to the Bank for Schedule 5 approval by DOW, after approval of such Subproject by the Para 12 authorities concerned of the Borrower; and (b) the relevant Subproject documentation submitted to the bank referred to in paragraph 11 of this Schedule shall include inter alia:

(i) A Subproject summary; Complied

(ii) A Sub-project description (including map) Complied (iii) Relevant Sub-project traffic forecast Complied

(iv) A detailed description of the proposed road treatment Complied under the Subproject (v) A Sub-project summary environmental evaluation Complied

(vi) Detailed Sub-project cost estimates Complied

(vii) Detailed eco. analysis of the proposed road treatment Complied under the Sub-project provided under vi including sensitivity analysis testing key parameters (viii) Land acquisition plan developed for the Sub-project Complied and satisfactory evidence of completed land acquisition and compensation in accordance with applicable Bank policies and guidelines

(ix) A Sub-project implementation schedule Partly Complied. Not always prepared in detail.

46 Appendix 10

Reference Covenant in Loan Status of Compliance Agreement (x) Statements confirming the deposit of required Not Complied. Funds not always counterpart funding in the relevant Sub-project bank deposited by date of report account referred to in paragraph 4(b) of the Schedule. submittal. Performance Evaluation: Within 12 months of the Schedule 5 Partially Complied. Effective Date, the Borrower shall cause DOW to establish Para 14 a project performance evaluation system (including Performance monitoring system performance evaluation for each Subproject) and to carry prepared and agreed with ADB. out performance evaluation in accordance with Baseline and expected post- performance measurement indicators and related completion target values prepared implementation schedules to be agreed between DOW and for most sub-projects. However, the Bank. Such performance measurement indicators shall subsequently agreed with ADB focus on, inter alia, critical areas of road network and that many of the selected agency performance and collection of specified Subproject indicators are not appropriate for and socio-economic data. the sub-project evaluations. Without limiting the generality of Section 4.07 of this Loan Schedule 5 Partially Complied. Annual budget Agreement, the Borrower shall cause DOW during each Para 15 details were made available but year of not necessarily prior to finalization Project Implementation to provide the Bank with and presentation to Parliament. satisfactory details of: Given the limited time between preparation of initial budget (a) The proposed annual road budget prior to submission of estimates by DOW, review by such budget to the relevant authorities of the Borrower for NEC and MOF, it was considered finalization and shall take into account the comments of the unlikely that ADB would be able to Bank thereon: provide comment which could be taken into account. (b) The RAMS generated annual program of road Complied. maintenance requirements; and (c) Quarterly reports on (i) the application of the Borrower's Partially Complied. Quarterly road maintenance requirements; and (ii) progress in reports prepared with the implementing road sector policy initiatives; and (iii) assistance of the Project organizational changes and progress in achieved in Implementation Consultant and strengthening DOW and HRMG submitted to ADB. These did not include national policy initiatives and all organizational changes in DOW.

The Borrower shall undertake a technical review of the Schedule 5 Complied. Project no later than 24 months after the Effective Date Para 16 which shall include, inter alia, an assessment of the need DOW assisted with the Technical for modifications to Project design and/or implementation Review carried out by ADB staff arrangements in order to more effectively achieve Project Consultant 21 months after objectives mobilization of the Project Implementation Consultant and dated 3 November 2002.

Appendix 10 47

LOANS 2242/2243-PNG (SF): ROAD MAINTENANCE AND UPGRADING (SECTOR) PROJECT (SUPPLEMENTARY)

Reference in Loan Covenant Agreement Status of Compliance Sector Covenants: Schedule 5, Partial Compliance. Road Maintenance: The Borrower, through DOW, Para 7(ADF) shall ensure that (i) sufficient funds are allocated for The maintenance trust accounts for the maintenance of the roads financed under the 5 provinces were not established Initial Loan Agreement, this Loan Agreement, and the because of concerns over misuse of the accounts and the Government's OCR Loan Agreement and to keep the Road Asset measures to improve financial Management System (RAMS) fully operational; and discipline. (ii) HRMG contracts out routine and periodic road maintenance with local communities and other contractors. National Road Authority (NRA): The Borrower shall ensure Schedule 5, Complied. the full operation of the NRA by appointing the Chief Para 8(ADF) Executive Officer and other essential personnel and NRA was established in 2002 and delineating responsibilities between DOW and the NRA. the CEO appointed. TA 3716-PNG was extended up to 31 December 2007 in order to conduct the ff. activities, including (i) implementation of the road fund; (ii) future changes in legislation stemming from the road sector reforms; (iii) design and installation of a financial management system for NRA; (iv) formulation of operational links between NRA, DOW, DOT, and Department of Treasury; (v) formulation of road maintenance planning and programming systems, making full utilization of RAMS; (vi) contract administration procedures; and (vii) NRA public awareness programs. Project Performance Monitoring and Evaluation: The Schedule 5, Not Complied. Borrower, through HRMG, assisted by consultants Para 15(ADF) engaged under the Project and the HRMG community A Design and Monitoring relations officer, shall monitor and evaluate the Project and Framework was submitted by Subproject impacts to ensure that the project facilities are Renardet S.A. on 3 June 2008. managed effectively and the project benefits maximized. The Borrower, through HRMG, shall discuss and agree Baseline data and ongoing with ADB on the indicators and baseline data prepared by monitoring did not occur. the consultants prior to the commencement of civil works financed by this Loan Agreement and the OCR Loan A Government Project Completion Agreement, and ensure that the consultants shall monitor Report has not been submitted. and compare the data during the Project implementation and at Project completion, and submit monitoring and evaluation reports to ADB one month after the completion of their field work. To the extent possible, the indicators and baseline data shall make full use of gender-disaggregated data and information. The Borrower and DOW shall collect the data agreed with ADB at the inception, project completion, and 3 years after project completion.

48 Appendix 10

Reference in Loan Covenant Agreement Status of Compliance Environmental Covenants: Schedule 5, Complied. Environment : The Borrower, through HRMG, shall ensure Para 13 (ADF) that: (a) the Project design, construction, and operations - The Project is a Category B project comply with applicable domestic laws, regulations, and and the environmental impact standards, and ADB's Environment Policy; (b) all assessment for each road was environmental mitigation measures, institutional completed. All Environmental requirements, and monitoring plans specified in the IEEs Management Plans is being are complied with; (c) the mitigation measures are updated reviewed for each contract package. during the detailed design; (d) all the above requirements are incorporated in the bidding documents and civil works contracts to ensure compliance, (e) environmental compliance monitoring by DOW and HRMG is undertaken in accordance with all applicable laws and regulations, of the Borrower and ADB’s Environment Policy and reflected in the Project progress reports and Project completion report. Financial Covenants: The Borrower shall (i) maintain, or cause to be maintained, Art IV, Section Complied. separate accounts for the Project and each Subproject; (ii) 4.02(a) (ADF) have such accounts and related financial statements and Section Separate accounts were established audited annually, in accordance with appropriate auditing 4.05(a) (OCR) and maintained by DOW. standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditor's opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement), all in English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. The Borrower shall enable ADB, upon ADB's request, to Art IV, Section Complied. discuss the Borrower's financial statements for the Project 4.02(b) (ADF) and its financial affairs related to the Project from time to and Section time with the auditors appointed by the Borrower pursuant 4.05(b) (OCR) to (a) above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree. Counterpart Funding: The Borrower shall provide on a Schedule 5, Partly Complied. timely basis, all funds and resources necessary for Para 4(ADF) upgrading, rehabilitation, maintenance, and management Government provided counterpart of the Project facilities financed under the Project. funding but not on timely basis and usually lower than budgeted. Project Auditing: The Borrower shall cause DOW to: (i) Sched5, Para Complied. undertake timely audit of Project accounts according to 16(ADF)- sound auditing standards by an external auditor acceptable Audited accounts prior to 2011 have to ADB, and (ii) submit to ADB audited Project accounts been submitted, but are submitted and related financial statements within 6 months of the end after the due date of 30 June each of each fiscal year during implementation. year. Y2011 audited accounts yet to be submitted.

Appendix 10 49

Reference in Loan Covenant Agreement Status of Compliance Social Covenants: Labor: The Borrower, through DOW, shall ensure that civil Schedule 5, Complied. works contractors comply with all applicable labor laws and Para 9 (ADF) regulations as well as international treaties, do not employ Provisions made in bidding child or forced labor for road construction, rehabilitation and document for civil contract by DOW maintenance, provide equal opportunities for women in to employ women. Most women road construction, rehabilitation and maintenance activities, along project routes were employed and promptly pay equal wages to men and women for work to undertake jobs such as directing of equal value. DOW shall ensure that specific provisions oncoming and ongoing traffic and to this effect are included in bidding documents and civil camp site jobs. works contracts and that compliance is monitored on an on-going basis. Gender and Development: The Borrower shall ensure that Schedule 5, Complied. the Project is implemented according to ADB's policy on Para 10(ADF) Gender and Development. The Borrower, through HRMG, ADB mission to project sites noted shall: (i) encourage local contractors to recruit women in engagement of women especially on the reconstruction, rehabilitation and maintenance of the construction sites on casual basis to roads financed; and (ii) provide safe working conditions for direct traffic, time keeping including both male and female workers. The Borrower, through camp site jobs for cleaning and HMRM, shall ensure that the above requirements are messing. included in the bidding documents and civil works contracts.

Health Standards: The Borrower, through HRMG, shall Schedule 5, Complied. ensure that all civil works contractors engaged under the Para 11(ADF) Project shall participate in the community-based training Provision made in bidding programs with respect to road safety and STI/HIV/AIDS documents for Contractors to prevention (in consultation with the Provincial AIDS Council undertake these activities. ADB and the Health Administration) to be funded under the review missions confirmed Project along the prioritized road sections. In addition, contractor activities in community HRMG shall ensure that similar information on the risk of awareness on STI/HIVAIDS. transmission of HIV/AIDS and other sexually transmitted infections (STIs) is also disseminated to local communities in the corridor of influence, in coordination with national agencies working on this issue. Specific provisions to this effect shall be included in civil works contracts, and compliance shall be strictly monitored by the HRMG through the engagement of a qualified international consultant. Resettlement: The Borrower and DOW shall ensure that all Schedule 5, Complied. Project rehabilitation and upgraded works are undertaken Para 12(ADF) - within the existing right-of-way. In the event of any No resettlement issue identified unforeseen resettlement, the Borrower shall inform ADB under each civil works contract. and prepare and implement a resettlement plan according to the relevant local laws and regulations, and ADB’s Policy on Involuntary Resettlement. The Borrower shall allocate adequate resources to prepare and implement the resettlement plan, and supervise and monitor its implementation. The Borrower, through DOW, shall ensure that land acquisition and/or resettlement shall not commence before the resettlement plan is reviewed and approved by ADB, and that civil works shall not start before the resettlement plan is approved by ADB.

50 Appendix 10

Reference in Loan Covenant Agreement Status of Compliance Road Safety: The Borrower shall ensure that appropriate Schedule 5, Complied. road safety facilities such as pavement markings, warning Para 6(ADF) signs, traffic signs, and signals and hazard barriers are Road safety awareness undertaken installed during Project implementation and after by contractors and HRMG. Kilometer completion, and that adequate training on road safety are markers and safety signs put up by provided to local communities by HRMG. contractors for all ADB funded roads. Other Covenants: Established, Staffed, and Operating PMU/PIU Complied.

PMU established within DOW, fully operation with full time staff. Fielding of Consultants. Complied.

Signed contract for Implementation Supervision consultants (Renardet SA) received by ADB in May 2007. The Borrower shall make available, promptly as needed, Art IV, Section Complied. the funds, facilities, services, land and other resources 4.01 (ADF) which are required, in addition to the proceeds of the Loan, and Section Borrower’s support in terms of for the carrying out of the Project and for the operation and 4.02 (OCR) resource needs for the project is maintenance of the Project facilities. evident, although timeliness for release of funds is a bit an issue. Terms of and Updates to the Procurement Plan: The initial Schedule 4, Complied. Procurement Plan shall cover a minimum period of 18 Para 4(a) months after the Effective Date. Thereafter, the Borrower (ADF) shall update the Procurement Plan in accordance with the Procurement Guidelines and the Consulting Guidelines, as needed throughout implementation of the Project, so that each such subsequent Procurement Plan is provided to ADB upon each anniversary of the Effective Date.

Terms of and Updates to the Procurement Plan: In the Schedule 4, Complied. event that either this Loan Agreement or the OCR Loan Para 4(b) Agreement does not become effective within 4 months of (ADF) There was no delay in loan ADB's agreement to the initial Procurement Plan, the effectiveness hence Procurement Borrower shall prepare and submit to ADB an updated Plan need not be updated. Procurement Plan for approval within 14 days of the Effective Date. Thereafter, all updates to the Procurement Plan shall be made in accordance with clause (a) above. The initial Procurement Plan shall become effective on the Schedule 4, Complied. Effective Date. Updates to the initial Procurement Plan and Para 5 (ADF) Procurement Plan(s) shall become effective on the date of approval by ADB and shall supersede the immediately preceding Procurement Plan upon that date. The Borrower shall apply the Single Source Selection Schedule 4, Complied. method for selecting and engaging the specified Consulting Para 11(ADF) Services, in accordance with the relevant provisions set forth in Chapter II of the Consulting Guidelines and the procedures set forth in the Procurement Plan for engineering design, preparation of bidding documents, construction supervision, monitoring and evaluation, financial auditing, and training on road maintenance, road safety and STI/HIV/AIDS prevention.

Appendix 10 51

Reference in Loan Covenant Agreement Status of Compliance All contracts procured under ICB and the process of Schedule 4, Complied. selection and engagement for the Consulting Services shall Para 14(ADF) be subject to Prior Review by ADB, unless otherwise agreed between the Borrower and ADB, and as set forth in the Procurement Plan. The procurement document of the first contract procured under National Competitive Bidding (NCB) shall be submitted to ADB for approval. ADB will review the award of contracts procured under NCB on a post-facto basis. Advance Contracting-Prior to the date of this Loan Schedule 4, Complied. Agreement and the OCR Loan Agreement, ADB has Para 15(ADF) approved certain Advance Contracting undertaken on behalf of the Borrower for the procurement of Works and Consulting Services for the Project. The Borrower confirms that all such Advance Contracting has been carried out in a manner consistent with the requirements of this Loan Agreement and OCR Loan Agreement. The approval of Advance Contracting shall not, in any way, derogate from or alter the Borrower's obligations set forth in this Loan Agreement and the OCR Loan Agreement. Misprocurement-If the procurement of Works or Consulting Schedule 4, Complied. Services, is not conducted in accordance with this Loan Para 16(ADF) Agreement or the OCR Loan Agreement, or the Procurement Guidelines or Consulting Guidelines, as applicable, ADB shall declare Misprocurement, and: (i) may take any action set forth in paragraph 1.12 of the Procurement Guidelines, or paragraph 1.18 of the Consulting Guidelines, as appropriate; and/or (ii) may exercise its right of suspension, cancellation, or acceleration of maturity under Art. VIII of the Special Funds Loan Regulations and IX of the Ordinary Operations Loan Regulations, with respect to that portion of this Loan Agreement or the OCR Loan Agreement, as applicable, allocated to the Works or Consulting Services for which Misprocurement has been declared. The Project Steering Committee (PSC) set forth in the Schedule 5, Complied. Initial Loan Agreement shall continue to act as the PSC to Para 3(ADF) - ensure close interagency coordination and monitor the implementation of the Project. The PSC shall be chaired by a Provincial Administrator and shall be composed of 5 Provincial Administrators, 5 Government agencies, 2 representatives from the private sector. The Borrower, through DOW, shall ensure that PSC shall meet at least quarterly to review the progress of implementation and provide support and guidance on Project implementation, as necessary.

52 Appendix 10

Reference in Loan Covenant Agreement Status of Compliance Governance and Anticorruption: The Borrower and DOW Schedule 5, Complied. shall follow ADB’s policy on anticorruption. The Borrower Para 14(ADF) and DOW acknowledges that ADB, consistent with its commitment to good governance, accountability and transparency, reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project. All costs related to such investigations shall be borne by the Project. The Borrower, through DOW, shall ensure that the following anticorruption measures are undertaken during Project implementation: (i) anticorruption provisions acceptable to ADB shall be included in all bidding documents and contracts, in particular a provision specifying the right of ADB to audit and examine the records and accounts of the EA and all contractors, suppliers, consultants and other service providers as they relate to the Project ; and (ii) the Project supervision consultant shall verify the contractors’ payment claims in accordance with the contract specifications. Subproject Progress Reports: During the implementation Schedule 5, Complied. period, the Borrower, through HRMG, shall submit to ADB Para 17(ADF) quarterly Subproject progress report and Subproject Being undertaken on on-going basis completion report within 3 months of subproject completion. and as required. The Subproject progress reports shall cover civil works progress, environmental, institutional, socio-economic, and financial and other relevant aspects that may have an impact on the performance of the Subproject and its continuing activity. Construction Quality: The Borrower, through DOW shall Schedule 5, Complied. ensure that the roads are rehabilitated and upgraded Para 5(ADF) according to technical specifications of the design. In DOW Engineer Representatives and addition, the Borrower, through DOW, shall ensure that site engineers with HRMG undertake construction supervision, quality control, and Project progressive and regular inspections management are performed according to internationally on road construction works to ensure accepted standards. quality control.

Appendix 11 53

ECONOMIC REEVALUATION

A. Traffic Analysis and Projections

1. Existing Traffic

1. Based on Papua New Guinea’s (PNG’s) existing vehicle fleet, the following vehicle types have been taken into account for the traffic analysis39: (i) cars, (ii) pickups, (iii) buses and large public motor vehicles (PMVs), (iv) light trucks, (v) medium trucks (three axles), (vi) heavy trucks (four axles), and (vii) articulated trucks (six axles). The main features of each vehicle type are detailed in Table A11.1.

2. Traffic surveys have been conducted and incorporated in the Department of Works (DOW) Road Asset Management System (RAMS) database and used as a basis for determining average daily traffic. Seasonal patterns were used to obtain annualized average daily traffic and adopted as normal traffic, and have been included in Table A11.1.

3. The analysis of traffic distribution as detailed in the same table shows that cars and buses represent 40% of the total traffic, and pickups and trucks contribute equally to make up the remaining 60%.

Table A11.1: Annualized Average Daily Traffic Categories of Vehicles Subproject Road Buses Annualized Sections and Light Medium Heavy Articulated Average Daily Cars Pickups PMV Trucks Trucks Trucks Trucks Traffic Rypinka–Okapa 1 & 2 82 136 6 116 0 0 0 340 24% 40% 2% 34% 0% 0% 0% 100% Goroka–Lahame 59 257 149 30 0 0 0 495 12% 52% 30% 6% 0% 0% 0% 100% Kamaliki–Move 1 & 2 49 118 47 47 29 0 0 290 17% 41% 16% 16% 10% 0% 0% 100% Kindeng–Kondopina 178 99 30 134 54 0 0 495 21% 37% 21% 17% 4% 0% 0% 100% Banz–Dona 1 & 2 233 165 147 56 13 0 0 614 38% 27% 24% 9% 2% 0% 0% 100% Gewa–Gembogle 101 66 58 130 28 8 0 391 26% 17% 15% 33% 7% 2% 0% 100% Kerowagi–Dona 127 71 21 96 39 0 0 354 36% 20% 6% 27% 11% 0% 0% 100% Keronige–Kerowagi 100 66 58 128 38 8 0 398 26% 17% 15% 33% 7% 2% 0% 100% Warumanda–Laiagam 1 and 2 257 214 13 0 79 30 19 612 42% 35% 2% 0% 13% 5% 3% 100% Ialibu–Kagua 1 and 2 151 60 19 110 34 4 0 378 40% 16% 5% 29% 9% 1% 0% 100% Ialibu–Pangia 77 99 44 96 52 0 0 368 21% 27% 12% 26% 14% 0% 0% 100% PMV = passenger motor vehicle Source: Papua New Guinea Department of Works estimates from Road Asset Management System 2. Traffic Forecast

39 As determined by the Department of Works, Road Asset Management System database.

54 Appendix 11

4. Normal traffic growth rates were based on the projected gross domestic product growth rate and estimated to be 3% per year for 2006–2025. Additional traffic is generated either because a journey becomes more attractive by virtue of its costing less or because of increased development brought about by the improved roads. For all sections, the generated traffic was assumed to equal 5% of normal traffic that would occur during the first year after rehabilitation works end. This assumes intense agricultural activity in the 11 project areas.

5. Volumes of traffic forecast on the project road sections as derived from RAMS are summarized in Table A11.2.

Table A11.2: Actual and Projected Average Traffic Volume (2006–2025) Years Subproject Road Sections Traffic Component 2006 2010 2015 2020 2025 Rypinka–Okapa 1 and 2 Normal Traffic 372 418 485 562 640 Generated Traffic 0 21 24 28 32 Subtotal 372 439 509 590 672 Goroka–Lahame Normal Traffic 524 590 684 793 919 Generated Traffic 0 30 34 40 46 Subtotal 524 620 718 833 965 Kamaliki–Move 1 & 2 Normal Traffic 317 357 413 479 540 Generated Traffic 0 18 21 24 27 Subtotal 317 375 434 503 567 Kindeng–Kondopina Normal Traffic 467 525 609 706 818 Generated Traffic 0 26 30 35 41 Subtotal 467 551 639 741 859 Banz–Dona 1 and 2 Normal Traffic 651 733 850 985 1142 Generated Traffic 0 37 42 49 57 Subtotal 651 770 892 1,034 1,199 Gewa–Gembogle Normal Traffic 424 477 553 641 720 Generated Traffic 0 24 28 32 36 Subtotal 424 501 581 673 756 Kerowagi–Dona Normal Traffic 387 435 505 585 660 Generated Traffic 0 22 25 29 33 Subtotal 387 457 530 614 693 Keronige–Kerowagi Normal Traffic 424 477 553 641 743 Generated Traffic 0 24 28 32 37 Subtotal 424 501 581 673 780 Warumanda–Laiagam 1 and 2 Normal Traffic 530 596 691 793 929 Generated Traffic 0 30 35 40 46 Subtotal 530 626 726 833 975 Ialibu–Kagua 1 and 2 Normal Traffic 423 476 552 640 720 Generated Traffic 0 24 28 32 36 Subtotal 423 500 580 672 756 Ialibu–Pangia Normal Traffic 402 453 525 608 680 Generated Traffic 0 23 26 30 34 Subtotal 402 476 551 638 714 Source: Department of Works, Road Asset Management System

B. Economic Evaluation

Appendix 11 55

1. General

6. The economic analysis was carried out for all subproject roads by comparing scenarios with and without the Project using the highway design and management model. The economic analysis covers 20 years, with actual construction periods of 2 years. All benefits and costs are in constant 2008 prices. All prices are expressed in PNG kina.

7. In the scenario without the Project, the subproject road sections are assumed to receive a minimum of maintenance to keep them at an average roughness measuring 16 on the International Roughness Index (IRI). The scenario with the Project includes routine and periodic maintenance.

8. During project preparation, two improvement options were considered, namely upgrade to sealed and regravelling, to determine which would be the more cost-effective. In the scenario with the Project, the average roughness would decrease to about 4.5 IRI after upgrading to sealed and would keep road surface roughness below 7 IRI. In the re-gravelling option, the average roughness of the road would be reduced to 6.5 IRI, and proposed maintenance would keep road surface roughness below 10 IRI.

2. Costs

9. Road section economic costs include the financial roadwork costs in terms of materials, equipment, labor, and consulting services. Taxes and duties are excluded. Costs were divided into tradable and nontradable components. A standard conversion factor of 0.95 has been used to revalue goods and services at world prices into PNG kina, and a shadow wage rate factor of 0.5 has been applied to local unskilled labor to account for local unemployment and underemployment. These factors have been applied to capital and maintenance costs, as well as to vehicle operating and passenger time costs.

3. Benefits

10. Benefits for the subproject roads are significant because they have relatively high traffic usage due to active agricultural and commercial sectors, and because they were in poor or very poor condition in the pre-project situation. The main benefits are savings in vehicle operating costs and time for road users, and in maintenance costs.

11. Vehicle operating costs include the costs of (i) replacing spare parts, (ii) gas and diesel, (iii) lubricating oil, (iv) maintenance labor, and (v) crew wages. Subproject economic costs were used as inputs to the analysis.

12. The value of time in the economic analysis is derived from two components: (i) working time and (ii) nonworking time. The value of working time during productive hours was derived from the average per capita income of K2,300. Assuming a 48-hour work week and 48 weeks of work per year, the value of a working hour used in the analysis was K1.00. Nonworking time was valued at a quarter of working time. This rate was used for bus and PMV passengers only. The rate was doubled for passengers in cars and pickups

4. Results of Economic Analysis

13. Using a 12% discount rate, the economic benefits for the infrastructure components of the Project were significant. The net present value of all Loan road subprojects (L1709 and L2242/2243) was $21.75 million and the economic internal rate of return (EIRR) was 14.9%. The

56 Appendix 11 net present value of the Loan 1709 road subprojects was $14.8 million and the economic internal rate of return (EIRR) was 15.5%. As L1709 was a sector loan, only a single road section was subject to economic appraisal and the EIRR was presented as 18.2%. This road section was not undertaken, so there is no direct comparison for actual EIRR achieved. As an indicative rate it seems optimistic as actual L1709 EIRRs achieved were in the range 12.9% to 17.9%. The net present value of the Loan L2242/2243 road subprojects was $11.0 million and the economic internal rate of return (EIRR) was a lower 14.1%. These results compare with the L2242/2243 Appraisal estimated EIRR of 18.8%, where individual road segments had estimated EIRRs in the range 13.3% to 33.3%. These Appraisal estimates were on the optimistic side, assuming lower subproject costs and shorter construction times. The net benefit streams are shown in Table A11.3 through Table A11.5.

Appendix 11 57

Table A.11.3: Combined Road Sections L1709 and L2242/2243 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Costs Benefits Normal Traffic Costs Capital O&M Total Traffic Total Net Benefits plus & delayed plus Cost Cost Cost Benefit Benefits less 10% benefits by one VOC Time VOC Time 10% less 10% year 2004 2.37 2.37 -2.37 -2.61 -2.37 -2.61 -2.37 2005 12.64 12.64 -1.00 -0.15 -1.14 -13.78 -15.04 -13.67 -14.93 -12.64 2006 11.66 -1.57 10.09 -2.87 -0.53 -3.40 -13.50 -14.51 -13.16 -14.17 -11.24 2007 6.58 -2.04 4.54 3.55 0.29 0.01 3.85 -0.69 -1.14 -1.07 -1.53 -7.94 2008 35.32 -3.02 32.30 0.85 -0.32 0.05 0.58 -31.71 -34.94 -31.77 -35.00 -28.45 2009 62.75 -5.11 57.64 -6.88 -1.61 0.08 -8.41 -66.05 -71.81 -65.20 -70.97 -57.05 2010 27.08 -13.88 13.20 5.18 -0.62 0.50 0.03 5.10 -8.10 -9.42 -8.61 -9.93 -21.61 2011 10.89 -14.14 -3.25 16.19 0.56 0.93 0.02 17.71 20.96 21.28 19.19 19.51 8.35 2012 7.20 -12.43 -5.23 14.43 0.14 1.62 0.04 16.22 21.46 21.98 19.83 20.36 22.94 2013 -12.64 -12.64 17.98 0.48 2.21 0.06 20.72 33.35 34.62 31.28 32.55 28.86 2014 -12.59 -12.59 17.63 0.43 2.40 0.07 20.53 33.11 34.37 31.06 32.32 33.31 2015 -12.77 -12.77 17.68 0.46 2.41 0.07 20.62 33.38 34.66 31.32 32.60 33.29 2016 -12.96 -12.96 17.51 0.49 2.39 0.07 20.47 33.43 34.73 31.38 32.68 33.58 2017 -13.22 -13.22 17.16 0.51 2.36 0.08 20.11 33.32 34.65 31.31 32.64 33.69 2018 -13.40 -13.40 16.60 0.53 2.30 0.08 19.51 32.91 34.25 30.96 32.30 33.51 2019 -8.93 -8.93 15.78 0.53 2.20 0.09 18.60 27.54 28.43 25.68 26.57 28.44 2020 -10.80 -10.80 17.05 0.61 2.07 0.09 19.81 30.61 31.69 28.63 29.71 29.40 2021 -11.38 -11.38 16.82 0.64 2.14 0.10 19.70 31.09 32.23 29.12 30.26 31.20 2022 -8.74 -8.74 15.73 0.62 1.97 0.10 18.41 27.16 28.03 25.32 26.19 28.45 2023 1.06 1.06 16.11 0.61 1.94 0.09 18.75 17.68 17.58 15.81 15.70 17.35 2024 7.45 7.45 18.22 0.62 2.60 0.10 21.54 14.08 13.34 11.93 11.19 11.30 2025 22.87 22.87 21.79 0.72 3.10 0.12 25.73 2.86 0.57 0.29 -2.00 -1.34 2026 -18.29 -18.29 29.26 1.02 4.22 0.17 34.66 52.96 54.79 49.49 51.32 44.03 2027 -13.11 -13.11 26.03 0.82 4.23 0.17 31.25 44.36 45.67 41.23 42.54 47.77 2028 -14.12 -14.12 26.06 0.89 4.13 0.18 31.26 45.38 46.79 42.25 43.67 45.37 2029 -28.47 -28.47 25.43 0.96 4.18 0.20 30.76 59.23 62.07 56.15 59.00 59.73 2030 -22.75 -22.75 14.36 0.48 1.46 0.07 16.38 39.13 41.40 37.49 39.77 53.51 2031 -1.16 -1.16 3.36 0.11 3.47 4.62 4.74 4.28 4.39 17.53 2032 -5.79 -5.79 3.20 0.10 3.30 9.09 9.67 8.76 9.34 9.25

Net Present Value at 12% 21.75 17.28 15.10 10.63 14.52 Economic Internal Rate of Return 14.9% 14.2% 14.1% 13.4% 13.9% Sensitivity indicator 0.51 0.56 Source: Department of Works, Road Asset Management System

58 Appendix 11

Table A11.4: Combined Road Sections L1709 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Normal Generated Traffic Traffic Costs Costs Benefits Total Net Benefits plus & VOC Time VOC Time plus delayed by Capital O&M Total Benefit Benefits less 10% benefits 10% one year Cost Cost Cost less 10% 2004 2.37 2.37 -2.37 -2.61 -2.37 -2.61 -2.37 2005 12.64 12.64 -1.00 -0.15 -1.14 -13.78 -15.04 -13.67 -14.93 -12.64 2006 11.66 -1.57 10.09 -2.87 -0.53 -3.40 -13.50 -14.51 -13.16 -14.17 -11.24 2007 6.58 -2.04 4.54 3.55 0.29 0.01 3.85 -0.69 -1.14 -1.07 -1.53 -7.94 2008 18.11 -3.02 15.09 0.85 -0.32 0.05 0.58 -14.51 -16.02 -14.57 -16.07 -11.24 2009 27.97 -5.11 22.86 -3.59 -1.08 0.08 -4.58 -27.44 -29.73 -26.98 -29.27 -22.28 2010 10.58 -10.67 -0.10 3.63 -0.14 0.33 0.02 3.83 3.93 3.94 3.54 3.55 -4.49 2011 -9.34 -9.34 9.54 0.47 0.50 0.02 10.52 19.86 20.79 18.81 19.74 13.17 2012 -8.37 -8.37 8.42 0.20 0.81 0.02 9.45 17.82 18.66 16.88 17.71 18.89 2013 -8.32 -8.32 8.67 0.23 1.08 0.03 10.01 18.33 19.17 17.33 18.16 17.77 2014 -8.49 -8.49 8.71 0.25 1.16 0.04 10.16 18.65 19.49 17.63 18.48 18.50 2015 -8.60 -8.60 8.55 0.27 1.15 0.04 10.01 18.61 19.48 17.61 18.47 18.76 2016 -8.74 -8.74 8.25 0.29 1.12 0.05 9.71 18.44 19.32 17.47 18.35 18.75 2017 -8.93 -8.93 7.82 0.31 1.08 0.05 9.25 18.18 19.08 17.26 18.15 18.64 2018 -9.05 -9.05 7.24 0.31 1.02 0.05 8.62 17.68 18.58 16.81 17.72 18.31 2019 -4.51 -4.51 6.47 0.30 0.94 0.05 7.76 12.28 12.73 11.50 11.95 13.14 2020 -6.33 -6.33 7.85 0.38 0.83 0.05 9.11 15.44 16.08 14.53 15.16 14.09 2021 -6.84 -6.84 7.83 0.40 0.95 0.06 9.25 16.08 16.77 15.16 15.84 15.95 2022 -4.11 -4.11 7.04 0.39 0.82 0.06 8.32 12.43 12.84 11.59 12.01 13.36 2023 -0.13 -0.13 7.83 0.39 0.86 0.06 9.15 9.28 9.29 8.36 8.38 8.45 2024 10.17 10.17 8.90 0.39 1.14 0.06 10.50 0.33 -0.69 -0.72 -1.74 -1.03 2025 9.87 9.87 12.29 0.53 1.65 0.08 14.56 4.69 3.70 3.23 2.25 0.63 2026 -13.30 -13.30 15.53 0.68 2.22 0.11 18.54 31.83 33.16 29.98 31.31 27.86 2027 -11.13 -11.13 11.92 0.47 2.17 0.12 14.67 25.80 26.91 24.33 25.45 29.67 2028 -8.95 -8.95 10.95 0.49 2.02 0.12 13.59 22.53 23.43 21.18 22.07 23.62 2029 -14.55 -14.55 10.03 0.53 2.04 0.13 12.73 27.28 28.73 26.01 27.46 28.14 2030 -8.61 -8.61 4.32 0.21 0.69 0.04 5.27 13.88 14.75 13.36 14.22 21.34

Net Present Value at 12% 14.78 12.97 11.50 9.69 11.04 Economic Internal Rate of Return 15.5% 14.9% 14.8% 14.2% 14.6% Sensitivity indicator 0.41 0.45 Source: Department of Works, Road Asset Management System

Appendix 11 59

Table A11.5: All Roads L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Normal Traffic Generated Traffic Costs plus Benefits Capital O&M Total Net Costs plus Benefits & delayed Total Cost VOC Time VOC Time Cost Cost Benefit Benefits 10% less 10% benefits by one less 10% year 2008 17.21 17.21 ‐17.21 ‐18.93 ‐17.21 ‐18.93 ‐17.21 2009 34.77 34.77 ‐3.29 ‐0.54 ‐3.83 ‐38.60 ‐42.08 ‐38.22 ‐41.70 ‐34.77 2010 16.50 ‐3.21 13.29 1.56 ‐0.47 0.18 0.01 1.27 ‐12.02 ‐13.35 ‐12.15 ‐13.48 ‐17.12 2011 10.89 ‐4.80 6.09 6.65 0.09 0.43 0.01 7.19 1.10 0.49 0.38 ‐0.23 ‐4.82 2012 7.20 ‐4.06 3.14 6.01 ‐0.06 0.82 0.01 6.77 3.64 3.32 2.96 2.64 4.05 2013 ‐4.31 ‐4.31 9.31 0.25 1.13 0.02 10.71 15.02 15.45 13.95 14.38 11.09 2014 ‐4.10 ‐4.10 8.93 0.18 1.24 0.02 10.37 14.47 14.88 13.43 13.84 14.81 2015 ‐4.16 ‐4.16 9.13 0.19 1.26 0.03 10.61 14.77 15.18 13.71 14.12 14.53 2016 ‐4.22 ‐4.22 9.27 0.20 1.27 0.03 10.76 14.99 15.41 13.91 14.33 14.83 2017 ‐4.29 ‐4.29 9.34 0.21 1.27 0.03 10.85 15.14 15.57 14.06 14.48 15.05 2018 ‐4.35 ‐4.35 9.36 0.22 1.27 0.03 10.88 15.24 15.67 14.15 14.58 15.21 2019 ‐4.42 ‐4.42 9.32 0.23 1.26 0.03 10.84 15.26 15.70 14.18 14.62 15.30 2020 ‐4.46 ‐4.46 9.20 0.24 1.24 0.03 10.70 15.17 15.62 14.10 14.54 15.30 2021 ‐4.55 ‐4.55 8.99 0.24 1.20 0.03 10.46 15.01 15.46 13.96 14.42 15.25 2022 ‐4.63 ‐4.63 8.69 0.23 1.14 0.03 10.10 14.73 15.20 13.72 14.19 15.09 2023 1.20 1.20 8.28 0.21 1.08 0.03 9.60 8.41 8.29 7.45 7.33 8.90 2024 ‐2.72 ‐2.72 9.32 0.22 1.46 0.04 11.03 13.76 14.03 12.65 12.92 12.33 2025 13.00 13.00 9.50 0.19 1.45 0.03 11.17 ‐1.83 ‐3.13 ‐2.95 ‐4.25 ‐1.97 2026 ‐5.00 ‐5.00 13.73 0.34 2.00 0.05 16.13 21.13 21.63 19.51 20.01 16.17 2027 ‐1.98 ‐1.98 14.11 0.35 2.06 0.06 16.58 18.56 18.76 16.90 17.10 18.10 2028 ‐5.17 ‐5.17 15.11 0.40 2.11 0.06 17.67 22.85 23.36 21.08 21.60 21.76 2029 ‐13.92 ‐13.92 15.40 0.42 2.14 0.07 18.03 31.95 33.34 30.15 31.54 31.59 2030 ‐14.14 ‐14.14 10.04 0.27 0.77 0.02 11.10 25.24 26.66 24.13 25.55 32.17 2031 ‐1.16 ‐1.16 3.36 0.11 3.47 4.62 4.74 4.28 4.39 12.26 2032 ‐5.79 ‐5.79 3.20 0.10 3.30 9.09 9.67 8.76 9.34 9.25

Net Present Value at 12% 10.97 6.77 5.67 1.47 5.12 Economic Internal Rate of Return 14.1% 13.2% 13.1% 12.3% 12.9% Sensitivity indicator 0.65 0.71 Source: Department of Works, Road Asset Management System

14. A summary of the individual road subprojects is included in Table A11.6 and Table A11.7, indicating that all road sections had a positive net present value using a 12% discount rates and the individual EIRRs ranged from 12.9% to 18.6%. The net benefit streams for each of the road subprojects are shown in Table A11.8 through Table A11.29.

60 Appendix 11

Table A11.6: Summary of Highlands Road Maintenance and Upgrading Project – L1709 Sensitivity Tests Costs Benefits Highlands Road Maintenance and Upgrading Net Costs Benefits plus & delayed Project Benefits plus less 10% benefits by one 10% less 10% year

All Roads L1709 Net Present Value at 12% - Kina million 14.78 12.97 11.50 9.69 11.04 Economic Internal Rate of Return - % 15.5% 14.9% 14.8% 14.2% 14.6% Sensitivity indicator 0.41 0.45

Chauve-Move Road Section Net Present Value at 12% - Kina million 0.81 0.53 0.45 0.16 0.32 Economic Internal Rate of Return - % 13.4% 12.9% 12.8% 12.3% 12.5% Sensitivity indicator 0.42 0.47

Goro-Gumine Road Section Net Present Value at 12% - Kina million 1.75 1.98 1.81 2.04 0.32 Economic Internal Rate of Return - % 17.9% 18.2% 18.3% 18.6% 12.5% Sensitivity indicator -0.18 -0.20

Goroka - Lahame Road Section Net Present Value at 12% - Kina million 0.84 0.17 0.08 -0.59 -0.17 Economic Internal Rate of Return - % 12.9% 12.2% 12.1% 11.4% 11.8% Sensitivity indicator 0.59 0.65

Kandep-Kaipau Road Section Net Present Value at 12% - Kina million 2.62 2.28 2.02 1.68 1.80 Economic Internal Rate of Return - % 15.6% 14.9% 14.8% 14.2% 14.5% Sensitivity indicator 0.44 0.48

Korifegu - Nupuru Road Section Net Present Value at 12% - Kina million 4.64 4.28 3.81 3.45 3.48 Economic Internal Rate of Return - % 17.0% 16.3% 16.2% 15.6% 15.8% Sensitivity indicator 0.42 0.46

Kotna - Banz Road Sectiona Net Present Value at 12% - Kina million 1.79 1.93 1.75 1.89 1.66 Economic Internal Rate of Return - % 17.8% 17.9% 17.9% 18.0% 17.8%a Sensitivity indicator -0.05 -0.06

Kundiawa - Goro Road Section Net Present Value at 12% - Kina million 0.36 0.22 0.18 0.04 0.11 Economic Internal Rate of Return - % 13.3% 12.7% 12.7% 12.1% 12.4% Sensitivity indicator 0.43 0.47

Mt Ambra-Kotna Road Section Net Present Value at 12% - Kina million 5.35 4.73 4.19 3.56 3.85 Economic Internal Rate of Return - % 17.4% 16.5% 16.4% 15.4% 15.8% Sensitivity indicator 0.56 0.61

Oliguti-Lufa Road Section Net Present Value at 12% - Kina million 1.78 1.41 1.23 0.86 1.00 Economic Internal Rate of Return - % 14.2% 13.6% 13.5% 13.0% 13.2% Sensitivity indicator 0.39 0.43

Ogelbeng - Mt Ambra Road Section Net Present Value at 12% - Kina million 0.70 0.59 0.52 0.42 0.45 Economic Internal Rate of Return - % 15.0% 14.4% 14.3% 13.7% 14.0% Sensitivity indicator 0.41 0.46 a EIRR remains the same under the sensitivity test owing to initial year negative benefits. Source: Department of Works, Road Asset Management System

Appendix 11 61

Table A11.7: Summary of Highlands Road Maintenance and Upgrading Project ‐ L2242/2243 Sensitivity Tests Net Costs plus Benefits Highlands Road Maintenance and Upgrading Project Costs plus Benefits Benefits & benefits delayed by 10% less 10% less 10% one year

All Roads L2242/2243 Net Present Value at 12% ‐ Kina million 10.97 6.77 5.67 1.47 5.12 Economic Internal Rate of Return ‐ % 14.1% 13.2% 13.1% 12.3% 12.9% Sensitivity indicator 0.65 0.71

Banz‐Dona Road Section Net Present Value at 12% ‐ Kina million 3.84 2.58 2.19 0.92 1.17 Economic Internal Rate of Return ‐ % 14.5% 13.6% 13.5% 12.6% 13.1% Sensitivity indicator 0.66 0.73

Ialibu ‐ Pangia Road Section Net Present Value at 12% ‐ Kina million 2.74 1.56 1.29 0.11 0.87 Economic Internal Rate of Return ‐ % 14.0% 13.1% 13.0% 12.1% 12.6% Sensitivity indicator 0.67 0.74

Kamaliki ‐ Bekuvia Road Section Net Present Value at 12% ‐ Kina million 1.38 0.42 0.28 ‐0.67 0.87 Economic Internal Rate of Return ‐ % 13.2% 12.4% 12.3% 11.4% 12.6% Sensitivity indicator 0.67 0.74

Kindeng ‐ Kondopina Road Section Net Present Value at 12% ‐ Kina million 1.92 1.86 1.67 1.61 ‐0.05 Economic Internal Rate of Return ‐ % 18.6% 18.0% 18.0% 17.4% 12.0% Sensitivity indicator 0.34 0.37

Korinige ‐ Kerowagi Road Section Net Present Value at 12% ‐ Kina million 0.67 0.45 0.38 0.17 0.30 Economic Internal Rate of Return ‐ % 14.3% 13.4% 13.4% 12.6% 13.0% Sensitivity indicator 0.60 0.66

Lame Bridge ‐ Laiagam 2A Road Section Net Present Value at 12% ‐ Kina million 0.20 0.30 0.28 0.39 0.28 Economic Internal Rate of Return ‐ % 16.5% 18.3% 18.5% 20.1% 19.6%a Sensitivity indicator ‐1.07 ‐1.18

Laiagam 2A ‐ Laiagam 2B Road Section Net Present Value at 12% ‐ Kina million 1.00 ‐0.18 ‐0.28 ‐1.46 ‐0.61 Economic Internal Rate of Return ‐ % 12.9% 11.9% 11.8% 10.8% 11.5% Sensitivity indicator 0.78 0.86 a EIRR increases under the sensitivity test owing to initial year negative benefits. Source: Department of Works, Road Asset Management System

62 Appendix 11

Table A11.8: Chauve-Move Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs Benefits Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost VOC Time VOC Time Benefit Benefits by one 10% 10% less year 10% 2006 5.18 5.18 0.00 -5.18 -5.70 -5.18 -5.70 -5.18 2007 4.32 4.32 -1.03 -0.08 -1.11 -5.43 -5.86 -5.32 -5.75 -4.32 2008 -1.57 -1.57 1.13 0.03 0.03 0.00 1.19 2.76 2.92 2.64 2.80 0.46 2009 -0.78 -0.78 0.55 0.00 0.04 0.00 0.60 1.38 1.46 1.32 1.40 1.98 2010 -0.83 -0.83 0.60 0.01 0.08 0.00 0.69 1.52 1.60 1.45 1.53 1.43 2011 -0.85 -0.85 0.64 0.01 0.10 0.00 0.74 1.59 1.68 1.52 1.60 1.54 2012 -0.87 -0.87 0.65 0.01 0.10 0.00 0.76 1.62 1.71 1.55 1.64 1.61 2013 -0.88 -0.88 0.64 0.01 0.10 0.00 0.75 1.62 1.71 1.55 1.64 1.63 2014 -0.89 -0.89 0.63 0.01 0.09 0.00 0.73 1.62 1.71 1.55 1.64 1.64 2015 -0.90 -0.90 0.60 0.01 0.09 0.00 0.70 1.61 1.70 1.54 1.63 1.63 2016 -0.92 -0.92 0.57 0.01 0.09 0.00 0.67 1.59 1.68 1.52 1.61 1.62 2017 -0.93 -0.93 0.52 0.01 0.08 0.00 0.61 1.54 1.64 1.48 1.57 1.60 2018 -0.95 -0.95 0.46 0.01 0.07 0.00 0.54 1.49 1.59 1.44 1.53 1.56 2019 -0.96 -0.96 0.39 0.01 0.06 0.00 0.45 1.41 1.51 1.37 1.46 1.50 2020 -0.98 -0.98 0.29 0.01 0.04 0.00 0.34 1.32 1.42 1.29 1.39 1.43 2021 -0.99 -0.99 0.18 0.00 0.03 0.00 0.21 1.20 1.30 1.18 1.28 1.34 2022 4.66 4.66 0.05 0.00 0.01 0.00 0.06 -4.60 -5.07 -4.61 -5.07 -4.45 2023 -1.03 -1.03 1.14 0.01 0.17 0.00 1.33 2.35 2.46 2.22 2.32 1.08 2024 -1.05 -1.05 1.19 0.02 0.18 0.00 1.38 2.43 2.54 2.29 2.40 2.38 2025 -1.06 -1.06 1.23 0.02 0.18 0.00 1.44 2.50 2.60 2.35 2.46 2.45 2026 -0.97 -0.97 1.26 0.02 0.19 0.00 1.46 2.44 2.53 2.29 2.39 2.41 2027 -3.84 -3.84 1.24 0.02 0.19 0.00 1.45 5.28 5.67 5.14 5.52 5.30

Net Present Value at 12% 0.81 0.53 0.45 0.16 0.32 Economic Internal Rate of Return 13.4% 12.9% 12.8% 12.3% 12.5% Sensitivity indicator 0.42 0.47 Source: Department of Works, Road Asset Management System

Appendix 11 63

Table A11.9: Goro-Gumine Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs Benefits Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost VOC Time VOC Time Benefit Benefits by one 10% 10% less year 10% 2007 2.26 2.26 -2.26 -2.49 -2.26 -2.49 -2.26 2008 3.06 3.06 -2.85 -0.42 -3.27 -6.32 -6.63 -6.00 -6.30 -3.06 2009 -2.82 -2.82 1.30 0.07 1.37 4.19 4.47 4.05 4.33 -0.45 2010 -1.05 -1.05 0.34 -0.01 0.32 1.38 1.48 1.35 1.45 2.42 2011 -1.08 -1.08 0.36 -0.01 0.34 1.42 1.53 1.38 1.49 1.40 2012 -1.08 -1.08 0.37 -0.01 0.36 1.44 1.54 1.40 1.51 1.42 2013 -1.10 -1.10 0.38 -0.01 0.36 1.46 1.57 1.43 1.54 1.46 2014 -1.10 -1.10 0.35 -0.01 0.34 1.44 1.55 1.40 1.51 1.47 2015 -1.12 -1.12 0.31 -0.01 0.29 1.42 1.53 1.39 1.50 1.46 2016 -1.13 -1.13 0.25 -0.01 0.24 1.37 1.48 1.34 1.46 1.42 2017 -1.15 -1.15 0.18 -0.01 0.17 1.32 1.44 1.30 1.42 1.39 2018 -1.15 -1.15 0.10 -0.01 0.08 1.24 1.35 1.23 1.34 1.32 2019 -1.18 -1.18 -0.02 -0.01 -0.03 1.15 1.26 1.15 1.27 1.26 2020 -1.18 -1.18 -0.15 -0.02 -0.17 1.01 1.13 1.03 1.15 1.15 2021 -1.21 -1.21 -0.32 -0.02 -0.34 0.87 0.99 0.90 1.02 1.04 2022 -1.21 -1.21 -0.51 -0.03 -0.54 0.68 0.80 0.73 0.85 0.88 2023 -1.24 -1.24 -0.73 -0.04 -0.77 0.47 0.59 0.55 0.67 0.70 2024 8.96 8.96 -0.98 -0.06 -1.04 -10.00 -10.90 -9.90 -10.80 -9.73 2025 -1.27 -1.27 0.91 -0.01 0.91 2.18 2.31 2.09 2.22 0.23 2026 -1.28 -1.28 0.96 0.00 0.96 2.24 2.37 2.14 2.27 2.19 2027 -1.31 -1.31 1.01 0.00 1.01 2.31 2.44 2.21 2.34 2.27 2028 -2.91 -2.91 1.04 0.00 1.04 3.95 4.24 3.84 4.14 3.92 Net Present Value at 12% 1.75 1.98 1.81 2.04 1.73 Economic Internal Rate of Return 17.9% 18.2% 18.3% 18.6% 18.4% Sensitivity indicator -0.18 -0.20 Source: Department of Works, Road Asset Management System

64 Appendix 11

Table A11.10: Goroka - Lahame Road Section L1709 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs Benefits Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost VOC Time VOC Time Benefit Benefits by one 10% 10% less year 10% 2009 7.03 7.03 -7.03 -7.74 -7.03 -7.74 -7.03 2010 5.26 5.26 -2.10 -0.33 -2.42 -7.69 -8.21 -7.44 -7.97 -5.26 2011 -1.04 -1.04 1.60 0.14 0.08 0.01 1.82 2.87 2.97 2.69 2.79 -1.38 2012 -0.55 -0.55 0.98 0.04 0.15 0.01 1.17 1.72 1.77 1.60 1.66 2.37 2013 -0.58 -0.58 1.06 0.04 0.26 0.01 1.37 1.96 2.02 1.82 1.88 1.76 2014 -0.60 -0.60 1.11 0.05 0.33 0.01 1.50 2.11 2.17 1.96 2.02 1.98 2015 -0.62 -0.62 1.13 0.05 0.34 0.01 1.54 2.15 2.21 2.00 2.06 2.12 2016 -0.62 -0.62 1.14 0.05 0.34 0.02 1.55 2.17 2.23 2.02 2.08 2.16 2017 -0.64 -0.64 1.14 0.05 0.34 0.02 1.55 2.19 2.25 2.03 2.10 2.18 2018 -0.65 -0.65 1.13 0.06 0.34 0.02 1.54 2.18 2.25 2.03 2.09 2.19 2019 -0.64 -0.64 1.10 0.06 0.33 0.02 1.51 2.16 2.22 2.00 2.07 2.18 2020 -0.67 -0.67 1.06 0.06 0.32 0.02 1.46 2.13 2.20 1.98 2.05 2.18 2021 -0.68 -0.68 1.01 0.07 0.30 0.02 1.39 2.08 2.14 1.94 2.00 2.15 2022 -0.69 -0.69 0.93 0.06 0.28 0.02 1.29 1.99 2.06 1.86 1.93 2.08 2023 -0.71 -0.71 0.84 0.06 0.25 0.02 1.17 1.88 1.95 1.76 1.83 2.00 2024 3.06 3.06 0.73 0.04 0.22 0.01 1.01 -2.06 -2.36 -2.16 -2.46 -1.89 2025 -0.73 -0.73 1.77 0.09 0.53 0.03 2.43 3.16 3.23 2.92 2.99 1.74 2026 -0.75 -0.75 1.84 0.10 0.55 0.03 2.52 3.27 3.34 3.02 3.09 3.17 2027 -0.76 -0.76 1.91 0.10 0.57 0.03 2.61 3.38 3.45 3.12 3.19 3.29 2028 -0.77 -0.77 1.94 0.11 0.58 0.03 2.67 3.44 3.52 3.17 3.25 3.39 2029 -0.72 -0.72 1.94 0.12 0.58 0.04 2.67 3.39 3.46 3.13 3.20 3.39 2030 -4.40 -4.40 1.92 0.13 0.58 0.04 2.66 7.07 7.51 6.80 7.24 7.08 Net Present Value at 12% 0.84 0.17 0.08 -0.59 -0.17 Economic Internal Rate of Return 12.9% 12.2% 12.1% 11.4% 11.8% Sensitivity indicator 0.59 0.65 Source: Department of Works, Road Asset Management System

Appendix 11 65

TableA11.11: Laiagam 2A - Laiagam 2B Road Section L2242/2243 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs plus & Benefits Costs Benefits benefits delayed VOC Time VOC Time Capital O&M Total Total Net plus less less by one Cost Cost Cost Benefit Benefits 10% 10% 10% year 2011 10.21 10.21 -10.21 -11.23 -10.21 -11.23 -10.21 2012 7.20 7.20 -0.84 -0.21 -1.05 -8.25 -8.97 -8.14 -8.86 -7.20 2013 -0.72 -0.72 2.49 0.12 2.61 3.33 3.40 3.07 3.14 -0.33 2014 -0.44 -0.44 1.89 0.04 1.94 2.38 2.42 2.18 2.23 3.06 2015 -0.45 -0.45 1.96 0.05 2.00 2.45 2.50 2.25 2.30 2.39 2016 -0.46 -0.46 2.01 0.05 2.06 2.52 2.56 2.31 2.36 2.46 2017 -0.47 -0.47 2.05 0.05 2.10 2.57 2.62 2.36 2.41 2.53 2018 -0.47 -0.47 2.08 0.05 2.13 2.61 2.65 2.39 2.44 2.58 2019 -0.48 -0.48 2.10 0.05 2.16 2.64 2.69 2.43 2.47 2.62 2020 -0.49 -0.49 2.12 0.06 2.17 2.66 2.71 2.45 2.49 2.65 2021 -0.50 -0.50 2.12 0.06 2.17 2.67 2.72 2.46 2.51 2.67 2022 -0.51 -0.51 2.10 0.06 2.16 2.67 2.72 2.45 2.50 2.68 2023 -0.51 -0.51 2.07 0.06 2.13 2.64 2.69 2.43 2.48 2.67 2024 -0.53 -0.53 2.03 0.05 2.08 2.61 2.66 2.40 2.46 2.66 2025 2.05 2.05 1.98 0.04 2.02 -0.03 -0.24 -0.24 -0.44 0.03 2026 -0.55 -0.55 2.90 0.08 2.98 3.52 3.58 3.23 3.28 2.57 2027 -0.56 -0.56 3.00 0.08 3.08 3.64 3.70 3.33 3.39 3.54 2028 -0.57 -0.57 3.09 0.08 3.18 3.75 3.80 3.43 3.48 3.65 2029 -0.53 -0.53 3.15 0.09 3.24 3.77 3.82 3.44 3.50 3.71 2030 -0.54 -0.54 3.18 0.09 3.28 3.82 3.87 3.49 3.54 3.78 2031 -0.55 -0.55 3.20 0.10 3.30 3.86 3.91 3.53 3.58 3.83 2032 -5.79 -5.79 3.20 0.10 3.30 9.09 9.67 8.76 9.34 9.09

Net Present Value at 12% 1.00 -0.18 -0.28 -1.46 -0.61 Economic Internal Rate of Return 12.9% 11.9% 11.8% 10.8% 11.5% Sensitivity indicator 0.78 0.86 Source: Department of Works, Road Asset Management System

66 Appendix 11

Table A11.12: Chauve-Move Road Section L1709 Economic Analysis (2008 Kina million)

Appendix 11 67

Table A11.13: Goro-Gumine Road Section L1709 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Costs Normal Traffic Benefits Traffic Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost Benefit Benefits by one VOC Time VOC Time 10% 10% less year 10% 2007 2.26 2.26 -2.26 -2.49 -2.26 -2.49 -2.26 2008 3.06 3.06 -2.85 -0.42 -3.27 -6.32 -6.63 -6.00 -6.30 -3.06 2009 -2.82 -2.82 1.30 0.07 1.37 4.19 4.47 4.05 4.33 -0.45 2010 -1.05 -1.05 0.34 -0.01 0.32 1.38 1.48 1.35 1.45 2.42 2011 -1.08 -1.08 0.36 -0.01 0.34 1.42 1.53 1.38 1.49 1.40 2012 -1.08 -1.08 0.37 -0.01 0.36 1.44 1.54 1.40 1.51 1.42 2013 -1.10 -1.10 0.38 -0.01 0.36 1.46 1.57 1.43 1.54 1.46 2014 -1.10 -1.10 0.35 -0.01 0.34 1.44 1.55 1.40 1.51 1.47 2015 -1.12 -1.12 0.31 -0.01 0.29 1.42 1.53 1.39 1.50 1.46 2016 -1.13 -1.13 0.25 -0.01 0.24 1.37 1.48 1.34 1.46 1.42 2017 -1.15 -1.15 0.18 -0.01 0.17 1.32 1.44 1.30 1.42 1.39 2018 -1.15 -1.15 0.10 -0.01 0.08 1.24 1.35 1.23 1.34 1.32 2019 -1.18 -1.18 -0.02 -0.01 -0.03 1.15 1.26 1.15 1.27 1.26 2020 -1.18 -1.18 -0.15 -0.02 -0.17 1.01 1.13 1.03 1.15 1.15 2021 -1.21 -1.21 -0.32 -0.02 -0.34 0.87 0.99 0.90 1.02 1.04 2022 -1.21 -1.21 -0.51 -0.03 -0.54 0.68 0.80 0.73 0.85 0.88 2023 -1.24 -1.24 -0.73 -0.04 -0.77 0.47 0.59 0.55 0.67 0.70 2024 8.96 8.96 -0.98 -0.06 -1.04 -10.00 -10.90 -9.90 -10.80 -9.73 2025 -1.27 -1.27 0.91 -0.01 0.91 2.18 2.31 2.09 2.22 0.23 2026 -1.28 -1.28 0.96 0.00 0.96 2.24 2.37 2.14 2.27 2.19 2027 -1.31 -1.31 1.01 0.00 1.01 2.31 2.44 2.21 2.34 2.27 2028 -2.91 -2.91 1.04 0.00 1.04 3.95 4.24 3.84 4.14 3.92 Net Present Value at 12% 1.75 1.98 1.81 2.04 1.73 Economic Internal Rate of Return 17.9% 18.2% 18.3% 18.6% 18.4% Sensitivity indicator -0.18 -0.20 Source: Department of Works, Road Asset Management System

68 Appendix 11

Table A11.14: Goroka - Lahame Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs Benefits Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost VOC Time VOC Time Benefit Benefits by one 10% 10% less year 10% 2009 7.03 7.03 -7.03 -7.74 -7.03 -7.74 -7.03 2010 5.26 5.26 -2.10 -0.33 -2.42 -7.69 -8.21 -7.44 -7.97 -5.26 2011 -1.04 -1.04 1.60 0.14 0.08 0.01 1.82 2.87 2.97 2.69 2.79 -1.38 2012 -0.55 -0.55 0.98 0.04 0.15 0.01 1.17 1.72 1.77 1.60 1.66 2.37 2013 -0.58 -0.58 1.06 0.04 0.26 0.01 1.37 1.96 2.02 1.82 1.88 1.76 2014 -0.60 -0.60 1.11 0.05 0.33 0.01 1.50 2.11 2.17 1.96 2.02 1.98 2015 -0.62 -0.62 1.13 0.05 0.34 0.01 1.54 2.15 2.21 2.00 2.06 2.12 2016 -0.62 -0.62 1.14 0.05 0.34 0.02 1.55 2.17 2.23 2.02 2.08 2.16 2017 -0.64 -0.64 1.14 0.05 0.34 0.02 1.55 2.19 2.25 2.03 2.10 2.18 2018 -0.65 -0.65 1.13 0.06 0.34 0.02 1.54 2.18 2.25 2.03 2.09 2.19 2019 -0.64 -0.64 1.10 0.06 0.33 0.02 1.51 2.16 2.22 2.00 2.07 2.18 2020 -0.67 -0.67 1.06 0.06 0.32 0.02 1.46 2.13 2.20 1.98 2.05 2.18 2021 -0.68 -0.68 1.01 0.07 0.30 0.02 1.39 2.08 2.14 1.94 2.00 2.15 2022 -0.69 -0.69 0.93 0.06 0.28 0.02 1.29 1.99 2.06 1.86 1.93 2.08 2023 -0.71 -0.71 0.84 0.06 0.25 0.02 1.17 1.88 1.95 1.76 1.83 2.00 2024 3.06 3.06 0.73 0.04 0.22 0.01 1.01 -2.06 -2.36 -2.16 -2.46 -1.89 2025 -0.73 -0.73 1.77 0.09 0.53 0.03 2.43 3.16 3.23 2.92 2.99 1.74 2026 -0.75 -0.75 1.84 0.10 0.55 0.03 2.52 3.27 3.34 3.02 3.09 3.17 2027 -0.76 -0.76 1.91 0.10 0.57 0.03 2.61 3.38 3.45 3.12 3.19 3.29 2028 -0.77 -0.77 1.94 0.11 0.58 0.03 2.67 3.44 3.52 3.17 3.25 3.39 2029 -0.72 -0.72 1.94 0.12 0.58 0.04 2.67 3.39 3.46 3.13 3.20 3.39 2030 -4.40 -4.40 1.92 0.13 0.58 0.04 2.66 7.07 7.51 6.80 7.24 7.08 Net Present Value at 12% 0.84 0.17 0.08 -0.59 -0.17 Economic Internal Rate of Return 12.9% 12.2% 12.1% 11.4% 11.8% Sensitivity indicator 0.59 0.65 Source: Department of Works, Road Asset Management System

Appendix 11 69

Table A11.15: Kandep-Kaipau Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Costs Normal Traffic Benefits Traffic Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost Benefit Benefits by one VOC Time VOC Time 10% 10% less year 10% 2008 5.67 5.67 -5.67 -6.24 -5.67 -6.24 -5.67 2009 4.77 4.77 -2.16 -0.28 -2.45 -7.21 -7.69 -6.97 -7.45 -4.77 2010 -1.79 -1.79 1.74 0.13 0.09 0.01 1.96 3.75 3.93 3.56 3.74 -0.65 2011 -0.81 -0.81 0.78 0.01 0.12 0.00 0.92 1.73 1.81 1.64 1.72 2.78 2012 -0.87 -0.87 0.87 0.02 0.22 0.00 1.11 1.98 2.06 1.87 1.95 1.79 2013 -0.90 -0.90 0.93 0.02 0.28 0.01 1.24 2.13 2.22 2.01 2.10 2.00 2014 -0.92 -0.92 0.95 0.02 0.28 0.01 1.27 2.18 2.27 2.06 2.15 2.15 2015 -0.93 -0.93 0.94 0.03 0.28 0.01 1.26 2.19 2.28 2.06 2.15 2.19 2016 -0.95 -0.95 0.93 0.03 0.28 0.01 1.25 2.20 2.29 2.07 2.17 2.21 2017 -0.96 -0.96 0.91 0.03 0.27 0.01 1.22 2.18 2.28 2.06 2.15 2.21 2018 -0.98 -0.98 0.87 0.03 0.26 0.01 1.18 2.16 2.26 2.04 2.14 2.20 2019 -0.99 -0.99 0.81 0.04 0.24 0.01 1.10 2.10 2.19 1.99 2.08 2.17 2020 -1.02 -1.02 0.74 0.04 0.22 0.01 1.01 2.02 2.12 1.92 2.02 2.12 2021 -1.03 -1.03 0.64 0.04 0.19 0.01 0.88 1.90 2.01 1.82 1.92 2.03 2022 -1.05 -1.05 0.51 0.04 0.15 0.01 0.71 1.77 1.87 1.69 1.80 1.93 2023 5.44 5.44 0.37 0.03 0.11 0.01 0.51 -4.92 -5.47 -4.98 -5.52 -4.72 2024 -1.09 -1.09 1.62 0.06 0.49 0.02 2.19 3.28 3.39 3.06 3.17 1.60 2025 -1.11 -1.11 1.70 0.06 0.51 0.02 2.29 3.40 3.51 3.17 3.28 3.29 2026 -1.13 -1.13 1.77 0.07 0.53 0.02 2.39 3.52 3.64 3.28 3.40 3.42 2027 -1.02 -1.02 1.81 0.08 0.54 0.02 2.45 3.47 3.57 3.23 3.33 3.41 2028 -1.05 -1.05 1.80 0.08 0.54 0.02 2.45 3.50 3.60 3.25 3.36 3.50 2029 -4.29 -4.29 1.77 0.09 0.53 0.03 2.42 6.71 7.14 6.47 6.90 6.74

Net Present Value at 12% 2.62 2.28 2.02 1.68 1.80 Economic Internal Rate of Return 15.6% 14.9% 14.8% 14.2% 14.5% Sensitivity indicator 0.44 0.48 Source: Department of Works, Road Asset Management System

70 Appendix 11

Table A11.16: Korifegu - Nupuru Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs

Costs Benefits plus & Benefits Capital O&M Total Total Net plus less benefits delayed by Cost Cost Cost VOC Time VOC Time Benefit Benefits 10% 10% less one year 10% 2008 7.11 7.11 -7.11 -7.82 -7.11 -7.82 -7.11 2009 6.11 6.11 -2.73 -0.53 -3.25 -9.36 -9.97 -9.04 -9.65 -6.11 2010 -2.62 -2.62 2.30 0.29 0.11 0.01 2.72 5.34 5.60 5.07 5.33 -0.63 2011 -1.05 -1.05 1.03 0.03 0.15 0.00 1.22 2.26 2.37 2.14 2.25 3.76 2012 -1.12 -1.12 1.14 0.04 0.29 0.01 1.48 2.60 2.71 2.45 2.56 2.34 2013 -1.15 -1.15 1.23 0.05 0.37 0.01 1.66 2.81 2.92 2.64 2.76 2.63 2014 -1.18 -1.18 1.27 0.05 0.38 0.02 1.72 2.90 3.02 2.73 2.85 2.84 2015 -1.19 -1.19 1.29 0.06 0.39 0.02 1.75 2.94 3.06 2.77 2.89 2.91 2016 -1.22 -1.22 1.29 0.06 0.39 0.02 1.77 2.98 3.11 2.81 2.93 2.97 2017 -1.23 -1.23 1.29 0.07 0.39 0.02 1.77 3.00 3.12 2.82 2.95 3.00 2018 -1.26 -1.26 1.27 0.08 0.38 0.02 1.76 3.02 3.15 2.84 2.97 3.03 2019 -1.27 -1.27 1.24 0.09 0.37 0.03 1.73 3.00 3.13 2.83 2.96 3.03 2020 -1.31 -1.31 1.19 0.09 0.36 0.03 1.67 2.98 3.11 2.81 2.94 3.04 2021 -1.32 -1.32 1.12 0.10 0.34 0.03 1.58 2.90 3.04 2.75 2.88 2.99 2022 -1.48 -1.48 1.02 0.11 0.31 0.03 1.47 2.95 3.10 2.80 2.95 3.07 2023 -1.46 -1.46 0.91 0.11 0.27 0.03 1.32 2.78 2.93 2.65 2.79 2.93 2024 -1.53 -1.53 0.77 0.10 0.23 0.03 1.13 2.67 2.82 2.55 2.71 2.85 2025 7.46 7.46 0.61 0.09 0.18 0.03 0.91 -6.56 -7.30 -6.65 -7.40 -6.33 2026 -1.59 -1.59 2.34 0.17 0.70 0.05 3.27 4.85 5.01 4.53 4.68 2.49 2027 -1.61 -1.61 2.45 0.18 0.74 0.06 3.43 5.03 5.19 4.69 4.85 4.87 2028 -1.64 -1.64 2.56 0.20 0.77 0.06 3.59 5.23 5.39 4.87 5.03 5.07 2029 -5.45 -5.45 2.65 0.22 0.80 0.07 3.73 9.18 9.73 8.81 9.35 9.04

Net Present Value at 12% 4.64 4.28 3.81 3.45 3.48 Economic Internal Rate of Return 17.0% 16.3% 16.2% 15.6% 15.8% Sensitivity indicator 0.42 0.46 Source: Department of Works, Road Asset Management System

Appendix 11 71

Table A11.17: Kotna - Banz Road Section L1709 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Costs Normal Traffic Traffic Costs Benefits plus & Benefits Capital O&M Total Total Net plus less benefits delayed by Cost Cost Cost Benefit Benefits VOC Time VOC Time 10% 10% less one year 10% 2008 2.27 2.27 -2.27 -2.50 -2.27 -2.50 -2.27 2009 3.05 3.05 -3.04 -0.38 -3.41 -6.47 -6.77 -6.12 -6.43 -3.05 2010 -2.79 -2.79 1.55 0.13 1.68 4.47 4.75 4.31 4.59 -0.62 2011 -0.89 -0.89 0.40 -0.01 0.39 1.28 1.37 1.25 1.34 2.57 2012 -0.91 -0.91 0.42 -0.01 0.42 1.33 1.42 1.29 1.38 1.31 2013 -0.92 -0.92 0.45 -0.01 0.44 1.36 1.45 1.31 1.40 1.33 2014 -0.94 -0.94 0.46 -0.01 0.46 1.39 1.49 1.35 1.44 1.38 2015 -0.94 -0.94 0.45 0.00 0.44 1.38 1.48 1.34 1.43 1.40 2016 -0.96 -0.96 0.42 0.00 0.42 1.38 1.48 1.34 1.43 1.40 2017 -0.96 -0.96 0.39 0.00 0.38 1.35 1.44 1.31 1.41 1.38 2018 -0.99 -0.99 0.34 0.00 0.34 1.32 1.42 1.29 1.39 1.37 2019 -0.99 -0.99 0.28 0.00 0.28 1.27 1.37 1.24 1.34 1.33 2020 -1.01 -1.01 0.19 0.00 0.19 1.20 1.31 1.18 1.29 1.29 2021 -1.02 -1.02 0.09 0.00 0.09 1.10 1.20 1.09 1.20 1.21 2022 -1.04 -1.04 -0.04 0.00 -0.04 1.00 1.10 1.00 1.11 1.13 2023 -1.05 -1.05 -0.19 -0.01 -0.20 0.85 0.95 0.87 0.97 1.00 2024 -1.07 -1.07 -0.37 -0.01 -0.39 0.68 0.79 0.72 0.83 0.87 2025 9.04 9.04 -0.58 -0.03 -0.61 -9.65 -10.55 -9.59 -10.49 -9.42 2026 -1.10 -1.10 1.06 0.02 1.08 2.18 2.29 2.07 2.18 0.49 2027 -1.11 -1.11 1.12 0.02 1.14 2.25 2.36 2.14 2.25 2.19 2028 -1.13 -1.13 1.18 0.02 1.20 2.34 2.45 2.22 2.33 2.28 2029 -2.74 -2.74 1.23 0.03 1.26 4.00 4.27 3.87 4.14 3.94 Net Present Value at 12% 1.79 1.93 1.75 1.89 1.66 Economic Internal Rate of Return 17.8% 17.9% 17.9% 18.0% 17.8% Sensitivity indicator -0.05 -0.06 Source: Department of Works, Road Asset Management System

72 Appendix 11

Table A11.18: Kundiawa - Goro Road Section L1709 Economic Analysis (2008 Kina million)

Net Present Value at 12% 0.36 0.22 0.18 0.04 0.11 Economic Internal Rate of Return 13.3% 12.7% 12.7% 12.1% 12.4% Sensitivity indicator 0.43 0.47 Source: Department of Works, Road Asset Management System

Appendix 11 73

Table A11.19: Mt Ambra-Kotna Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs plus & Benefits Costs Benefits benefits delayed VOC Time VOC Time Capital O&M Total Total Net plus less less by one Cost Cost Cost Benefit Benefits 10% 10% 10% year 2005 7.50 7.50 -7.50 -8.25 -7.50 -8.25 -7.50 2006 5.71 5.71 -2.94 -0.45 -3.39 -9.10 -9.67 -8.76 -9.33 -5.71 2007 -1.36 -1.36 3.57 0.32 3.89 5.25 5.39 4.86 5.00 -2.03 2008 -0.76 -0.76 1.87 0.06 1.93 2.69 2.77 2.50 2.57 4.65 2009 -0.78 -0.78 1.95 0.06 2.02 2.79 2.87 2.59 2.67 2.71 2010 -0.79 -0.79 2.02 0.07 2.08 2.87 2.95 2.66 2.74 2.80 2011 -0.81 -0.81 2.03 0.08 2.10 2.91 2.99 2.70 2.78 2.89 2012 -0.82 -0.82 2.02 0.08 2.10 2.92 3.00 2.71 2.79 2.92 2013 -0.82 -0.82 2.00 0.09 2.09 2.90 2.98 2.69 2.77 2.92 2014 -0.85 -0.85 1.95 0.09 2.04 2.89 2.98 2.69 2.77 2.93 2015 -0.87 -0.87 1.86 0.10 1.96 2.83 2.92 2.64 2.72 2.91 2016 -0.88 -0.88 1.75 0.10 1.85 2.73 2.82 2.55 2.64 2.85 2017 -0.97 -0.97 1.59 0.11 1.70 2.67 2.76 2.50 2.59 2.82 2018 -0.96 -0.96 1.39 0.10 1.50 2.46 2.56 2.31 2.41 2.66 2019 3.67 3.67 1.15 0.08 1.23 -2.43 -2.80 -2.56 -2.92 -2.17 2020 -1.02 -1.02 3.23 0.15 3.39 4.41 4.51 4.07 4.17 2.26 2021 -1.04 -1.04 3.37 0.16 3.53 4.58 4.68 4.22 4.33 4.43 2022 -1.06 -1.06 3.48 0.18 3.66 4.72 4.83 4.36 4.46 4.59 2023 -0.99 -0.99 3.50 0.19 3.69 4.69 4.79 4.32 4.42 4.66 2024 -0.99 -0.99 3.48 0.20 3.68 4.68 4.77 4.31 4.41 4.69 2025 -1.04 -1.04 3.42 0.22 3.63 4.67 4.78 4.31 4.41 4.72 2026 -5.02 -5.02 3.30 0.23 3.53 8.55 9.05 8.20 8.70 8.66

Net Present Value at 12% 5.35 4.73 4.19 3.56 3.85 Economic Internal Rate of Return 17.4% 16.5% 16.4% 15.4% 15.8% Sensitivity indicator 0.56 0.61 Source: Department of Works, Road Asset Management System

74 Appendix 11

Table A11.20: Oliguti‐Lufa Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Normal Traffic Generated Traffic Benefits Costs plus Capital Total Net Costs plus Benefits delayed O&M Cost Total Cost VOC Time VOC Time & benefits Cost Benefit Benefits 10% less 10% by one less 10% year 2009 7.01 ‐0.04 6.97 ‐0.19 ‐0.04 ‐6.97 ‐7.67 ‐6.97 ‐7.67 ‐6.97 2010 5.31 ‐0.08 5.23 ‐3.56 ‐0.45 ‐4.00 ‐9.24 ‐9.76 ‐8.84 ‐9.36 ‐5.23 2011 ‐2.09 ‐2.09 1.96 0.22 0.01 0.00 2.18 4.27 4.48 4.05 4.26 ‐1.91 2012 ‐1.43 ‐1.43 1.21 0.02 0.02 0.00 1.26 2.69 2.83 2.56 2.70 3.61 2013 ‐1.25 ‐1.25 1.26 0.03 0.04 0.00 1.33 2.58 2.71 2.45 2.57 2.51 2014 ‐1.25 ‐1.25 1.28 0.03 0.05 0.00 1.36 2.61 2.74 2.48 2.60 2.59 2015 ‐1.28 ‐1.28 1.28 0.03 0.04 0.00 1.35 2.64 2.76 2.50 2.63 2.64 2016 ‐1.28 ‐1.28 1.26 0.03 0.04 0.00 1.33 2.62 2.74 2.48 2.61 2.64 2017 ‐1.31 ‐1.31 1.23 0.03 0.03 0.00 1.30 2.61 2.74 2.48 2.61 2.64 2018 ‐1.31 ‐1.31 1.18 0.03 0.02 0.00 1.24 2.56 2.69 2.43 2.56 2.61 2019 ‐1.34 ‐1.34 1.12 0.04 0.01 0.00 1.16 2.50 2.64 2.39 2.52 2.58 2020 ‐1.35 ‐1.35 1.03 0.03 ‐0.01 0.00 1.06 2.40 2.54 2.30 2.43 2.51 2021 ‐1.38 ‐1.38 0.91 0.03 ‐0.03 0.00 0.92 2.29 2.43 2.20 2.34 2.43 2022 ‐1.38 ‐1.38 0.78 0.02 ‐0.05 0.00 0.75 2.13 2.27 2.06 2.19 2.30 2023 1.76 1.76 0.61 0.01 ‐0.07 0.00 0.54 ‐1.22 ‐1.40 ‐1.28 ‐1.45 ‐1.01 2024 4.76 4.76 1.03 0.01 ‐0.10 ‐0.01 0.93 ‐3.83 ‐4.31 ‐3.93 ‐4.40 ‐4.23 2025 1.72 1.72 1.76 0.05 0.12 0.00 1.93 0.21 0.04 0.02 ‐0.15 ‐0.79 2026 ‐1.46 ‐1.46 2.30 0.07 0.12 0.00 2.49 3.95 4.10 3.70 3.85 3.39 2027 ‐1.49 ‐1.49 2.38 0.07 0.13 0.00 2.59 4.07 4.22 3.82 3.96 3.98 2028 ‐1.44 ‐1.44 2.43 0.08 0.13 0.00 2.64 4.08 4.22 3.81 3.96 4.02 2029 ‐1.35 ‐1.35 2.44 0.08 0.13 0.00 2.65 4.00 4.13 3.73 3.87 3.99 2030 ‐4.21 ‐4.21 2.40 0.09 0.12 0.01 2.61 6.82 7.24 6.56 6.98 6.85

Net Present Value at 12% 1.78 1.41 1.23 0.86 1.00 Economic Internal Rate of Return 14.2% 13.6% 13.5% 13.0% 13.2% Sensitivity indicator 0.39 0.43 Source: Department of Works, Road Asset Management System

Appendix 11 75

Table A11.21: Ongelbeng ‐ Mt Ambra Road Section L1709 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Normal Traffic Generated Traffic Costs Benefits Capital O&M Total Total Net Costs Benefits plus & delayed VOC Time VOC Time Cost Cost Cost Benefit Benefits plus 10% less 10% benefits by one less 10% year 2005 3.09 3.09 ‐3.09 ‐3.40 ‐3.09 ‐3.40 ‐3.09 2006 0.77 ‐0.73 0.03 ‐0.71 ‐0.13 ‐0.84 ‐0.87 ‐0.88 ‐0.79 ‐0.79 ‐0.03 2007 ‐0.32 ‐0.32 0.64 0.05 0.01 0.00 0.69 1.02 1.05 0.95 0.98 ‐0.52 2008 ‐0.33 ‐0.33 0.30 0.00 0.02 0.00 0.33 0.66 0.69 0.63 0.66 1.02 2009 ‐0.33 ‐0.33 0.32 0.00 0.04 0.00 0.36 0.70 0.73 0.66 0.69 0.66 2010 ‐0.34 ‐0.34 0.33 0.00 0.05 0.00 0.39 0.72 0.76 0.68 0.72 0.70 2011 ‐0.34 ‐0.34 0.34 0.00 0.04 0.00 0.39 0.73 0.76 0.69 0.73 0.73 2012 ‐0.35 ‐0.35 0.34 0.00 0.04 0.00 0.39 0.73 0.77 0.69 0.73 0.74 2013 ‐0.35 ‐0.35 0.34 0.01 0.03 0.00 0.38 0.73 0.76 0.69 0.72 0.74 2014 ‐0.36 ‐0.36 0.33 0.01 0.02 0.00 0.36 0.72 0.75 0.68 0.72 0.73 2015 ‐0.36 ‐0.36 0.32 0.01 0.01 0.00 0.34 0.70 0.73 0.66 0.70 0.72 2016 ‐0.37 ‐0.37 0.31 0.01 ‐0.01 0.00 0.31 0.68 0.71 0.65 0.68 0.71 2017 ‐0.37 ‐0.37 0.29 0.01 ‐0.03 0.00 0.27 0.64 0.68 0.61 0.65 0.68 2018 ‐0.38 ‐0.38 0.26 0.01 ‐0.05 0.00 0.22 0.59 0.63 0.57 0.61 0.65 2019 ‐0.38 ‐0.38 0.22 0.01 ‐0.07 0.00 0.15 0.53 0.57 0.52 0.56 0.60 2020 ‐0.39 ‐0.39 0.18 0.01 ‐0.10 ‐0.01 0.07 0.46 0.50 0.46 0.49 0.54 2021 2.26 2.26 0.13 0.00 0.12 0.00 0.25 ‐2.01 ‐2.24 ‐2.04 ‐2.27 ‐2.19 2022 ‐0.40 ‐0.40 0.07 0.00 0.12 0.00 0.19 0.59 0.63 0.57 0.61 0.65 2023 ‐0.41 ‐0.41 0.62 0.01 0.13 0.00 0.76 1.17 1.21 1.10 1.14 0.60 2024 ‐0.42 ‐0.42 0.64 0.02 0.13 0.00 0.80 1.21 1.25 1.13 1.17 1.18 2025 ‐1.35 ‐1.35 0.67 0.02 0.13 0.00 0.82 2.17 2.30 2.09 2.22 2.14 2026 0.00 0.00 0.69 0.02 0.12 0.01 0.83 0.83 0.83 0.75 0.75 0.82

Net Present Value at 12% 0.70 0.59 0.52 0.42 0.45 Economic Internal Rate of Return 15.0% 14.4% 14.3% 13.7% 14.0% Sensitivity indicator 0.41 0.46 Source: Department of Works, Road Asset Management System

76 Appendix 11

Table E11.22: Banz‐Dona Road Section L2242/2243 Economic Analysis (2008 Kina million)

2013 ‐0.93 2.18 0.04 0.65 0.01 2.88 3.81 3.90 3.52 3.62 3.58 ‐0.93 2014 ‐0.95 ‐0.95 2.23 0.04 0.67 0.01 2.95 3.90 4.00 3.61 3.70 3.83 2015 ‐0.96 ‐0.96 2.26 0.04 0.68 0.01 2.99 3.95 4.05 3.65 3.75 3.91 2016 ‐0.99 ‐0.99 2.28 0.04 0.68 0.01 3.01 4.00 4.10 3.70 3.80 3.97 2017 ‐1.00 ‐1.00 2.28 0.04 0.69 0.01 3.03 4.02 4.12 3.72 3.82 4.01 2018 ‐1.02 ‐1.02 2.28 0.05 0.68 0.01 3.02 4.04 4.14 3.74 3.84 4.05 2019 ‐1.03 ‐1.03 2.25 0.05 0.68 0.01 2.99 4.02 4.12 3.72 3.82 4.05 2020 ‐1.03 ‐1.03 2.20 0.05 0.66 0.01 2.93 3.96 4.06 3.66 3.77 4.02 2021 ‐1.07 ‐1.07 2.13 0.05 0.64 0.01 2.83 3.90 4.01 3.62 3.73 3.99 2022 ‐1.09 ‐1.09 2.04 0.04 0.61 0.01 2.71 3.80 3.91 3.53 3.64 3.93 2023 4.84 4.84 1.92 0.03 0.58 0.01 2.54 ‐2.30 ‐2.78 ‐2.55 ‐3.04 ‐2.13 2024 ‐1.13 ‐1.13 3.32 0.07 1.00 0.02 4.40 5.53 5.65 5.09 5.21 3.67 2025 ‐1.15 ‐1.15 3.44 0.07 1.03 0.02 4.56 5.71 5.83 5.25 5.37 5.55 2026 ‐1.17 ‐1.17 3.56 0.08 1.07 0.02 4.72 5.90 6.01 5.42 5.54 5.74 2027 ‐1.19 ‐1.19 3.64 0.08 1.09 0.02 4.84 6.03 6.15 5.55 5.67 5.91 2028 ‐1.22 ‐1.22 3.68 0.09 1.10 0.03 4.89 6.11 6.23 5.62 5.74 6.06 2029 ‐7.67 ‐7.67 3.69 0.09 1.11 0.03 4.92 12.59 13.35 12.09 12.86 12.56

Net Present Value at 12% 3.84 2.58 2.19 0.92 1.71 Economic Internal Rate of Return 14.5% 13.6% 13.5% 12.6% 13.1% Sensitivity indicator 0.66 0.73 Source: Department of Works, Road Asset Management System

Appendix 11 77

Table A11.23: Ialibu ‐ Pangia Road Section L2242/2243 Economic Analysis (2008 Kina million)

Economic Costs Economic Benefits Sensitivity Tests Normal Traffic Generated Traffic Costs Benefits Capital O&M Total Total Net Costs Benefits plus & delayed VOC Time VOC Time Cost Cost Cost Benefit Benefits plus 10% less 10% benefits by one less 10% year 2009 12.04 12.04 ‐12.04 ‐13.25 ‐12.04 ‐13.25 ‐12.04 2010 9.04 9.04 ‐1.48 ‐0.34 ‐1.82 ‐10.86 ‐11.76 ‐10.68 ‐11.58 ‐9.04 2011 ‐1.84 ‐1.84 3.02 0.11 3.13 4.96 5.15 4.65 4.83 0.01 2012 ‐0.94 ‐0.94 2.24 0.04 2.28 3.21 3.31 2.99 3.08 4.07 2013 ‐0.96 ‐0.96 2.31 0.04 2.36 3.31 3.41 3.08 3.17 3.23 2014 ‐0.96 ‐0.96 2.39 0.04 2.43 3.40 3.49 3.15 3.25 3.32 2015 ‐0.98 ‐0.98 2.46 0.04 2.50 3.48 3.58 3.23 3.33 3.41 2016 ‐0.99 ‐0.99 2.49 0.05 2.54 3.53 3.63 3.27 3.37 3.49 2017 ‐1.01 ‐1.01 2.52 0.05 2.57 3.58 3.68 3.32 3.42 3.55 2018 ‐1.02 ‐1.02 2.54 0.05 2.59 3.61 3.71 3.35 3.45 3.59 2019 ‐1.04 ‐1.04 2.55 0.05 2.60 3.64 3.75 3.38 3.49 3.63 2020 ‐1.05 ‐1.05 2.54 0.05 2.60 3.65 3.75 3.39 3.49 3.65 2021 ‐1.07 ‐1.07 2.52 0.05 2.57 3.64 3.75 3.38 3.49 3.67 2022 ‐1.08 ‐1.08 2.47 0.05 2.52 3.60 3.71 3.35 3.46 3.65 2023 ‐1.10 ‐1.10 2.40 0.05 2.45 3.55 3.66 3.31 3.42 3.63 2024 ‐1.11 ‐1.11 2.31 0.04 2.35 3.47 3.58 3.23 3.34 3.57 2025 5.51 5.51 2.20 0.03 2.23 ‐3.29 ‐3.84 ‐3.51 ‐4.06 ‐3.16 2026 ‐1.15 ‐1.15 3.71 0.07 3.79 4.94 5.05 4.56 4.67 3.38 2027 ‐1.17 ‐1.17 3.85 0.08 3.92 5.10 5.21 4.70 4.82 4.96 2028 ‐1.19 ‐1.19 3.97 0.08 4.06 5.24 5.36 4.84 4.96 5.11 2029 ‐1.08 ‐1.08 4.08 0.08 4.17 5.25 5.36 4.84 4.94 5.14 2030 ‐7.42 ‐7.42 4.14 0.09 4.23 11.65 12.39 11.23 11.97 11.59

Net Present Value at 12% 2.74 1.56 1.29 0.11 0.87 Economic Internal Rate of Return 14.0% 13.1% 13.0% 12.1% 12.6% Sensitivity indicator 0.67 0.74 Source: Department of Works, Road Asset Management System

78 Appendix 11

Table A11.24: Kamaliki - Bekuvia Road Section L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs

Costs Benefits plus & Benefits Capital O&M Total Total Net plus less benefits delayed by Cost Cost Cost VOC Time VOC Time Benefit Benefits 10% 10% less one year 10% 2009 9.52 9.52 -9.52 -10.48 -9.52 -10.48 -9.52 2010 7.15 7.15 -1.21 -0.34 -1.55 -8.70 -9.42 -8.55 -9.26 -7.15 2011 -1.46 -1.46 1.79 0.08 0.09 0.00 1.96 3.42 3.57 3.23 3.37 -0.09 2012 -0.67 -0.67 1.34 0.03 0.20 0.00 1.58 2.25 2.31 2.09 2.15 2.63 2013 -0.71 -0.71 1.42 0.03 0.35 0.01 1.81 2.51 2.59 2.33 2.40 2.28 2014 -0.72 -0.72 1.48 0.03 0.44 0.01 1.96 2.68 2.76 2.49 2.56 2.53 2015 -0.74 -0.74 1.52 0.03 0.45 0.01 2.02 2.75 2.83 2.55 2.62 2.70 2016 -0.74 -0.74 1.54 0.04 0.46 0.01 2.04 2.79 2.86 2.58 2.66 2.76 2017 -0.76 -0.76 1.55 0.04 0.47 0.01 2.07 2.82 2.90 2.62 2.69 2.80 2018 -0.76 -0.76 1.56 0.04 0.47 0.01 2.08 2.84 2.92 2.63 2.71 2.83 2019 -0.78 -0.78 1.56 0.04 0.47 0.01 2.08 2.86 2.93 2.65 2.73 2.86 2020 -0.78 -0.78 1.54 0.04 0.46 0.01 2.06 2.85 2.93 2.64 2.72 2.86 2021 -0.80 -0.80 1.52 0.04 0.46 0.01 2.03 2.83 2.91 2.63 2.71 2.86 2022 -0.81 -0.81 1.48 0.04 0.44 0.01 1.97 2.78 2.86 2.58 2.66 2.83 2023 -0.82 -0.82 1.42 0.04 0.43 0.01 1.89 2.72 2.80 2.53 2.61 2.80 2024 -0.83 -0.83 1.35 0.03 0.40 0.01 1.79 2.62 2.71 2.44 2.53 2.73 2025 4.44 4.44 1.26 0.01 0.38 0.00 1.66 -2.78 -3.23 -2.95 -3.39 -2.65 2026 -0.86 -0.86 2.31 0.06 0.69 0.02 3.09 3.95 4.03 3.64 3.72 2.52 2027 -0.88 -0.88 2.39 0.06 0.72 0.02 3.20 4.07 4.16 3.76 3.84 3.96 2028 -0.89 -0.89 2.48 0.07 0.74 0.02 3.31 4.19 4.28 3.86 3.95 4.08 2029 -0.80 -0.80 2.54 0.07 0.76 0.02 3.40 4.20 4.28 3.86 3.94 4.11 2030 -5.82 -5.82 2.57 0.08 0.77 0.02 3.44 9.25 9.83 8.91 9.49 9.21 Net Present Value at 12% 1.38 0.42 0.28 -0.67 -0.05 Economic Internal Rate of Return 13.2% 12.4% 12.3% 11.4% 12.0% Sensitivity indicator 0.67 0.74 Source: Department of Works, Road Asset Management System

Appendix 11 79

Table A11.25: Kindeng - Kondopina Road Section L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Costs Normal Traffic Benefits Traffic Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost Benefit Benefits by one VOC Time VOC Time 10% 10% less year 10% 2008 2.13 2.13 -2.13 -2.35 -2.13 -2.35 -2.13 2009 1.94 1.94 -1.06 -0.16 -1.22 -3.16 -3.35 -3.04 -3.23 -1.94 2010 -0.98 -0.98 0.81 0.08 0.04 0.00 0.94 1.92 2.02 1.83 1.93 -0.24 2011 -0.40 -0.40 0.33 0.00 0.05 0.00 0.38 0.78 0.82 0.74 0.78 1.34 2012 -0.43 -0.43 0.37 0.01 0.09 0.00 0.47 0.90 0.94 0.85 0.90 0.81 2013 -0.44 -0.44 0.40 0.01 0.12 0.00 0.53 0.97 1.02 0.92 0.97 0.91 2014 -0.45 -0.45 0.41 0.01 0.12 0.00 0.55 1.01 1.05 0.95 1.00 0.99 2015 -0.46 -0.46 0.42 0.01 0.13 0.00 0.56 1.02 1.06 0.96 1.01 1.01 2016 -0.47 -0.47 0.42 0.02 0.13 0.00 0.56 1.03 1.08 0.97 1.02 1.03 2017 -0.47 -0.47 0.41 0.02 0.12 0.01 0.56 1.03 1.08 0.98 1.02 1.04 2018 -0.48 -0.48 0.41 0.02 0.12 0.01 0.55 1.04 1.08 0.98 1.03 1.04 2019 -0.49 -0.49 0.39 0.02 0.12 0.01 0.54 1.03 1.07 0.97 1.02 1.04 2020 -0.50 -0.50 0.37 0.02 0.11 0.01 0.51 1.01 1.06 0.96 1.01 1.04 2021 -0.49 -0.49 0.34 0.03 0.10 0.01 0.47 0.97 1.02 0.92 0.97 1.00 2022 -0.52 -0.52 0.30 0.03 0.09 0.01 0.42 0.94 1.00 0.90 0.95 0.99 2023 -0.57 -0.57 0.25 0.03 0.08 0.01 0.36 0.94 0.99 0.90 0.96 1.00 2024 -0.59 -0.59 0.19 0.03 0.06 0.01 0.28 0.87 0.93 0.84 0.90 0.95 2025 2.79 2.79 0.12 0.02 0.04 0.01 0.19 -2.60 -2.88 -2.62 -2.89 -2.50 2026 -0.61 -0.61 0.79 0.04 0.24 0.01 1.09 1.70 1.76 1.59 1.65 0.80 2027 -0.62 -0.62 0.83 0.05 0.25 0.01 1.15 1.76 1.82 1.65 1.71 1.71 2028 -0.63 -0.63 0.87 0.05 0.26 0.02 1.20 1.83 1.90 1.71 1.77 1.78 2029 -1.79 -1.79 0.90 0.06 0.27 0.02 1.25 3.04 3.22 2.92 3.10 3.00 Net Present Value at 12% 1.92 1.86 1.67 1.61 1.56 Economic Internal Rate of Return 18.6% 18.0% 18.0% 17.4% 17.4% Sensitivity indicator 0.34 0.37 Source: Department of Works, Road Asset Management System

80 Appendix 11

Table A11.26: Korinige - Kerowagi Road Section L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Normal Traffic Traffic Costs

Costs Benefits plus & Benefits Capital O&M Total Total Net plus less benefits delayed by Cost Cost Cost VOC Time VOC Time Benefit Benefits 10% 10% less one year 10% 2008 2.52 2.52 -2.52 -2.77 -2.52 -2.77 -2.52 2009 2.00 2.00 -0.54 -0.09 -0.63 -2.63 -2.83 -2.56 -2.76 -2.00 2010 -0.58 -0.58 0.69 0.02 0.72 1.30 1.36 1.23 1.29 -0.04 2011 -0.26 -0.26 0.47 0.01 0.48 0.74 0.76 0.69 0.72 0.97 2012 -0.26 -0.26 0.49 0.01 0.50 0.76 0.79 0.71 0.74 0.74 2013 -0.26 -0.26 0.51 0.01 0.51 0.78 0.80 0.73 0.75 0.76 2014 -0.27 -0.27 0.52 0.01 0.53 0.80 0.82 0.74 0.77 0.78 2015 -0.27 -0.27 0.52 0.01 0.53 0.80 0.83 0.75 0.78 0.80 2016 -0.28 -0.28 0.52 0.01 0.53 0.81 0.84 0.76 0.78 0.81 2017 -0.28 -0.28 0.52 0.01 0.53 0.81 0.84 0.76 0.78 0.81 2018 -0.28 -0.28 0.52 0.01 0.53 0.81 0.84 0.76 0.79 0.81 2019 -0.29 -0.29 0.51 0.01 0.51 0.80 0.83 0.75 0.78 0.81 2020 -0.29 -0.29 0.49 0.01 0.50 0.79 0.82 0.74 0.77 0.81 2021 -0.29 -0.29 0.47 0.01 0.47 0.77 0.80 0.72 0.75 0.79 2022 -0.30 -0.30 0.44 0.01 0.44 0.74 0.77 0.70 0.73 0.77 2023 -0.30 -0.30 0.40 0.00 0.40 0.71 0.74 0.67 0.70 0.75 2024 1.81 1.81 0.36 0.00 0.36 -1.45 -1.63 -1.49 -1.67 -1.40 2025 -0.31 -0.31 0.81 0.01 0.82 1.13 1.16 1.05 1.08 0.67 2026 -0.32 -0.32 0.83 0.01 0.85 1.16 1.20 1.08 1.11 1.13 2027 -0.32 -0.32 0.86 0.01 0.88 1.20 1.23 1.11 1.14 1.17 2028 -0.33 -0.33 0.89 0.01 0.90 1.23 1.26 1.14 1.17 1.20 2029 -1.68 -1.68 0.89 0.01 0.91 2.59 2.76 2.50 2.67 2.58 Net Present Value at 12% 0.67 0.45 0.38 0.17 0.30 Economic Internal Rate of Return 14.3% 13.4% 13.4% 12.6% 13.0% Sensitivity indicator 0.60 0.66 Source: Department of Works, Road Asset Management System

Appendix 11 81

Table A11.27: Lame Bridge - Laiagam 2A Road Section L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Generated Costs Normal Traffic Benefits Traffic Costs Benefits plus & Capital O&M Total Total Net delayed plus less benefits Cost Cost Cost Benefit Benefits by one VOC Time VOC Time 10% 10% less year 10% 2010 0.31 0.31 -0.31 -0.34 -0.31 -0.34 -0.31 2011 0.68 0.68 -0.93 -0.14 -1.07 -1.75 -1.82 -1.64 -1.71 -0.68 2012 -0.86 -0.86 0.32 0.03 0.35 1.21 1.30 1.18 1.26 -0.21 2013 -0.30 -0.30 0.00 0.00 0.00 0.30 0.33 0.30 0.33 0.65 2014 -0.30 -0.30 0.00 0.00 0.01 0.31 0.34 0.31 0.34 0.30 2015 -0.30 -0.30 0.01 0.00 0.01 0.31 0.34 0.31 0.34 0.31 2016 -0.31 -0.31 0.00 0.00 0.01 0.32 0.35 0.32 0.35 0.32 2017 -0.31 -0.31 -0.01 0.00 0.00 0.30 0.34 0.30 0.34 0.32 2018 -0.31 -0.31 -0.02 0.00 -0.02 0.29 0.33 0.30 0.33 0.31 2019 -0.32 -0.32 -0.04 0.00 -0.04 0.28 0.31 0.28 0.31 0.30 2020 -0.32 -0.32 -0.07 0.00 -0.06 0.26 0.29 0.26 0.30 0.28 2021 -0.32 -0.32 -0.10 0.00 -0.10 0.23 0.26 0.24 0.27 0.26 2022 -0.33 -0.33 -0.14 0.00 -0.13 0.19 0.23 0.21 0.24 0.23 2023 -0.33 -0.33 -0.19 0.00 -0.18 0.15 0.18 0.17 0.20 0.20 2024 -0.34 -0.34 -0.24 0.00 -0.24 0.10 0.13 0.12 0.16 0.16 2025 -0.34 -0.34 -0.31 0.00 -0.31 0.03 0.07 0.06 0.10 0.10 2026 -0.35 -0.35 -0.38 -0.01 -0.39 -0.04 -0.01 0.00 0.03 0.04 2027 2.76 2.76 -0.47 -0.01 -0.48 -3.24 -3.52 -3.19 -3.47 -3.15 2028 -0.36 -0.36 0.13 0.01 0.14 0.49 0.53 0.48 0.52 -0.12 2029 -0.36 -0.36 0.14 0.01 0.15 0.51 0.54 0.49 0.53 0.50 2030 -0.36 -0.36 0.15 0.01 0.16 0.53 0.56 0.51 0.55 0.52 2031 -0.60 -0.60 0.15 0.01 0.17 0.77 0.83 0.75 0.81 0.77 Net Present Value at 12% 0.20 0.30 0.28 0.39 0.28 Economic Internal Rate of Return 16.5% 18.3% 18.5% 20.1% 19.6% Sensitivity indicator -1.07 -1.18 Source: Department of Works, Road Asset Management System

82 Appendix 11

TableA11.28: Laiagam 2A - Laiagam 2B Road Section L2242/2243 Economic Analysis (2008 Kina million) Economic Costs Economic Benefits Sensitivity Tests Normal Traffic Generated Traffic Costs Costs Benefits plus & Benefits Capital O&M Total Total Net plus less benefits delayed by Cost Cost Cost VOC Time VOC Time Benefit Benefits 10% 10% less one year 10% 2011 10.21 10.21 -10.21 -11.23 -10.21 -11.23 -10.21 2012 7.20 7.20 -0.84 -0.21 -1.05 -8.25 -8.97 -8.14 -8.86 -7.20 2013 -0.72 -0.72 2.49 0.12 2.61 3.33 3.40 3.07 3.14 -0.33 2014 -0.44 -0.44 1.89 0.04 1.94 2.38 2.42 2.18 2.23 3.06 2015 -0.45 -0.45 1.96 0.05 2.00 2.45 2.50 2.25 2.30 2.39 2016 -0.46 -0.46 2.01 0.05 2.06 2.52 2.56 2.31 2.36 2.46 2017 -0.47 -0.47 2.05 0.05 2.10 2.57 2.62 2.36 2.41 2.53 2018 -0.47 -0.47 2.08 0.05 2.13 2.61 2.65 2.39 2.44 2.58 2019 -0.48 -0.48 2.10 0.05 2.16 2.64 2.69 2.43 2.47 2.62 2020 -0.49 -0.49 2.12 0.06 2.17 2.66 2.71 2.45 2.49 2.65 2021 -0.50 -0.50 2.12 0.06 2.17 2.67 2.72 2.46 2.51 2.67 2022 -0.51 -0.51 2.10 0.06 2.16 2.67 2.72 2.45 2.50 2.68 2023 -0.51 -0.51 2.07 0.06 2.13 2.64 2.69 2.43 2.48 2.67 2024 -0.53 -0.53 2.03 0.05 2.08 2.61 2.66 2.40 2.46 2.66 2025 2.05 2.05 1.98 0.04 2.02 -0.03 -0.24 -0.24 -0.44 0.03 2026 -0.55 -0.55 2.90 0.08 2.98 3.52 3.58 3.23 3.28 2.57 2027 -0.56 -0.56 3.00 0.08 3.08 3.64 3.70 3.33 3.39 3.54 2028 -0.57 -0.57 3.09 0.08 3.18 3.75 3.80 3.43 3.48 3.65 2029 -0.53 -0.53 3.15 0.09 3.24 3.77 3.82 3.44 3.50 3.71 2030 -0.54 -0.54 3.18 0.09 3.28 3.82 3.87 3.49 3.54 3.78 2031 -0.55 -0.55 3.20 0.10 3.30 3.86 3.91 3.53 3.58 3.83 2032 -5.79 -5.79 3.20 0.10 3.30 9.09 9.67 8.76 9.34 9.09 Net Present Value at 12% 1.00 -0.18 -0.28 -1.46 -0.61 Economic Internal Rate of Return 12.9% 11.9% 11.8% 10.8% 11.5% Sensitivity indicator 0.78 0.86 Source: Department of Works, Road Asset Management System

Appendix 12 83

0.00 0.00 0.68 0.00 0.00 0.68 0.00 0.00 0.00 0.00 0.00 0.00 0.68 ($ million) Government Undisbursed

52% 44% 45% 38% 49% 45% 41% 80% 47% 67% 51% 55% 48% (% Costs)(%

(% (% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Financing) Government Disbursed

($ 6.77 0.61 2.33 0.75 5.73 1.52 3.14 3.52 8.89 2.24 19.07 100% 27.96 100% million)

(% (% 45% 52% 44% 49% 45% 41% 80% 47% 67% 55% 51% 48% Contract) Financing

Government ($ 1.36 38% 1.36 6.77 0.61 2.33 0.75 5.73 1.52 3.14 3.52 8.89 2.24 19.07 27.96 million)

(% (% 2% 55% 51% 48% 56% 59% 55% 59% 20% 53% 33% 45% 33% 52% Costs)

(% (% 100% 100% 100% 101% 100% 100% 100% 100% 100% 100% 100% 100% Financing)

ADB Disbursed

($ 8.43 3.01 8.12 3.48 2.19 23.49 100% 30.90 100% million)

(%) (%) 55% 56% 59% 2.11 59% 53% 55% 52% 49%

($ 8.43 0.79 51% 0.79 0.09 2% 0.09 0.55 47% 0.56 3.01 0.39 20% 0.39 1.74 33% 1.74 8.12 3.48 7.41 45% 7.41 2.19 23.49 30.89 million) ADB Financing

($ 1.53 3.55 1.17 5.33 0.00 1.91 5.25 6.61 4.43 Cost 15.20 13.86 42.56 16.30 58.86 Project million) CONTRACTS AWARDED AND FINANCED BY ADB

5.77 0.65 3.01 0.39 1.77 6.57 3.48 7.44 2.19 18.59 26.03 ($ million) Allocation 8.8 33.8 10.5 2.19 10.0 21.5 15.5 33.5 29.9 70.2 18.8 (km) 112.1 182.3 8.8 33.8 10.5 2.11 10.0 15.5 33.5 29.9 70.2 21.5 18.8 Road Length (km) 132.1 202.3 Targets Actual EH 10.0 EH 10.0 EH EH WH WH WH Enga Simbu Simbu Simbu Province

Goro - Gumine Kundiawa - Goro - Kundiawa Kotna - Banz Oliguti - Lufa Contract Stage 1 Loan No 1709 - Completed Road Section Road Upgrade Mt Ogulbeng - Ambra Mt Ambra - Kotna Oliguti - Lufa Stage 2 Contract 1 Road Rehabilitation Korifegu - Nupuru Chauve - Move Oliguti - Lufa Stage 2 Contract 2 Kaipau - Kandep 84 Appendix 12 t bidding was lowest cost, t bidding was ions. Disruptions through truction commenced May 2005 some landslides and bank some landslides km10 required additional bench Comments Completion Design changes, adverse weather, Election disruptions Procurement mistakes/omiss 2005. completed in July and was security threats andsecurity police escorts provided. Collapse of Gumants bridge, 200 metres before the site also delayed construction. Bridge cons of working Slow contractor, delays in locating, testing, and approval of suitable materials for the road base. Due soil conditions, to weak along the roadsubsidence occurred alignment during rains.heavy involved base contract Technical design issues. Initial material from nominated below pit that DOW was standard specifications. The new acceptable base material source involved additional contract cost of K1.5 slip at million. A circular cuts to shift the centre line of carriageway from the slip edge, involving additional contract cost of K1.6 funded by the was million. The additional K3.1 million was of K3.77 million contract while original Government, funded from the ADB Loan. Slips and soil depressions occurred due to natural disasters and emergency repair workswere required. Contract terminated for poor performance on 23 May 2007 Invitation to bid under ICB on 2 August 2004, and only one bid received at cost 95% higher than engineering subsequently negotiatedwas estimate; which down by 72% higher thanK1 million, but still engineering estimate. EA requested rebid under LCB and ADB agreed. After rebidding lone bidder from firs and 37%higher than engineering estimate. Terminated. and orderLaw problems in January 2010. Implementation Schedule 01-Jul-10 01-Jul-05 17-Oct-06 01-Oct-10 29-Jun-08 27-Jun-05 01-Feb-10 10-Sep-02

Original Actual 19-Jul-02 01-Apr-03 01-Jun-03 20-Feb-08 01-Sep-07 28-Aug-08 06-Aug-09 19-May-08 19-Sep-09 t-01 07 Start 19-May- 22-Oct-04 01-Oc 20-Feb-07 14-Aug-02 06-Aug-07 23-Sep-02 10-Sep-07 y-06 31-Jul-06 Date Contract 11-Jul-07 03-Oct-05 01-Aug-02 11-Apr-07 07-Oct-04 25-Jun-07 28-Aug-07 09-Jan-07 26-Nov-04 13-Sep-07 16-Nov-01 04-Ma 10-May-02 19-May-06 liffe Ltd obal Constructions Shorncliffe Ltd Shorncliffe Raibro Construction Raibro Shorncliffe Ltd Contractor Tiong Seng ContractorsSeng Tiong CMC di Ravenna MMK Ltd Tiong Seng Contractors Wabag Construction Dekenai Shornc Covec PNG Ltd Gl

d 4.36 9.70 5.93 4.90 41.42 17.76 44.17 37.95 16.61 120.87 165.05 Disburse

4.47 3.75 6.55 13.86 9.38 12.55 5.40 30.09 34.76 13.59 (K million) Contract Amount

4.08 3.75 3.77 13.23 37.42 102.03 19.95 19.95 19.95 35.89 57.38 137.92 12.59 Original Revised

Road Section Loan No 1709 - Completed Road Upgrade Ogulbeng - Mt Ambra Mt Ambra - Kotna Kotna - Banz Goro - Gumine Oliguti - Lufa Contract Stage 1 Oliguti - Lufa Stage 2 Contract 1 Kundiawa - Goro Oliguti - Lufa Stage 2 Contract 2 9.97 Road Rehabilitation Korifegu - Nupuru Chauve - Move Kaipau - Kandep Appendix 12 85

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ($ million) Government Undisbursed

(% (% 66% 69% 67% 68% 40% 90% 100% 100% Costs) to unsettled claims claims unsettled to

(% (% 100% 100% 100% 100% 100% 100% 100% Financing) Loan funding was limited to $2.149 $2.149 to limited was funding Loan (K19.4 million; £6.4 million) ADB million) £6.4 million; (K19.4 of PNG. Taken Government to erred ct with CMC de Ravenna terminated in terminated Ravenna CMC de ct with e contract price was negotiated down down negotiated was price e contract h 2004 and as lowest bid was 35% 35% was bid as lowest and h 2004 funding amount beyond this allocation. this allocation. beyond amount funding ng 90% of work due due work 90% of ng

($ Government Disbursed Comments 2.36 4.31 100% 6.68 0.12 2.24 1.42 1.15 1.74 million)

(% (% 69% 67% 66% 68% 40% 90% 100% 100% after 16.5% completion after contractor suspended work work suspended contractor after completion 16.5% after Completion Contract) Financing

($ Government 6.68 4.31 0.12 2.24 1.42 1.15 1.74 million) Contractor pulled out after completi after out pulled Contractor Terminated 26 April 2007 with only 13% completed. Rebid and financed using using financed and Rebid completed. 13% only with 2007 April 26 Terminated funds. Government Contract approved by ADB on 11 Marc ADB on 11 by approved Contract suggestion. at ADB's million from K12.50 Government with million) million (K7 did quantities bill of Original materials. sub-base providing difficulty Contractor and was fill) and cut (e.g. items earthwork major of estimates contain not land owners by disrupted Progress section. road whole to redesign necessary terminated Contract compensation. land seeking higher than the engineering estimate th the higher than engineering terminated Contract up in Taken PNG. of to Government Transferred issues. to landowner due HRRIIP funding limited to $3.245 million. Contra million. $3.245 to limited funding HRRIIP up in Contract approved by ADB on 22 March ADB on 22 by approved Contract as below repackaged 2007 and July to provide failed contractor after 2008 27 May on terminated Contract Guarantee. Transf Security Performance Implementation Schedule

(% (% 31% 2.36 33% 34% 32% 60% 10% Costs)

01-Apr-06 01-Apr-06 01-Jun-09 01-Jun-09

(% (% 30% 57% 100% 100% 100% 100% Financing) ADB Disbursed Disbursed ADB

Original Actual Original

16-Oct-08 16-Oct-08 ($ 22-Mar-06 22-Mar-06 13-Feb-08 13-Feb-08 3.34 1.07 2.27 1.07 2.15 0.12 million)

(%) (%) 58% 34% 32% 60% 10%

Start Start 104% ADB ADB ($ Financing 5.83 3.56 2.27 2.50 1.07 2.15 0.12

million) Date Contract 15-Jul-07 13-Aug-07 15-Jul-07 03-Oct-05 03-Oct-05 17-Oct-07 17-Oct-07 02-Oct-07 24-Oct-07 30-Jun-04 30-Jun-04 23-Jan-04 13-Sep-05

($ 3.43 6.59 0.00 0.12 3.31 1.74 Cost 10.02 Project million)

Carson Pratt Asi Holdings Holdings Asi Ltd CMC di Ravenna Contractor CMSS (PNG) Ltd CMC di Ravenna Holdings Asi Ltd 5.52 3.25 2.27 3.25 2.15 3.57 0.12 1.27 ($ million) Allocation

6.57 6.57 9.74 9.74 3.66 3.66 0.35 0.35 6.92 6.92 20.31 20.31 13.40 13.40 15.6 (km) Disbursed

81.2 15.6 50.0 0.0 31.2 15.6 25.0 25.0 15.6 (km) 0.85 0.85 (53.2) Road Length 19.41 19.41 Targets Actual d, Transferred to Government Government to d, Transferred SH SH SH 15.6 SH EH (30) SH

9.68 9.68 Contract Amount (K million) Contract Amount 19.37 19.37 11.34 11.34 0.00 0.00 31.31 19.96 19.96 20.26 20.26 29.04 20.26 60.35 Province Revised Revised Original

Nembi Bridge - Nipa Mendi - Nembi Bridge Road Rehabilitation Mendi - Nipa Kisenapoi - Ialibu B Kisenapoi - Ialibu A Original Original A Ialibu - Kisenapoi Contract Kisenapoi - Ialibu A Original Contract Kisenapoi - Ialibu B B Ialibu - Kisenapoi Road Rehabilitation Rehabilitation Road Nipa Mendi - Nembi Bridge - Nipa Nipa - Nembi Bridge Nupuru - Okapa (original (original Okapa Nupuru - contract) Road Section Road Upgrade Okapa Nupuru - (original contract) Road Section Not Complete Started, Loan No 1709 - Road Upgrade Mendi - Nembi Bridge Nembi Bridge Mendi - Loan No 1709 - Started, Not Completed, Transferred to Government 86 Appendix 12

0.00 1.33 0.80 1.33 0.00 0.00 2.13 0.00 0.00 0.00 0.00 0.80 ($ million) Government Undisbursed

(% (% 27% 30% 30% 30% 30% 27% 30% 37% 41% 19% 33% 30% Costs)

(% (% 66% 95% 66% 90% 80% 100% 100% 100% 100% 100% 100% 100% Financing)

Government Disbursed ($ 1.82 2.58 2.58 2.37 2.10 2.26 2.21 1.06 0.72 3.18 15.71 18.29 million)

(% (% 30% 46% 46% 31% 27% 37% 34% 41% 19% 27% 33% 37% Contract)

Financing

Government ($ 1.82 3.91 3.91 2.37 2.10 2.21 1.06 2.26 0.72 3.98 16.51 20.42 million)

(% (% 70% 70% 70% 70% 70% 73% 63% 59% 81% 73% 67% 70% Costs)

(% (% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Financing)

ADB DisbursedADB

4.19 5.95 5.95 3.53 3.20 6.31 4.59 1.43 6.01 7.46 36.71 42.66 ($ million)

(%) 70% 70% 70% 70% 70% 63% 59% 73% 81% 67% 73% 70%

4.19 5.95 36.7 5.95 3.53 3.20 4.59 6.31 1.43 6.01 7.46 42.66 ADB FinancingADB ($ million)

6.00 8.53 52.4 8.53 5.63 5.41 5.65 8.68 2.15 0.00 8.27 60.96 10.64 ($ million) Project Cost

30.6 2.74 6.30 4.63 6.30 4.06 33.34 ($ million) Allocation

9.3 3.05 7.0 1.10 8.6 12.5 3.23 17.5 2.74 11.2 3.83 10.4 2.73 10.3 22.0 (km) Actual 8.3 7.0 89.7 91.3 17.3 17.5 12.5 10.4 11.0 17.3 19.0 22.0 (km) Road Length 107.0 108.8 (34.0) Targets EH WH Enga 8.5 Enga 10.0 Province

Loans No 2242/2243 Kamaliki – EH Bekuvia Road Section Road Upgrade Goroka – Lahame EH Road Rehabilitation Kamaliki – Move Kindeng – Kondopina WH Ialibu–Pangia SH Banz – Karameng WH Banz - Dona Laiagam2A – Laiagam 2B Karameng – Dona WH Korinige – Kerowagi Simbu Lame Bridge – Laiagam 2A Appendix 12 87 ager’s unreasonable compensation ager’s unreasonable compensation Comments Completion Serious problems vill with demands. Serious problems vill with demands. 30-Jul-10 30-Apr-11 10-Jun-10 24-Mar-10 30-Nov-10

Implementation Schedule

Original Actual 14-Jul-10 01-Apr-09 18-Oct-10 01-Jan-10 25-Mar-12 16-Feb-12 11-Aug-09 30-Dec-09 30-Nov-10 07-Jan-09 Start 09-Jul-08 01-Feb-08 05-Jan-09 13-Mar-08 10-Feb-10 10-Feb-10 25-May-09 Date Contract 14-Apr-09 25-May-09 01-Oct-08 03-Jun-08 01-Feb-08 01-Feb-08 23-Dec-09 23-Dec-09 14-May-07 03-Jul-07 neering Ltd Civil Pacific Engi Contractor Shorncliffe Ltd Shorncliffe PNG Ltd Covec PNG Ltd Lorma Construction Lorma Covec PNG Ltd Lorma Construction Lorma Covec PNG Ltd Tiong Seng Contractors 26.27 15.22 13.66 20.79 13.30 20.79 151.07 Disbursed 4.84 5.81 9.82 14.00 15.30 11.94 17.68 19.80 16.74 20.93 14.81 11.87 24.03 101.71 130.28 (K million) Contract Amount

0.00 24.03 0.00 125.74 Original Revised

Road Section Loans No 2242/2243 Road Upgrade Goroka – Lahame Kindeng – Kondopina Ialibu–Pangia Road Rehabilitation Kamaliki – Move Kamaliki – Bekuvia Banz - Dona Banz – Karameng Korinige – Kerowagi Lame Bridge – Laiagam 2A Laiagam2A – Laiagam 2B Karameng – Dona 88 Appendix 12

8.50 8.50 19.70 11.20 ($ million) Government Undisbursed

(% (% 82% 27% 100% Costs) Comments

(% (% 17% 52% 20% 14% 14% Financing) Terminated - to be financed with slow to funds. Contractors Government 2009. mobilize. Site repossessed7 May Problems with identifying materialProblems with source. To be financed with funds. Government Completion

($ Government Disbursed 2.73 1.43 4.16 1.43 million)

(% (% 566% 299% 189% Contract) Financing

Implementation Schedule ($ Government 9.93 9.93 13.93 511% 23.86 million) Original Actual 06-Oct-12 11-Oct-09

(% (% 52% 18% 73% Costs) Start 06-Jan-11 26-Feb-08

(% (% 8% 108% 100% Financing) ADB Disbursed

($ 12-Apr-08 0.32 3.83 25-Nov-10 million) Contract Date Contract

(%) (%) 73% 218%

($ 3.83 3.83 ADB Financing million)

($ 7.99 3.83 0.73 4.15 2.73 1.75 5.26 Cost Project million) MMK Ltd MMK Contractor Tiong Seng Contractors

3.38 9.79 2.93 0.86 1.15 0.92 (5.28) ($ million) Allocation 0.0 8.24 12.38 (km) 32.38 (K million) Contract Amount

53.8 12.3 26.4 (km) Road Length (51.0) 0.00 32.38 Targets Actual Original Revised Disbursed 6.42

EH 27.4 SH EH EH Province

Seven Corners – Kagua Road Section Loan No 2242/2243 - Started, Not Completed, Transferred to Government, Not Completed Road Rehabilitation Raipinka - Okapa Station Loan No 2242/2243 - Started, Not Completed, Transferred to Government, Not Completed Road Section Road Rehabilitation Raipinka - Okapa Station Raipinka-Okapa back road Raipinka-Okapa back Okapa back road-Okapa station Seven Corners – Kagua Appendix 12 89

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ($ million) Government Undisbursed

(% (% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Costs)

(% (% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Financing)

($ 8.07 9.96 2.84 2.32 4.90 3.42 4.56 5.61 1.21 1.97 1.96 9.06 1.84 Government Disbursed 47.78 37.82 million)

(% (% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Contract) Financing

($ Government 8.07 100% 9.96 2.84 100% 2.32 4.90 5.61 1.21 1.97 3.42 4.56 1.96 9.06 1.84 47.78 37.82 million)

(% (%

Costs)

(% (%

Financing) ADB Disbursed

($ million)

(%) (%)

($ ADB Financing million)

($ 9.96 2.84 8.07 2.32 4.90 5.61 1.21 1.96 1.97 3.42 4.56 9.06 1.84 Cost 47.78 37.82 Project million)

3.50 3.50 8.07 1.84 2.32 3.30 3.30 1.21 1.93 5.64 2.01 33.11 29.62 (6.75) ($ million) Allocation

2.8 2.0 5.0 8.2 8.6 4.0 15.0 15.0 10.5 11.6 (km) 116.7 8.3 2.8 2.0 4.0 5.0 36.5 21.8 13.5 20.5 15.0 15.0 10.5 11.6 Road Length (km) 103.2 94.9 (47.5) (44.3) Target Actual Enga 31.5 Enga Enga Enga EH EH WH WH WH WH WH WH Enga Enga Enga Province

Total 139.7 Meriamanda - Kompiam 1A Meriamanda - Kompiam 1B WH = Western Highlands, EH = Eastern Highlands, SH = Southern Highlands, km = kilometers Mt Hagen - Kotna Separately Funded by Government Government by Funded Separately Road Rehabilitation Kandep Station Roads Meriamanda - Kompiam (2 contracts) Road Section Road Upgrade contracts)Okapa (2 Nupuru - 1 Okapa Package Nupuru - Source: Project Implementation Unit. Department of Works Notre Dame School- Bombolopa Bridge Penga - Kotna Station Wabang - Warumanda Mt Hagen - Notre Dame School WH Nupuru - Okapa Package 2 Okapa Package Nupuru - Mt Hagen - Baiyer 2 Wabang - Meriamanda Wabang Town Roads Mt Hagen - Baiyer Mt Hagen - Baiyer (3 contracts) 90 Appendix 12 Comments Completion Completed using Government funds After tendering and no awards due to lack of bids, split to four packages. Misprocurement EA on 2 packages by and ADB cancelled Loan allocations. 18.74 km sealed section between 18.74 km sealed section between Mt Hagen and Notre Dame School patching and second seal; 25.52 km section from Notre Dame River Patrol Post upgradedSchool to Baiyer to double seal standard. ADB funding approval of $6.573 million. Completed using Government funds Subproject split into two contract Subproject split into two packages and rebid. Financed using wholly funds. Government Government financed road.

31-Oct-03 01-Jun-04 30-Jun-10 30-Jun-10 02-Jun-09 01-Feb-10 29-May-07 Implementation Schedule

Original Actual 05-Jun-09 08-Mar-09

Start 05-Oct-07 05-Oct-07 17-Jun-02 04-Sep-06

21-Jul-06 27-Sep-07 27-Sep-07 Contract Date Contract uctions 21-Jul-06 Hire Constructions 21-Feb-08 E J Sisters JLW Contractors horncliffe Ltd horncliffe Ltd Covec PNG Ltd

Pangali Contractor Kaystar Lorma Constr S S Teddy Plant

Global Constructions 74 Global 8.47 5.74 7.04 3.00 4.88 5. 4.85 24.65 11.29 22.41 17.29 15.10 19.96 125.78 101.13 Disbursed 0.00 8.47 5.74 3.00 7.04 4.88 5.74 4.85 11.29 22.41 17.29 15.10 19.96 (K million) Contract Amount

0.00 24.65 5.74 5.30 9.65 1.93 9.65 5.74 38.00 125.78 38.00 101.13 Original Revised

WH = Western Highlands, EH = Eastern Highlands, SH = Southern Highlands, km = kilometers Meriamanda - Kompiam (2 contracts) Meriamanda - Kompiam 1A Meriamanda - Kompiam 1B Road Rehabilitation Kandep Station Roads Wabang Town Roads Wabang - Warumanda Wabang - Meriamanda Mt Hagen - Kotna Mt Hagen - Baiyer (3 contracts) Mt Hagen - Notre Dame School Mt Hagen - Baiyer 2 Notre Dame School-Bombolopa Bridge Penga - Kotna Station Mt Hagen - Baiyer Nupuru - Okapa Package 2 Okapa Package Nupuru - Road Section Government by Funded Separately Road Upgrade contracts)Okapa (2 Nupuru - Source: Project Implementation Unit. Department of Works Nupuru - Okapa Package 1 Okapa Package Nupuru - Appendix 13 91

PROJECT EVALUATION RATING SCHEDULES

Overall Project Rating Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Relevant 2 0.4 Effectiveness 30% Less effective 1 0.3 Efficiency 30% Efficient 2 0.6 Sustainability 20% Less likely 1 0.2 Overall Rating 1.5 Road Upgrading Component Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Highly Relevant 3 0.6 Effectiveness 30% Less effective 1 0.3 Efficiency 30% Efficient 2 0.6 Sustainability 20% Less likely 1 0.2 Overall Rating 1.7 Road Asset Management Component Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Highly Relevant 3 0.6 Effectiveness 30% Less effective 1 0.3 Efficiency 30% Less efficient 1 0.3 Sustainability 20% Unlikely 0 0.0 Overall Rating 1.2 Training Component Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Relevant 2 0.4 Effectiveness 30% Effective 2 0.6 Efficiency 30% Less efficient 1 0.3 Sustainability 20% Less likely 1 0.2 Overall Rating 1.5 Detailed Design & Construction Supervision Component Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Relevant 2 0.4 Effectiveness 30% Less effective 1 0.3 Efficiency 30% Efficient 2 0.6 Sustainability 20% Likely 2 0.4 Overall Rating 1.7 Strengthening of Project Implementation & Road Maintenance Operations Component Criterion Weight Assessment Rating Value Weighted Rating Relevance 20% Highly Relevant 3 0.6 Effectiveness 30% Less effective 1 0.3 Efficiency 30% Less efficient 1 0.3 Sustainability 20% Less likely 1 0.2 Overall Rating 1.4 Assessment Rating Value Relevance Highly Relevant 3 Relevant 2

92 Appendix 13

Partly relevant 1 Irrelevant 0 Effectiveness Highly effective 3 Effective 2 Less effective 1 Ineffective 0 Efficiency Highly efficient 3 Efficient 2 Less efficient 1 Inefficient 0 Sustainability Most likely 3 Likely 2 Less likely 1 Unlikely 0 Assessment (weighted average of above criteria) Highly Successful: Overall weighted average is greater than or equal to 2.7. Successful: Overall weighted average is greater than or equal to 1.6 and less than 2.7. Partly Successful: Overall weighted average is greater than or equal to 0.8 and less than 1.6. Unsuccessful: Overall weighted average is less than 0.8.