Document of The World Bank
Public Disclosure Authorized Report No: ICR2777
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74110)
ON A
Public Disclosure Authorized LOAN
IN THE AMOUNT OF US$ 100.00 MILLION
TO THE
BRAZIL – STATE OF BAHIA
FOR
INTEGRATED STATE HIGHWAY MANAGEMENT PROJECT
Public Disclosure Authorized
March 27, 2014
Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region
Public Disclosure Authorized
CURRENCY EQUIVALENTS
(Exchange Rate Effective January 8, 2014)
Currency Unit=Brazilian Real BRL 1.00 = US$ 0.42 US$ 1.00 = BRL2.38
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AADT Average Annual Daily Traffic AGERBA Bahia State regulation agency(Agencia Estadual de Regulação dos Serviços Públicos de Energia, Transportes e Comunicações da Bahia) CAS Country Assistance Strategy CREMA Performance-based Road Rehabilitation and Maintenance Contract (Contratos de Reabilitação e Manutenção) DERBA Bahia Transport Infrastructure Department (Departamento de Infraestrutura de Transportes da Bahia) DPL Development Policy Loan EA Environmental Assessment GDP Gross Domestic Product GERAM DERBA’senvironmental management unit HDM4 Highway Development & Management (Version 4) ICB International Competitive Bidding IL Investment Lending IRR Internal Rate of Return IRI International Roughness Index NCB National Competitive Bidding NPV Net Present Value PCN Project Concept Note PDO Project Development Objective PELTBAHIA Bahia State Transport and Logistics Masterplan (Plano Estadual de Logistica e Transporte) PMS Pavement Management System
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PPA Pluri annual budget plan (Plano Pluri-Anual) PPP Public-Private Partnership PREMAR Integrated State Highway Management Project (Projeto de Reabilitação e Manutençãode Rodovias) SIM Sector Investment and Maintenance SEI Superintendence for social and economics studies (Superintendência de Estudos Econômicos e Sociais da Bahia) SEINFRA Bahia Infrastructure Secretariat (Secretaria de Infraestrutura) SEPLAN Bahia Planning Secretariat (Secretaria de Planejamento) SIFRECA Department of Economy, Administration and Sociology of the University of Sao Paulo SUPET Superintendence of transports (Superintendência de Transportes) UCP Project Coordination Unit (Unidade de Coordenação do Projeto)
Vice President: Hasan A. Tuluy Country Director: Deborah L. Wetzel Sector Manager: Aurelio Menendez Project Team Leader: Gregoire F. Gauthier ICR Team Leader: Gregoire F. Gauthier
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BRAZIL – STATE OF BAHIA Integrated State Highway Management Project
CONTENTS
Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Profile
1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 11 4. Assessment of Risk to Development Outcome ...... 16 5. Assessment of Bank and Borrower Performance ...... 18 6. Lessons Learned ...... 21 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 23 Annex 1. Project Costs and Financing ...... 24 Annex 2. Outputs by Component ...... 26 Annex 3. Economic and Financial Analysis ...... 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 40 Annex 5. Beneficiary Survey Results ...... 42
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Annex 6. Stakeholder Workshop Report and Results ...... 43 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 44 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...... 46 Annex 9. List of Supporting Documents ...... 47 MAP
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A. Basic Information
Bahia Integrated State Country: Brazil Project Name: Highway Management Project
Project ID: P095460 L/C/TF Number(s): IBRD-74110
ICR Date: 09/27/2013 ICR Type: Core ICR
Lending Instrument: SIM Borrower: STATE OF BAHIA
Original Total USD 100.00M Disbursed Amount: USD 100.00M Commitment:
Revised Amount: USD 100.00M
Environmental Category: B
Implementing Agencies: SEINFRA, SEPLAN, DERBA, AGERBA
Cofinanciers and Other External Partners: /
B. Key Dates Revised / Actual Process Date Process Original Date Date(s)
Concept Review: 08/18/2005 Effectiveness: 12/06/2007 12/06/2007
09/20/2010 Appraisal: 10/10/2006 Restructuring(s): 04/16/2013
Approval: 11/14/2006 Mid-term Review: 10/26/2009
Closing: 09/30/2013 09/30/2013
C. Ratings Summary C.1 Performance Rating by ICR
Outcomes: Moderately Satisfactory
Risk to Development Outcome: Moderate
Bank Performance: Satisfactory
Borrower Performance: Satisfactory
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C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance:
C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any)
Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA):
Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA):
DO rating before Moderately
Closing/Inactive status: Satisfactory
D. Sector and Theme Codes Original Actual
Sector Code (as % of total Bank financing)
General agriculture, fishing and forestry sector 3 3
Rural and Inter-Urban Roads and Highways 87 87
Sub-national government administration 10 10
Theme Code (as % of total Bank financing)
Infrastructure services for private sector development 40 40
Municipal governance and institution building 20 20
Regulation and competition policy 20 20
Trade facilitation and market access 20 20
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E. Bank Staff Positions At ICR At Approval
Vice President: Hasan A. Tuluy Pamela Cox
Country Director: Deborah L. Wetzel John Briscoe
Sector Manager: Aurelio Menendez Jose Luis Irigoyen
Project Team Leader: Gregoire Francois Gauthier Aymeric-Albin Meyer
ICR Team Leader: Gregoire Francois Gauthier
Virginia Maria Henriquez ICR Primary Author: Fernandez
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document) The Project's ultimate development objective is to increase effective use of the State road infrastructure, with an aim at stimulating higher economic growth.
Revised Project Development Objectives (as approved by original approving authority)
(a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : % reduction in average land transport freight rates on selected itineraries (cum.) Value quantitative or 0 6.0 10.8 Qualitative) Date achieved 10/10/2006 9/30/2013 12/31/2011 Target met. On average, from 2006 to 2013, truck transport freight rates on the Project’s Comments sections have been reduced by 10.8%, as measured in 2006 Reais. A specific study was carried out in 2013 to assess the variation of average land transport freight rates on selected Project (incl. % itineraries. Ex-post freight rates per product were surveyed on 10 Project sections. Ex-ante achievement) freight rates, which had not been surveyed upfront, were inferred from: (i) historic data available from the logistics firms surveyed ex-post; (ii) comparison with freight rates evolution surveyed
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on two highway sections (respectively 77 km and 137 km) out of the Project (i.e. not rehabilitated), but with similar i transport demand characteristics as the Project’s sections, but which did not benefit from rehabilitation and maintenance; (iii) information from Sao Paulo university’s SIFRECA database. % increase in use of road transport infrastructure on selected itineraries (as measured in Indicator 2 : veh.-km. increase relatively to 2005 levels ) (cum.) Value quantitative or 0 12.0 66.2 Qualitative) Date achieved 10/10/2006 10/15/2013 10/15/2012
Comments Target met. From 2006 to 2013, the Average Annual Daily Traffic (AADT) on the Project’s sections increased by almost two-thirds. Traffic increase, at an annual average of 9.5%, has been (incl. % much higher than expected. Latest available traffic surveys date back to October 2012; by Project closeout (September 30, 2013), the AADT measurements for 2013 were not yet achievement) available. Indicator 3 : % decrease of average unit vehicle costs on selected itineraries (cum.) Value quantitative or 0 8.0 12.5 Qualitative) Date achieved 10/10/2006 9/30/2013 09/30/2013 Target met. The percentage decrease of vehicle operating costs on Project’s sections Comments has decreased by 12.5% from 2006 to 2013. This indicator was computed using the (incl. % HDM4 model; the ex-ante costs had been computed at appraisal, based on the highway condition at that time, while the ex-post costs were computed after rehabilitation, achievement) updating in the model the ex-post pavement condition.
(b) Intermediate Outcome Indicator(s)
Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Indicator 1 : Cumulative number of km of roads rehabilitated under result-based contracts Value (quantitative 0 2000 1196 or Qualitative) Date achieved 10/10/2006 9/30/2013 9/30/2013
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Target partially met. While the PAD established a 2,000 km target for State highways to be rehabilitated under result-based contracts (understood as performance-based road rehabilitation and maintenance contracts – CREMAs), only 1,196 km were rehabilitated, and maintained, as Comments such; an additional financing of about US$80 million would have been necessary to complete the performance-based program as initially planned. Yet, during 2008- 2013, the State rehabilitated, (incl. % on his own funds, an additional 2,513 km of paved highways but under traditional input-based (not performance-based) contracts. Overall, over 2008-2013, the State of Bahia rehabilitated achievement) about 3,709 km, representing about twice as much as the 2,000 km target but fell short of meeting the 2,000 km target for performance-based rehabilitation. Since being able to rejuvenate about a third of the network in 6 years is deemed to be a considerable achievement, the “partially met target” rating is proposed.. Indicator 2 : % of network traffic traveling on paved roads in good conditions (cum.) Value (quantitative 50 80 83.5% or Qualitative) Date achieved 10/10/2006 9/30/2013 04/13/2013
Comments Target met. As surveyed by DERBA, 83.5% of the road traffic circulates on State (incl. % highways in good conditions. achievement)
Indicator 3 : Integrated road planning and management system operational Value System partially (quantitative System not operational System operational operational or Qualitative) Date achieved 10/10/2006 12/31/2011 09/30/2013 Target partially met. The Pavement Management System was still being developed by Project closeout. The software has been installed in DERBA's server and can be accessed through the Intranet. Some of the data collected from the previous field surveys such as road structure, work Comments history, IRI, traffic volume, and FWD have been already installed into the database. Given that the latest survey was still ongoing by Project closeout, the data collection was not completed. (incl. % The software is able to create graphs or diagrams of the road structure and condition, which are useful for road management but the model calibration needs to be completed. . Finally, in order achievement) for this system to become fully operational, it requires the assignment of a technically qualified manager, responsible of its implementation and the monitoring of its future ongoing operation. By Project closeout, SEINFRA/DERBA was identifying potential qualified and trained managers. # of regional offices (residencias) operating DERBA's information systems on-line Indicator 4 : (cum.) Value (quantitative 0 10 20 or Qualitative) Date achieved 10/10/2006 12/31/2011 09/30/2013
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Target met. By Project closing, all 20 DERBA’s regional offices were operating DERBA’s Comments information systems on-line. This indicator would have been better defined as: “number of on- line systems operated by the 20 DERBA’s regional offices”. Indeed, all DERBA’s regional (incl. % offices necessarily operate the same on-line systems. It is noteworthy that, at appraisal, achievement) DERBA’s 20 regional offices, operated 5 online DERBA information systems, whereas, by Project closeout, these same 20 regional offices were operating 9 online information systems. Indicator 5 : # of staff weeks of training for DERBA staff (cum.) Value (quantitative 0 200 1,527 or Qualitative) Date achieved 10/10/2006 9/30/2013 09/30/2013 Target met. Between 2006 and 2013, DERBA staff benefited from 1,527 staff-weeks of training; this effort represents about 0.5% of the total workload of DERBA’s agents. DERBA’s human resources department has recorded all training provided to the staff since 2006. The Comments training included: (i) Technical courses (road geometrical design, construction and restoration, supervision of works, traffic and geological studies, road safety signaling, transport (incl. % multimodality, etc.); (ii) Project Management courses (financial, contracts and pavement management systems); and (iii) Behavioral courses related to transport Projects (management of achievement) personnel, work ethics and knowledge management). The largest chunk of training (1,028 staff- weeks) was provided by the Bahia federal university to DERBA’s engineers, through two (2) one-year specialization courses: (i) Specialization Certificate in Road Works; and (ii) Specialization Certificate in the Management of Transport Infrastructure Institutions. Indicator 6 : # of technical audits realized annually by the Quality Group Value 5 audits per year, An average of 10 (quantitative 0 starting in year 2 audits per year or Qualitative) Date achieved 10/10/2006 9/30/2013 09/30/2013
Comments Target met. 60 audits were carried out in total: 12 audits/year from 2008 to 2011 (1 monthly audit during the period of works execution) and 6 audits/year from 2012 to 2013. These technical (incl. % audits were carried out by DERBA’s Project Management Unit’s Quality Group and proved to be a key instrument to adequately monitor the works quality and timeliness; the audits focused achievement) on technical (works quality), contractual and environmental issues. Indicator 7 : State multimodal strategy defined Value (quantitative No strategy Strategy defined Strategy defined or Qualitative) Date achieved 10/10/2006 12/31/2012 09/30/2013
Comments Target met. Beyond the Bahia transport and logistics masterplan (Indicator 8), several plans and studies contributed to define the State multimodal strategy: (i) the Bahia State airport plan, (incl. % concluded in July 2012, aiming at providing improved air access to Bahia’s remote areas; (ii) the Bahia State inter-municipal passenger transport, concluded in November 2013, aiming at achievement) redefining the functions and services of intercity public transport in Bahia; (iii) the transport
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survey Salvador metropolitan area, concluded in May 2013, key contribution to better plan the Bahia State capital’s sustained urban mobility; (iv) the Bahia de Todosos Santos plan, concluded in April 2013, aiming at redefining waterway transport infrastructure and services; and (v) the waterways transport regulation, concluded in October 2012. Indicator 8 : Data warehouse system for PELTBAHIA operational Value Data warehouse (quantitative No data warehouse No data warehouse operational or Qualitative) Date achieved 10/10/2006 12/31/2011 09/30/2013 Target not met. The data warehouse was still being developed by Project closeout. There was still significant work to be done, both in terms of data and software development. The lack of data was due to the delays in the execution of surveys, because of SUPET’s difficulties to mobilize the federal road police in charge of carrying them out. Regarding the software’s Comments development, only 5% of the functions had been developed. All the functions were set to be fully developed by December 2013. (incl. % It should be highlighted that, within the development of PELTBAHIA, the State and the Bank achievement) agreed to work together in the creation of a State Logistics Committee Council, which became one of the disbursement conditions for a new DPL operation (Bahia Socio Economic Development for Inclusive Growth, approved by the Board in May 25, 2012). By Project closeout, the Committee had been created and was in operation, therefore ensuring a good articulation between this IL Project and the new DPL operation. Plan under implementation to optimize logistics impacts on the development of Indicator 9 : Salvador Metropolitan Region Value (quantitative No plan Plan developed Plan not developed or Qualitative) Date achieved 10/10/2006 12/31/2012 09/30/2013
Comments Target not met. In August 2010, SEPLAN’s Superintendence for Social and Economic Studies (SEI) contracted out the preparation of this plan. Despite efforts to orient the (incl. % consultancy’s works, the Borrower considered that the output was not satisfactory and did not accept the final product. As a result, the Plan was not implemented. As the Project was coming achievement) to its closeout, SEI did not have time to rebid the Plan’s preparation. Indicator 10 : Geo-referenced social and economic database in operation Value Database in Database in (quantitative No database operation operation or Qualitative) Date achieved 10/10/2006 12/31/2011 09/30/2013 Comments Target met. The education and health geo-referenced database is in operation, available on- (incl. % line at http://azimute.sei.ba.gov.br/.Online since 2011, this database has been highly successful to the civil society, as per the number of hits (queries) recorded. achievement)
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Indicator 11 : AGERBA's normative body, and analysis/supervision capacity consolidated Value Capacity Capacity not (quantitative No capacity consolidation consolidated Consolidated or Qualitative) Date achieved 10/10/2006 12/31/2013 09/30/2013
Comments Target not met. AGERBA did not undertake any action to consolidate its normative body (incl. % (e.g.: road concessions regulation / supervision). During Project implementation, AGERBA went through various managerial changes, which, in addition to its lack of technical capacity, involved achievement) changes in its institutional priorities. Indicator 12 : # of feasibility studies for PPP (cum.) Value (quantitative 0 4 4 or Qualitative) Date achieved 10/10/2006 9/30/2013 09/30/2013
Target met. PPP feasibility studies carried out by the State of Bahia include: (i) PPP for the BA-093 highway, contract awarded in 08/17/2010; the IFC, with World Bank support, was the Comments transaction advisor for this operation; (ii) PPP for Feira de Santana’s road terminal operation, the contract was ready to be awarded by Project closeout; (iii) PPP for the Ferry boat operation, (incl. % contract awarded in 03/14/2013; and (iv) PPP for the Salvador metro, contract awarded in 2013. In addition, other PPP contracts, not related to the transport sector, were: (i) the Arena Fonte achievement) Nova, contract awarded in 01/21/2010; (ii) Hospital do Suburbio emergency hospital, contract awarded in 05/28/2010; and (iii) the Instituto Couto Maia, a hospital specialized in infection caused sicknesses, contracted in 05/20/2013. Indicator 13 : # of staff weeks of training for AGERBA staff (cum.) Value (quantitative 0 100 0 or Qualitative) ```Date achieved 10/10/2006 9/30/2013 09/30/2013
Comments Target not met. During almost three years of Project implementation, an MBA course (with focus on public services regulation) for AGERBA staff was discussed with the Rio Grande do (incl. % Sul federal university (UFRGS); this training represented about 300 staff-weeks, benefiting to 25 AGERBA staff. Procurement issues in contracting with UFRGS caused this activity to be achievement) dropped.
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G. Ratings of Project Performance in ISRs
Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 02/08/2007 Satisfactory Satisfactory 0.00 2 09/11/2007 Satisfactory Satisfactory 0.00 Moderately 3 12/04/2007 Satisfactory 0.00 Unsatisfactory Moderately 4 06/02/2008 Satisfactory 0.00 Unsatisfactory 5 11/25/2008 Satisfactory Moderately Satisfactory 5.00 6 04/30/2009 Satisfactory Moderately Satisfactory 5.00 7 12/06/2009 Satisfactory Moderately Satisfactory 7.89 8 05/27/2010 Moderately Satisfactory Moderately Satisfactory 21.66 9 02/18/2011 Satisfactory Satisfactory 93.24 10 07/26/2011 Satisfactory Satisfactory 93.24 11 01/17/2012 Satisfactory Satisfactory 94.74 12 08/14/2012 Moderately Satisfactory Satisfactory 95.24 13 04/24/2013 Moderately Satisfactory Satisfactory 97.24
H. Restructuring (if any)
ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions The restructuring:
(i) Increased the percentage of 09/20/2010 MS S 32.00 expenditures to be financed by the loan for Works from 50% to 90%, addressing issues related to the State counterpart funding,
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ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions stemming from the fiscal crisis.
(ii) Allocated funds from the Unallocated category to the Works category, so as to cover the cost of works.
(iii) Introduced a new Project outcome indicator (reduction of average unit vehicle operating costs on selected itineraries), to better assess the Project outcomes. The restructuring reallocated remaining US$ 448,000 from the “Goods” category to the “Services” category, to 04/16/2013 MS S 97.24 adequate the remaining available loan proceeds to planned expenditures in the “Services” category.
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I. Disbursement Profile
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1. Project Context, Development Objectives and Design
1.1 Context at Appraisal At appraisal, the State of Bahia had good economic performance, in spite of Brazil’s difficulties. These difficulties were related to Brazil’s development of a series of far- reaching economic reforms, that aimed at bringing inflation down and encompassed trade liberalization, deregulation, privatization, and the promotion of foreign investment. In this context, the State’s GDP nonetheless increased by over 3% p.a. during 1994-2003, while the national GDP increased at an average 2.2% p.a. Bahia became the sixth largest State economy in Brazil with about 5 % of Brazil’s GDP. More importantly, the State made substantial progress toward diversifying its previously commodity-based economy. The State’s fiscal performance had been sound and stable over the 2000-2005 period. From a balanced situation in 2000, the State had achieved robust positive primary balances over the previous 5 years, reaching up to 11% of net current revenues in 2004. The good performance of revenues, combined with favorable dynamics of exchange rate and prices, resulted in the acceleration of the decreasing trend of indebtedness. As a result, Bahia complied with all the fiscal limits established by the Fiscal Responsibility Law, since its enactment in 2000 and with all the Fiscal Adjustment Program targets agreed with the National Treasury Secretariat (STN) for 2000-2004. From economic and social standpoints, Bahia improved faster than the national average, but the State remained below economic and social national levels averages. A large proportion of the population still dependent on low-productivity activities, mainly traditional farming and cattle raising, resulted in a State a GDP per capita well below Brazil’s average (about R$4,600 vs. R$7,630 in 2003). 1 Likewise, although the Municipal Human Development Index (IDH-M) for the State had increased from 0.60 in 1991 to 0.69 in 2000, more rapidly than the national index, Bahia still ranked twentieth in Brazil. The continuity of the State’s administration, stimulated by the implementation of multi- annual plans by the federal government, allowed Bahia to build a solid planning management framework. In 2003, the State government presented a long term strategic plan (Bahia 2020) identifying the main priorities for action regarding economic and social issues. The State prepared two medium-term Multi Annual Plans (PPA)2, for the 2000-2003 and 2004-2007 periods; the latter included important first expected to lead towards the Bahia 2020 objectives: (a) inclusive social justice; (b) diversified and competitive economy; (c) clean and sustainable environment; and (d) spatial integration, with adequate local and regional infrastructure and transport services.
1Source: Brazilian Institute for Geography and Statistics (IBGE) 2Bahia 2020, O Futuro A Gente Faz, Plano Estratégico da Bahia, 2003, and PPA 2004-2007, Plano Plurianual da Bahia, Desenvolvimento Humano e Competitividade. 1
At appraisal, federal, State and municipal road networks were in poor condition, jeopardizing growth and competitiveness. At appraisal, the total road network in Bahia was about 120,000 km, out of which approximately 13,800 km (11.4%) were paved; the paved State highway network was about 9,400 km. In 2006, only half the traffic, measured in vehicle-km, was circulating on highway in good conditions. This situation was compounded by a steep truck traffic growth, resulting from the economic recovery, putting ageing pavements under increased stress. Moreover, in many federal trunk highways, a substantial proportion of traffic, including heavy trucks, had deviated onto alternative State routes, which had not been designed for such heavy traffic. Overall, deteriorating road conditions, railway bottlenecks and lack of adequate rural access to markets adversely impacted the agro-businesses and petrochemical industries. Drastic reduction of the funds allocated to roads over the previous ten to fifteen years, as a result of the fiscal adjustment policies, led to a substantial deterioration of the networks. Investments in the road sector, all financed through the general Bahia State budget, decreased (in current terms) from US$172 million in 1993 to an average of US$50 million over the 2002-2005 period. Rehabilitation needs of the State road network largely exceeded the expected availability of funds over the medium-term. As such, the State’s road network management strategy focused on improving transport conditions on the State’s main transport corridors and on their feeders, instead of following a more traditional, network-wide strategy. In spite of the general weakening of roads’ institutions in Brazil at the time of the appraisal, the State had a well-run road administration (Departamento de Infraestrutura de Transportes da Bahia – DERBA). DERBA’s management capacity had significantly improved with the 2002 reorganization of the road administration approved in 2002, the set-up of a State-of-the-art information system, of the basis for an integrated road planning system, further staff contracting, and the implementation of a long-term, entity- wide training program. Yet, the road administration was still facing some challenges, including an imbalance between the profiles of the present staff and the staff profiles required to fully fulfill the administration’s management duties, the consolidation of its planning system, the lack of investments’ monitoring and evaluation system, and weak supervision and quality assurance capacity.
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The Project Development Objective was “to increase the effective use of the State road infrastructure, with an aim at stimulating higher economic growth”. Project Development Objective indicators were: (i) Percentage of reduction in average land transport freight rates on selected itineraries; and (ii) Percentage of increase in use of road transport infrastructure on selected itineraries. Intermediate results indicators included: (i) Percentage of State paved network extension under result-based contracts; (ii) Percentage of network traffic traveling on paved roads in good conditions; (iii) Integrated road planning and management system operational; (iv) number of regional offices (residências) operating DERBA’s information systems on-line; (v) State multimodal strategy defined; (vi) Data warehouse system for 2
PELTBAHIA operational; (vii) Plan under implementation to optimize logistics impacts on the development of RMS; (viii) Geo-referenced social and economic database in operation; and (ix) AGERBA’s normative body, and analysis/supervision capacity consolidated.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The Project Development Objective was not revised. Yet, the first Project restructuring introduced a third PDO indicator: “percentage decrease of average unit vehicle operating costs on selected itineraries (cumulative)”. The rationale for introducing this new PDO indicator was to tighten up the result chain between the Project activities (primarily: road rehabilitation) and its intended results. The baseline data had been collected in 2006 to carry out the Project economic analysis. Besides, the intermediate result indicator “Percentage increase of State paved network extension under result-based contracts (cumulative)” was rephrased as “Cumulative number of kilometers of roads rehabilitated under result-based contracts”. Both versions of the indicator basically measure the same result, but the latter wording is closer to one of the Bank’s Core Indicators for roads and highways.
1.4 Main Beneficiaries Multiple stakeholders were expected to benefit from the Project. More specifically, road users and road transport services would directly benefit from the improvement of key highways, with decreased transport costs. It is estimated that the Project yearly benefitted about 14.8 3 million travelers in 7.4 million trips. Moreover, the Project targeted remote and poor populations, seeking to improve their accessibility to markets, job opportunities and social services, by interventions on the municipal road network to enable year round transit. The close to 1,200 km of rehabilitated highways provide enhanced access to about one million poor population4.
1.5 Original Components (as approved) Component 1: rehabilitation of State paved road (US$166 million) The component supported the introduction and execution of long-term, performance- based road maintenance and rehabilitation contracts5, on about 2,000 km of the State
3 Based on 2012 Average Annual Daily Traffics on the Project’s sections and 2 people / vehicle on average.
4Poor population from the municipalities where Project’s sections are located. People receiving conditional cash transfers were considered “poor” for the needs of this assessment. The Bahia Socio Economic Development for Inclusive Growth DPL (P126351) Project Appraisal Document States that 60% of the State’s population receives conditional cash transfers from the Government.
5 Road rehabilitation and maintenance performance-based contracts main features are: (i) lump sum / global prices contracts, instead of traditional input-based contracts, implying an important transfer of responsibility in the design and 3
paved road network (or 15% of the State highway network length).Works would include: (a) initial highway rehabilitation (pavement, drainage, horizontal / vertical signaling, equipment for road safety); and (b) highway routine maintenance over five years. All State road sections to be rehabilitated under the Project would meet the following criteria: (a) be part of the road sections identified for maintenance and/or rehabilitation in the PELTBAHIA 2004 or updated version thereof; or (b) be part of road corridors connecting strategic cities or connecting the economically dynamic regions of the State between themselves or to markets or ports for exports/imports from other States or countries. In addition, investments needed a minimum internal rate of return of 20%. During Project preparation, road sections totaling about 1,200 km for a Project first phase had been identified as meeting the above criteria, the remainder expected to be identified afterwards.
Road Road Section Km BA 270 BA 001 (Canavieiras) – Stª Luzia 48.0 BA 262 Brumado – Vitória da Conquista 138.0 BA 263 Vitória da Conquista – Itambé 57.0 BA 172 Entrº BR 242 (Javi) – STª Maria da Vitória 169.0 BA 052 Xique–Xique – Entrº BA 131 (Porto Feliz) 246.4 BA 001 / 046 Bom Despacho – Nazaré – Santo Antônio de Jesus 90.1 BA 152 Livramento – BA 156 79.3 BA 148 Brumado – Livramento 66.7 BA 156 BA 152 – BR 242 144 BA 148 BA 052 – BA 432 4.8 BA 432 BA 148 – BR 242 134.2 TOTAL 1,177.50 Table 1: Highway Sections included in PREMAR’s first phase
Component 2: institutional strengthening (US$20 million) The component supported five sets of activities: (a) Government efforts in optimizing the role of transport services to help deconcentrate economic growth and provision of basic services, through determination of existing logistics bottlenecks and level/localization of repressed economic growth due to inadequate transport costs, integration of transport dimension in planning for education
execution of the rehabilitation works to the contractor; (ii) a remuneration based on the contractor’s performance to achieve predetermined level of service (instead of ad-measurement payments); and (iii) bundling road rehabilitation and subsequent routine maintenance in a longer-term contract.
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and health interventions, identification of public actions required to improve logistics’ efficiency in the State, and definition of incentives to private sector to invest in logistics; (b) The consolidation and gradual implementation of the State’s logistics program (PELTBAHIA), especially with respect to the monitoring of the program’s impact in logistics’ performance, strengthening of the State’s regulatory framework, and capacity to model public-private partnerships; (c) The strengthening of the State road administration, with respect to the consolidation of its planning system (to allow for prioritization of interventions at the network level taking into account fiscal constraints, and for systematic road/bridge condition and traffic data collection), capacity improvements with respect to environmental/social impacts mitigation and works supervision, and modernization of information systems; (d) Improvements in the road administration’s technical capacity, to support municipalities in maintaining their road networks and in improving transport services to the poor; and (e) The preparation of works’ engineering designs and supervision, as well as support to the road administration in coordinating the Project’s implementation.
1.6 Revised Components The original components were not revised.
1.7 Other significant changes
This Project went through two restructurings, the first in 2010 for the increase in the financing percentage and the introduction of a new outcome indicator and the second in 2013 for the reallocation of loan proceeds. Details are provided in Table H in page xiii and in section 2.2.
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The Project was fully in line with the Brazil – World Bank Country Assistance Strategy6 (CAS). It supported the CAS pillars by guaranteeing that the Project would: (i) emphasize in the necessity for the Bank to consider economic growth as an equal priority with social equity and fiscal balance; (ii) factor in that, without faster and sustained growth, supporting the two former objectives would be increasingly difficult; and (iii) recommend developing a more integrated Bank assistance to selected States. The Project was consistent with the State’s long-term development strategy and priorities, as established in Bahia 2020: O Futuro Agente Faz (Bahia 2020 – The Future
6CPS 2004-2007, discussed by the Bank’s Board of Directors on December 9th, 2003. 5
We Do). This lending operation was a key component of the Bahia 2020 long-term development strategy and the 2004-2007 medium-term plan (Plano Pluri-Annual – PPA), which sought the reduction of travel times and costs, so as to foster greater integration and therefore contributing to a better balanced development. This Project was the first performance-based road rehabilitation and maintenance Project in the Northeast region and factored in lessons learned from previous similar projects. In particular, the Bank-financed the Rio Grande do Sul State Highway Management Project (P034578) and the Federal Highway Decentralization and Rehabilitation Project (P092990), which were instrumental in the Project design: these Projects developed the CREMA (Contrato de Reabilitação e Manutenção) concept, whereby a construction company enters into a medium-term (five years in the Bahia case) contract with the road agency in order to rehabilitate and maintain part of the network. Besides, and critically important, part of the contractor’s remuneration depends on quality standards to be reached (performance-based) and not on inputs. The State of Bahia had been closely following these results and became interested in implementing this performance-based contract model with the Bank’s support. The CREMA model developed in other Brazil States was adapted to the Bahia context. Improvements were incorporated to the CREMA approach through: (i) modifying DERBA’s technical norms; (ii) the preparation of a standard bidding document for performance-based contracts, factoring in the experience of earlier pilot contracts, and (iii) the inclusion of specific support under the Project’s institutional strengthening component, to ensure appropriate streamlining of performance-based contract management within DERBA’s operational processes. In order to suit the State’s particular needs, the contracts’ main characteristic included a functional recuperation of the pavements during the first year and routine maintenance during the following four years. Payments were based on ad-measurement, with globalized prices, for rehabilitation, and on performance, monitored on the basis of a simplified set of indicators, for maintenance. Project “technical” preparation was quick and did not suffer from the 2006 general elections in Brazil and the change of administration. Year 2006 was an election year in Brazil (President, Governors, Congress and State Assemblies), and the new administration in Bahia took power on January 1st, 2007. Preparation was quick, as it required only seven months between the first identification mission (June 2005) and the issuance of the invitation to negotiate (January 2006). Although the loan was fully prepared and negotiated with the outgoing administration, the new administration bought- in without hesitancy. At Appraisal, risk and mitigation measures during implementation were adequately assessed but a possible delay in the loan effectiveness, which actually occurred, should have been explicitly included among the risks. The delay in loan effectiveness (and, therefore, the delay in preparing the engineering designs) explain part of the construction cost increase which prevented the 2,000 km to be fully met. State fiscal stability issues, envisioned in the Project Appraisal Document risk matrix, actually materialized, stemming from the 2008 global crisis. Yet, Government’s commitment to maintain fiscal stability was indeed mitigated by the Bank’s agreement to monitor the
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State’s fiscal situation during Project implementation. In case of deterioration, the Bank would propose measures to minimize the Project’s implementation fiscal impact, leading to the first Project restructuring.
2.2 Implementation
After swift preparation, delays were substantial before effectiveness but, eventually, did not affect the Project outcomes. The Board approved the Project on November 14, 2006, during a national elections period that resulted in a transition of administration; the new administration took office on January 1st, 2007. The Senate could only approve the loan signature on August 7, 2007, as the electoral law did not allow for any contract to be signed neither three months prior to, nor three months after the elections. The issue was compounded by bottlenecks in PGFN, with few lawyers available at that time to review the draft legal agreement. Signing occurred on September 10, 2007. Loan effectiveness then suffered from delays as the loan needed to be ratified by the new Congress, which had stopped working for about eight months, due to political unconformities. The loan finally became effective on December 6, 2007, about a year after the Board had approved it. While the new Bahia administration fully supported the Project, capacity in the implementing agency was significantly lower, compounding delay issues. The new State of Bahia Government was committed to the Project as prepared under the previous Administration; only minor adjustments, which did not change the Project objectives, were agreed. Yet, this transition involved internal changes in SEINFRA and DERBA at both management and technical levels; the new personnel did not count, initially, with the adequate experience to deal with Projects of this kind. To address this issue, the newly elected Government of Bahia required to scale-up the institutional strengthening component, aiming at speeding up Project implementation. This resulted in the creation of a specific project implementation unit with the road agency, which indeed proved to be a key element in project implementation. In particular, the Government of Bahia’s decision to wait for the loan to be effective before bidding the engineering designs significantly increased the delays and costs of the works. Unfamiliarity with Bank international financing, the Government of Bahia decided to wait for the loan to become effective before bidding the works engineering designs. This decision increased by a year the Project initial delay. Engineering designs started in May 2008; once contracted, delays issues were again compounded by the poor quality of the designs, inducing back and forth exchanges between DERBA’s Project Coordination Unit and the consulting firms. As a result, works contracts were awarded only between March and November 2009. In sum, approximately four years elapsed between the initial road assessments (end of 2004), on which the initial road works cost estimates were based, and the actual works contracting. Road conditions had meanwhile substantially deteriorated, and final engineering designs required adjustments to those prepared at a conceptual level four years earlier in the Project Appraisal Document. Rehabilitation costs consequently increased, compounded by four years of inflation. Inflation has been particularly high in this time period for asphalt products. Heavier
7
pavement rehabilitation solutions and construction cost / material inflation increased the works cost by an estimated US$40.7 million. The decreasing US Dollar vs. Brazilian Real further widened the Project financing gap. While the PAD exchange rate is 2.16 R$ / 1 US$, the average exchange rate over Project implementation was about 1.76 R$ / 1 US$; it is estimated that this unfavorable foreign exchange rate caused an estimated financial gap of US$33.7 million. In sum, the works costs increased by about US$77 million, jeopardizing the execution of the Project’s second phase (800 km). The table below recaps the Project costs increase.
Works cost increase (actual vs. PAD) , US$ million From additional km in PREMAR’s first phase7 2.9 From heavier rehabilitation solution and inflation 40.7 From unfavorable foreign exchange rate 33.7 TOTAL 77.3 Table 2: PREMAR’s Works Cost Increase Estimates
In parallel, the 2008 global crisis resulted, in Bahia, in a severe fiscal crisis, which jeopardized the 50% counterpart financing required for the Works component. In 2008 and 2009, the State of Bahia fiscal revenues were respectively cut by 40% and 13%, adversely impacting the implementation of most Bahia’s programs. Infrastructure programs, among which PREMAR, were more affected than others, as the State gave priority to addressing social issues first. In 2011, the federal government’s decision to eliminate the regular fuel federal tax proceeds8 transfer to the State further compounded the financing of the infrastructure sector at State level. As a consequence, the Project was restructured in September 2010. The main feature of this restructuring was to address the counterpart funding issue: the percentage of works expenditures to be financed out of the loan proceeds was increased from 50% to 90%. This restructuring did not include any additional financing to bridge financing gap stemming from the works cost increase and unfavorable foreign exchange rate: in April 2010, the State of Bahia informed the Bank that the US$ 80 million additional financing, which was discussed during the October 2009 midterm review, was no longer being sought. The second phase of PREMAR (800 km) was de facto dropped.
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
7 About 20 additional km were actually rehabilitated in PREMAR’s first phase, rather than what the PAD anticipated. 8CIDE: Contribuição de Intervenção do Domínio Econômico. CIDE is a tax perceived, among others, on oil products. 8
Overall, the Project Monitoring and Evaluation framework was adequately designed, considering the rather wide scope of the PDO: the increased effectiveness of the State road infrastructure could be monitored through decreasing freight rates, increased road usage, and decreasing vehicle operating costs. Yet, other factors than road rehabilitation (e.g.: economic situation, level of competition of the trucking industry on these segments) could also affect them substantially. With hindsight, two other aspects of the monitoring and evaluation framework could have been considered for enhancing it: (i) no Project Development Objective indicator captured the 11 intermediate outcome indicators focusing on institutional strengthening; and (ii) there were probably too many intermediate outcome indicators devoted to institutional strengthening. Implementation. The Result and Monitoring Framework was substantially implemented as planned. The Project outcome indicators proved to be precise and measurable. Project outcome indicator #1 required specific survey and study, in order to compute the ex-post rates freight rates on PREMAR’s sections and reconstitute part of the missing baseline data for this indicator. During implementation, the Project Coordination Unit submitted biannual monitoring reports, in a timely and satisfactorily manner. These reports included: (i) a description of the overall Project progress; (ii) data on disbursement performance over the previous 6 months and an updated disbursement calendar; (iii) an update on the procurement activities and an adjusted procurement plan; (iv) a description of the social and environmental safeguards’ implementation progress; (v) a description of potential developments that could affect implementation; and (vi) the measurement of Project performance through the impact indicators included in the Results Framework.
2.4 Safeguard and Fiduciary Compliance Safeguards. Project preparation and implementation were compliant with the Project safeguards instruments prepared for the Project in application of the Bank Operational Guidelines. The Road Agency prepared the following instruments, found acceptable to the Bank: (i) Indigenous People Plan; (ii) Resettlement Framework; and (iii) Guidelines for the Program’s Environmental Evaluation. At appraisal, the Project was rated Category B: low or temporary environmental / social adverse impacts were expected, as often with highway rehabilitation and maintenance projects with interventions within the existing right-of-way. Indeed, during implementation, no critical safeguards issue has been raised. The Bank environmental / social specialists carried out supervision missions once a year; during all Project implementation, DERBA’s environment unit quarterly visited the PREMAR sections, even after the rehabilitation works were over. No land acquisition or resettlement stemming from the Project activities was required; the only environmental issues were related to worksites clean-up, and had been overall addressed by Project closing.
Financial Management. Financial management was carried out in accordance with the arrangements agreed upon in the legal agreement and the operational manual. The Project had an acceptable financial system in place on the onset of Project implementation, strongly relying on the Road Agency systems. Specific financial management missions were carried out once or twice a year during implementation; no critical issue has been
9
raised. Annual Audited Financial Statements, issued by the Bahia State Court of Account (Tribunal de Contas do Estado), were submitted to the Bank in timely manner, and did not raise major issues either. For the most part, ISR ratings were deemed as “Satisfactory”, except during the period covered between January and May 2010 (“Moderately Satisfactory”); this Moderately Satisfactory rating resulted from counterpart financing issues, later addressed in 2010 by modifying the Bank / State pari – passu financing for works.
Procurement. The Project financed six works contracts (ICBs), eight goods contracts (including four ICBs) and 41 consultancy contracts, out of which 17 were for individual consultants. Almost all consulting services were contracted through the Quality and Cost Based Selection procedure. All procurement processes have been prior-reviewed, to better control the adequacy of procurement processes. Until October 2009, procurement supervision was embedded in the standard supervision missions, as the Project TTL was a Procurement-Accredited Staff. Afterwards, with a change to TTL, a Procurement Specialist based in Brasilia was designated; procurement missions were then carried out once a year.
The procurement of goods, works, and services was carried out satisfactorily in accordance with Bank Procurement Policy. During Project implementation, procurement was rated “Satisfactory” and “Moderately Satisfactory” after January 2012. This overall rating was confirmed by a procurement audit (conducted in March 2013). The “Moderately Satisfactory” rating resulted from long delays in contracting consultancies for the Institutional strengthening component: the average procurement process duration for Quality and Cost Based Selections was 2 years and 4 months (between preparation of the requests for proposals and contract signing). Reasons include: (i) initial misunderstanding from DERBA’s procurement office, imposing that bidding processes were also subject to the State of Bahia’s procurement rules, and, therefore, triggering additional administrative burden and delays; (ii) delays between the Project Coordination Unit and other State entities beneficiaries; (iii) overall poor initial quality of procurement documents, requiring thus back and forth between the Project Coordination Unit and the Bank; and (iv) difficulty to come up with short-lists of two consultancies maximum per country.
2.5 Post-completion Operation/Next Phase
Road maintenance performance-based contracts will be still on-going about a year after the loan closing date; the road agency even plans to extend them by another year, fully financed by the Government of Bahia’s own resources and making the most of the routine maintenance carried out by private entrepreneurs. In sum, the Project contributed to put in place a strengthened road asset management system through, (i) better planning (Pavement Management System) and, (ii) more cost-effective road management contracts (CREMA contracts).
On April 16th 2013, the Governor of the State of Bahia declared his intention to seek a new loan from the Bank, in support of the transport sector. This new operation (PREMAR 2) would be a continuation of PREMAR, consolidating and scaling it up 10
through a US$200 million loan, contributing to a US$300 million Project. Continuing and improving, based on lessons learned, the performance-based road rehabilitation and maintenance model, PREMAR 2 would also contribute the Project outcome sustainability: highway performance-based maintenance requires a change of mindsets, both from public (road agency) and private (contractors) partners, which only can take place on a longer term, with mutual and well-understood benefits. In September 2013, the Brazil federal government secretariat for external affairs’ technical committee had reviewed the loan proposal. The federal Commission for external financings (COFIEX) was expected to examine this proposal in a near future. See also Section 4, Assessment of Risk to Development Outcome.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation The objective of increasing the effective use of the State road infrastructure, with an aim at stimulating higher economic growth, was and continues to be highly relevant, in a State that is over-dependent on the highway network for the transport of goods and passengers and is still facing high levels of traffic growth. This objective was to be achieved through (a) rehabilitation and maintenance of key sections of the State paved network and (b) support a set of key institutional improvements in the road sector to ensure the sustainability of physical achievements. Today, this objective is still fully aligned with the Brazil – World Bank Country Partnership Strategy 9 (equity, sustainability and competitiveness pillars) as well as with the State of Bahia priorities, as outlined in the Bahia Multi-Year Plan (PPA)10.
3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) Linking, through the PDO, Project activities (basically the rehabilitation 12% of the State highway network) to the “higher objectives” of stimulating growth, was probably ambitious; the Project certainly contributed but a quantitative causal link is difficult to establish. Yet, as the PDO had this “aim at stimulating higher economic growth”, let’s first examine what was the State’s economic growth during Project implementation. Between 2006 and 2012, despite the 2008 fiscal crisis, Bahia’s economic growth has been substantial, with about a 27 point increase of the State’s GDP per capita11. In parallel, inequalities have been reduced, the State’s Gini index related to households income decreasing from 0.556 in 2006 to 0.554 in 201112. As detailed in Section 1.1, these results are better that the Brazil average. The causal linkage between the Project
9 CPS 2012-2015, discussed by the Board of Executive Directors on Sept. 21, 2011 10PPA 2004-2007, Plano Plurianual da Bahia. This PPA included the priorities established in the Bahia 2020 Plan: O future a gentefaz. 11 Bahia per capita GDP index 116.0 in 2006 and 143.3 in 2012. Base 100 in 2002. Source: Secretaria de Planejamento da Bahia / SEI 12 Source: Boletim PNAD – Outubro 2012. Secretaria de Planejamento da Bahia / SEI 11
activities, and their good results, and the State’s economic growth is not direct; yet, several studies13have shown the close correlation between freight transport demand and economic growth. On this basis, as the estimated growth of cargo transport on the PREMAR sections has been about 20% between 2006 and 2012, the Project activities are deemed to have, at least, accompanied the State economic growth. Road rehabilitation and maintenance works More specifically, the three Project outcome indicators were met and show that, in Project sections, both freight rates and road users operating costs have decreased, and the use of road transport infrastructure has increased. A specific ex-post survey carried out by a transport and logistics company, using the PREMAR rehabilitated sections, concluded that the freight rates decreased by 10.8%, for a series of products, between 2005 and 2012. While a number of factors determine freight rates (including diesel cost, labor cost, level of competition, truck depreciation, etc.), it is deemed that roadway rehabilitation influenced this trend. Actually, the third PDO indicator estimated that road users’ costs had decreased by about 12.5%, as a result of better road conditions. Finally, and this may be the most compelling result, highlighting the strength of Bahia’s economic growth in this period, road traffic volumes have increased by 66% between 2005 and 2012, when only a mere 12% increase was expected. The loan financed the rehabilitation and maintenance of 1,196 km of the State highway network: without the Project, about 12% of the key State highway network would not have been rehabilitated. This counterfactual scenario is described in details in Annex 3: highways undergoing only from routine maintenance, as well as reconstruction when required by an advanced stage of deterioration. This scenario would have entailed higher economic costs for the society, both in terms of capital investment costs for the Road agency (reconstruction is more expensive than rehabilitation) but also for road users and final clients, stemming from higher vehicle operating costs, on highways in poor conditions. Even beyond PREMAR’s sections, fully rehabilitated, the overall condition of the State paved highway network has substantially improved, as shown in the Chart below. In 2012, about 85% of the State paved highways were in good conditions14, compared to a mere 71.5% in 2007.
13 See, e.g., papers in : OECD-CEMT – 16th International Symposium on Theory and Practice in Transport Economics, Budapest, 29-31 October 2003 14 As evaluated by DERBA’s regional offices, based on visual inspection (not IRI) 12
100.0% 8.0% 3.8% 12.6% 13.0% 11.1% 9.8% 90.0% 11.2% 15.8% 15.2% 80.0% 15.9% 16.4% 19.3% 70.0%
60.0%
50.0%
40.0% 85.0% 74.4% 76.8% 71.5% 70.6% 69.7% 30.0%
20.0%
10.0%
0.0% 2007 2008 2009 2010 2011 2012
Good Reg Bad
Chart 1: Evolution of the Highway Network Conditions – State Paved Roads (Source: DERBA)
The key achievement is that Bahia, over 2008 – 2013, rehabilitated a total of about 3,700 km, about a third of the state paved network; rejuvenating a third of the network in 6 years this is a considerable result. The loan contributed to finance the rehabilitation (and maintenance) of 1,196 km of the State highway network, while the State financed the rehabilitation of an additional 2,513 km of paved highways. Rehabilitation works quality and subsequent routine maintenance has been overall satisfactory. Despite some initial or punctual issues, PREMAR’s sections rehabilitation was adequately carried out, leading in good results in terms of comfort and transport condition, meeting standards and triggering payments. The second intermediate outcome indicator surveyed that 83% of the traffic circulates on State highways in good conditions. At contract level, few rehabilitation solutions were changed, highlighting the good quality of the engineering designs. Works execution has been overall timely. Performance-based road rehabilitation and maintenance appear to have been more cost-effective than traditional rehabilitation contracts. Rehabilitation of the PREMAR sections averaged BRL280,000 per km and routine maintenance about BRL6,000 per km and per year. Excluding the PREMAR program, highway rehabilitation cost over the same period averaged BRL405,000 per km. Acknowledging that these averages can cover very different initial road condition and traffics, the gap between traditional rehabilitation and performance-based rehabilitation costs remains substantial. A life cycle cost analysis would be required to fully capture, on the medium term, the benefits of
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bundling rehabilitation and maintenance within performance-based contracts15. Contract management has also been improved: the five CREMA contracts covering the PREMAR network have had cost overruns less than 5% of the initial contract amounts, while it is not unusual that traditional road rehabilitation contracts reach a 25% cost overruns16. Finally, rehabilitation quality has been overall good, reaching the contractual quality standards: (i) about 95% of rehabilitated sections met the contractual quality standards for pavement roughness; and (ii) during the maintenance phase, payment penalties of only a few percent have been applied to contractors for some criteria not being met, highlighting the globally satisfactory implementation of routine maintenance.
Bahia is the first State of Brazil’s Northeast region to have executed large-scale CREMA Projects. The implementation of this innovative results-based modality of contracts had transformational implications on the State’s road rehabilitation and maintenance culture, both in the public and private sectors, at the technical and decision- making levels. This culture change was achieved through the provision of plenty of training and supervision during Project preparation and implementation. This resulted in a successful experience to be replicated in other States and countries. As a matter of fact, this innovative performance-based approach has triggered knowledge transfer and south- south collaboration: delegations from Vietnam and Cabo Verde visited Bahia to learn from the Bahia road management performance-based experience.
Institutional strengthening Important results have been achieved altogether through institutional strengthening, complementing the works activities towards the achievement of the Project Development Objective. SEINFRA’s Road Agency (DERBA) most benefited from the institutional strengthening component. The Pavement Management System was updated; although the works were not finalized by Project closeout, this step is expected to critically enhance and optimize road rehabilitation planning, with a better allocation of available resources. Besides, a comprehensive assessment of DERBA’s workflow has been undertaken, in order to modernize this institution towards a result-based organization. A new model has been designed and a pilot test is scheduled to take place in the coming months. Other technical assistance support focused on roadworks’ environmental management, as well as on engineering design quality control. Several initiatives focused on logistics planning, building up knowledge on this key topic for the State economy. The flagship study is Bahia’s transport and logistics masterplan (PELTBAHIA), which will outline the State’s strategic orientations for
15 As carried out, for instance, in Performance-based contracts in the road sector in Brazil, World Bank, TP-31, 2010 16Maximum authorized by the Brazil procurement law 14
logistics and transport State for the next 20 years. This activity, which included a strong analytical and forecast part, unfortunately started late within Project implementation and could not be completed by Project closeout. Nevertheless, several other studies were completed, including: (i) the State airports masterplan, (ii) a draft new regulation for waterborne transport, and (iii) an estimate of freight transport rate reduction stemming from road rehabilitation. A critical step forward has been given to the State on-line georeferenced information. SEPLAN’s superintendence for social and economic studies (SEI) developed two interesting databases aiming at providing online information to public agencies, private actors, researchers and the public at large. The first one, “Azimute”, is available online at http://azimute.sei.ba.gov.br/;it focuses on State health and education services. The other one (Bahia Geoportal) is currently being finalized and will focus on the State infrastructure database: transport, energy, water and sanitation. This is a collaborative effort of several public agencies in Bahia, pooling data and updating procedures in one integrated tool. These initiatives are particularly innovative – few States in Brazil have such tools, and Azimute was already presented in several research events. The institutional strengthening of the State’s transport, energy and communication regulating agency (AGERBA) was the only subcomponent which failed. No action materialized, despite efforts to organize a Master’s in Business Administration training, adapted to the needs of AGERBA’s staff. The overall weak capacity and many managerial changes in this entity could explain this shortcoming. Nevertheless, this situation did not prevent the State’s Public-Private Partnerships program to move forward (indicator #12 met), essentially thanks to the creation of the State PPP unit, linked to the Finance Secretariat. On some occurrences, the institutional strengthening dialogue went beyond what was initially planned in the Project Appraisal Document. Thanks to the dynamism of SEINFRA’s Transport studies superintendence (SUPET), two key pieces of work have been developed with Bank’s financing. First, the intermunicipal passenger transport masterplan aimed at developing a large study to redesign the intermunicipal bus routes within the State of Bahia; all bus routes were (or are about to) be retendered at the end of 2013. Intermunicipal public transport is critical to address the mobility needs of poor people, who cannot afford to buy a car, in the State most remote areas. Second, the wide passenger Origin-Destination survey over the Salvador metropolitan area was a critical input to better assess transport patterns and demand, feeding the studies for the planned Salvador mass transit PPP. These activities might be considered beyond the strict scope of the Project outline, but their impact has been considered instrumental for people’s mobility needs. Beyond PREMAR, the State of Bahia and the World Bank Group developed a strong sector dialogue on transport. This materialized in particular through (i) the International Finance Corporation (IFC) advisory services on highway concessioning; since 2008, the IFC was the transaction advisor for the concessioning of the 121 km of the State BA-093. The deal was successful, signed in 2010, and the IFC provided further capacity building to the State on PPPs; and (ii) the 2012 Development Policy Loan Pro-
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Inclusao. This US$700 million Development Policy Loan (Pro-Inclusao) was approved by the Bank in May 2012. Aiming at “reducing social inequality, developing more efficient institutional infrastructure and logistics, and strengthening public sector management”, this loan has an interesting synergy with the PREMAR Program; this DPL contributed to the creation of the State Transport and Logistics Committee, a decision- making entity on policy and investment in the sector. The main benefit provided by this Committee, now operational, is the fostering of inter-institutional coordination and the addressing of cross-cutting issues, as this Committee includes representatives from various State secretariats, from the federal transport administration and from the transport and logistics private sector.
3.3 Efficiency An ex-post economic analysis was conducted following the same methodology as at Appraisal, computing costs and benefits over 20 years with HDM-4, based on data (works, traffic etc.) actually observed on the PREMAR highway sections, including: (i) types of road works applied, (ii) observed unit costs for road works, (iii) observed traffic volumes, and (iv) observed IRIs. Overall, the ex-post economic evaluation confirms that the investments under PREMAR have been economically sound; the investments resulted in an Economic Rate of Return (ERR) and a Net Present Value (NPV) of 74% and US$292.0 million at a 12% discount rate at a 2006 price respectively (full details are presented in Annex 3). The ex-post ERR is higher than the Appraisal estimate (46%); while the NPV is lower than the Appraisal estimate (US$453.3 million), the ex-post NPV remains by and large positive, confirming the efficiency of the investment. Increased ERR results mainly from much higher than expected traffics and benefits, while the reduced investment NPV stems from the fact that the works started later than initially scheduled.
3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Although the three Project outcome indicators were fully met, a few intermediate outcome indicators were only partially met. In light of this, the overall outcome rating is considered Moderately Satisfactory.
3.5 Overarching Themes, Other Outcomes and Impacts No further information.
4. Assessment of Risk to Development Outcome Rating: Moderate Highway rehabilitation and maintenance remains a priority at the State level. In the recent years, State expenditures for the transport sector, roads in particular, have dramatically
16
increased, as illustrated by the Chart below17: State expenditures level for transport has soared from around R$300 million a year before 2008, to about R$650 million a year in the 2012 period; most of these expenditures are devoted to highway investment. Maybe more importantly, about 51% of the Road Agency resources, since 2010, have been dedicated to highway rehabilitation and maintenance, as opposed to network development (construction of new roads, investments to increase capacity). This is a very positive trend, showing growing awareness and concern about existing asset maintenance, as opposed to a headlong rush toward an unsustainable road network development. At project close-out, the six road maintenance performance-based contracts are still on- going; they will end by August 2014, only including routine maintenance services. The State of Bahia will bear the full cost of these contracts. Looking ahead, it is expected that the Bank follow-up lending operation, PREMAR 2, could include some of the PREMAR’s corridors.
800 3
700 2.5 600 2 500 Expenditures 400 1.5 (Million)
State R$ 300 1 Total
200 % 0.5 100
0 0 2007 2008 2009 2010 2011 2012
Transport expenditures % Total State Expenditures
Chart 2: Evolution of the State of Bahia Transport Expenditures
Furthermore, after 2008 which was affected by the State’s fiscal crisis, the proportion of State expenditures devoted to the transport sector, almost doubled, from 1.5% to 2.75%. In recent years (2010 – 2012), this proportion has decreased, reaching 2.12% in 2012.
17 Source: Bahia State Court of Account, Annual reports 2007-2012
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This order of magnitude is in the standards of required investment levels to adequately maintain existing infrastructure. Looking ahead, the risk of policy reversal regarding the priority given to the transport sector among other State programs is deemed low: in its latest mid-term planning documents (Planejamento Pluri-Anual – PPA 2012-2015), the State commits to the development of the core infrastructure required to foster development and growth. The 2013 budget includes a particular allocation of about R$720 million in the road subsector only. However, the sustainability of the post-2010 level of investments in the road sector may be questioned and advocates for a Moderate risk level (rather than Low). While acknowledging that SEINFRA’s 2013 budget 18for roads is substantially higher that the 2012 one, the risk of falling back to pre-2010 level of investment remains. Whether the declining trend, since 2010, of transport expenditures within the total State of Bahia expenditures will continue declining (or stabilizing) is an open question. Such situation lays the ground for a second phase of PREMAR, aiming at deeper enrooting the performance-based approach in highway maintenance.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory Project design and preparation was very quick, with only seven months between the first preparation mission and the invitation to negotiate. The first identification mission took place in June 2005 and the invitation for negotiations was sent to the State mid-January 2006, aiming at carrying out negotiations in March. By February 2006, the preparation for negotiations was well underway, the bidding documents for the engineering designs had already been prepared and terms of reference for several institutional strengthening activities as well. Both the State and the Bank were very efficient in the definition of activities and action plans to be carried out from mission to mission during the preparation stage. This Project had a very innovative approach, promoting results-based contracts (CREMA), which made Bahia become the first State in the Northeast region to have executed this modality of contracts. Since Project preparation, the Bank provided the State’s public and private sectors with technical capacity, both at the decision making and technical levels, so as to achieve a complete understanding of the benefits this methodology could bring. This resulted in the client’s cultural change and therefore the acceptance and engagement to the carrying out of CREMA contracts.
18 There may be here interference, as 2013 is a pre-electoral year. 18
The Project also embedded, in its design, a varied and ambitious institutional strengthening component, which has been almost achieved by Project closing. A deep sector dialogue had been held with the Borrower, so that these institutional strengthening activities scale up the benefits expected to result from the works component. Finally, it is noteworthy that the Project Appraisal Document included a full specific annex (Annex 9B) presenting a fiscal analysis of the Bahia’s State Government. This was not (and is still not) standard practice in Investment Project Financing PADs. This extra analysis, assessing the fiscal soundness of the State with an aim to appraise the sustainability of the infrastructure investment, highlights the in-depth analysis that characterized the preparation phase Despite all these qualities, only a Moderately satisfactory rating is proposed, stemming mainly from: the too old costing elements of the engineering designs, which should have been, at least, updated by appraisal. This initial shortcoming paved the way for the financial gap (compounded by other factors) which materialized during implementation. The exceptional delay of 13 months between Board approval and effectiveness cannot be attributed neither to the Bank nor to the Borrower, as none of them can do much about it. Yet, while this delay eventually did not substantially impact the Projects outcomes (no closing date extension was requested), it could have been envisioned upfront as a risk in the PAD. (b) Quality of Supervision Rating: Satisfactory Bank implementation support has been satisfactorily carried out through: (i) strong relationship with DERBA, SEINFRA and the other implementing entities through including appropriate advice and solutions, and consistent efforts to remain abreast of the implementation situation; (ii) regular Bank missions (25 missions in 8 years) with monitored and agreed actions, as well as systematic field visits during the execution of works; (iii) adequate environmental and social implementation support, also with field trips, even though the Project could have benefited from some further involvement from Bank environmental and social specialists in the last two years: safeguards supervision was indeed mainly carried out by the Project’s Task-Team leader, in part due to existing capacity at local level and in part due to the lack of any significant events in this area during this period; (iv) adequate fiduciary supervision, with several financial management missions. During the first part of Project implementation, procurement supervision was directly carried out by the Project Task-Team Leader, a procurement- accredited staff. After 2010, a Sr. Procurement specialist, based in Brasilia, went on mission to Bahia once a year; this was deemed sufficient as all processes were prior-reviewed; (v) adequate responsiveness when the need to restructure the loan arose, which happened twice during implementation.
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On the negative side, the Bank supervision team should have amended the monitoring and evaluation framework, as part of a formal restructuring, to (i) reflect the impact of the increased works cost and (ii) incorporate an institutional development indicator at the PDO level. These shortcomings do not diminish the overall satisfactory performance of Bank’s implementation support.
(c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The overall Bank performance is considered Satisfactory: six years of effective supervision, including a rich institutional dialogue with DERBA, SEINFRA and the other Project beneficiaries outweigh the Moderately Satisfactory quality at entry. Even Bank performance in quality at entry would have been good, had the works costs estimates been adjusted before appraisal. This was the main shortcoming, even though, as already highlighted, this did not impact adversely the overall timely achievement of the outcome indicators. More importantly, the quality of the sector dialogue between the Borrower and the Bank, in areas as diverse as road management, transport and logistics planning, and administrative reform has led to high-profile results, exemplified by the integration of the Project sector dialogue with other World Bank Group activities in Bahia, namely the Development Policy Loan Pro-Inclusao (P126356) and the IFC advisory services on the BA-093 highway concessioning. Finally, the perspective of the new operation, PREMAR 2, shows the mutual interest on the Borrower and the Bank on continuing the partnership in the road sector, building on past PREMAR’s achievements.
5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory On the positive side, the State has been, from the beginning of preparation to the end of implementation, very committed to the Project. The administration transition, in 2007, was smoothed from the Project’s perspective, albeit with some delays in implementation. The strong element of commitment triggered the decision to initiate road management performance-based contracts on a wide scale in Bahia. Beyond the works component, the State was also fully committed in the design and implementation of the Project’s ambitious institutional strengthening component; it was the State who initially advocated for such comprehensive and diverse technical assistance activities. Finally, the State has complied with its counterpart financing responsibilities. The State actually went further, dutifully covering the financing gap from the first phase of CREMA cost overruns. Annex 1 shows that the participation of the State to the Project costs eventually amounted 129% of the Appraisal estimate, reversing the State/ Bank pari – passu Project financing. On shortcomings, two elements could be highlighted. First, at times, the late payment of counterpart financing; while this did not eventually affect the Project outcomes, this element should be noted. More importantly, the State has not been able to finance the full 2,000 km PREMAR program, as envisioned in the Project Appraisal Document. On this basis, a Moderately Satisfactory rating is proposed.
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(b) Implementing Agency or Agencies Performance Rating: Satisfactory DERBA and its Project Coordination Unit performances were together fully satisfactory. This rating is based on: (i) DERBA’s highly successful implementation of an innovative and therefore demanding road rehabilitation and maintenance program, which was the first of its kind in Brazil’s northeast region; (ii) the Project Coordination Unit was instrumental in making the activities move forward, coordinating with the various beneficiaries and providing constant technical contributions throughout all the Project phases, especially by closely monitoring and supervising the development of the engineering designs and the execution of the works; and (iii) the effective monitoring and evaluation performance of the activities, through comprehensive and detailed bi-yearly monitoring reports submitted to the Bank. Both SUPET (SEINFRA’s transport studies superintendence) and SEI (SEPLAN’s economic and social studies superintendence) carried out the technical assistance component in a satisfactory manner; they have shown close activity monitoring and follow-up, on a wide range of assignments. The less than highly satisfactory rating is based on the lengthy delays on the procurement processes. On the other hand, AGERBA’s (State regulation agency) performance was unsatisfactory. This Agency did not undertake any of the technical assistance activities, from which two were linked to intermediate results indicators. This was due to the low priority given to these activities and the lack of managerial leadership necessary to move them forward. Due to the aforementioned, the overall performance of the implementing agencies is deemed very positive and rated overall satisfactory.
(c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory The only main two negative elements are, at the Government level, the decision to drop the additional financing and, at the implementing agency level, AGERBA’s unsatisfactory performance. Overall Positive performance at both Government and implementing agencies levels, as above-detailed, altogether outstrip these shortcomings. An overall Satisfactory rating is proposed for the Borrower’s performance.
6. Lessons Learned (both Project-specific and of wide general application) (a) In Bahia, the implementation of performance-based road rehabilitation and maintenance contracts (CREMA) yielded significant benefits, but a close supervision was needed. Rehabilitation contracts were completed on-time, with almost any cost overrun. While comparisons are delicate to make and should cover the full road life cycle, PREMAR rehabilitation costs have been substantially lower than other simultaneous rehabilitation works in Bahia; this result would be in line with previous research on this matter. Highway rehabilitation quality has been up to the expected standards and, overall, routine maintenance as well. Yet, contract implementation
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required a strong supervision involvement from the road agency, and its Project Coordination Unit in particular, to get them right (contract requirement compliance). The lesson is that incentives mechanisms embedded in performance-based contracts are not necessary enough, especially in road agencies pioneering such kind of contracts. (b) The adoption of the CREMA concept is the right first step towards an improved road asset management in Bahia, but still important cultural change will be necessary to reap its full benefits. The State of Bahia is the pioneer, in Brazil’s Northeast region, in implementing performance-based road rehabilitation and maintenance. The implementation of this innovative modality of contracts required a cultural change, which was achieved through persistent dialogue, training and monitoring, at the technical and decision-making levels, both for public and private (consultancies and construction companies) sides, to explain the concept and ensure acceptance and commitment. While this CREMA program has been overall successful, Project design and implementation support should not understate that implementing such performance- based arrangements can be challenging, especially in cultures where tradition is deeply rooted and risk appetite, and capabilities, from the private sector is too low. In Bahia, despite dramatic progress on performance-based road management, there is still a long way to go to use it in its full scale. (c) The CREMA model is not cast in stone; learning from experience, improvements are possible. Likewise, CREMA specifications have to be tailored to the capabilities of the private and public sectors. Some contract features of the Bahia CREMA proved not to work fully adequately. For instance, the unbalance between rehabilitation and routine maintenance costs gave little incentives for contractors to perform in a completely satisfactory manner on maintenance. Regarding capacity, the monitoring and rating specifications in the contracts were certainly too complex to be thoroughly understood, and abided by old-fashioned local companies. DERBA carried out a retrospective analysis aiming at improving the model for future performance based rehabilitation / maintenance programs, in Bahia or elsewhere. This retrospective analysis includes, lessons learned and recommendations related to:(i) contract amendments; (ii) environmental assessments; (iii) penalty systems for works and supervision services; (iv) budget allocation for road signs; (v) enforcement of technical visits prior to starting the execution of the works to evaluate drainage conditions and proposed solutions; (vi) supervision services measurement methodologies; (vii) maintenance performance standards; and (viii) quality assessment tests. (d) Combined lending instruments and interventions across the World Bank Group leverage sector results. The Project included ambitious institutional strengthening activities, conducive to an in-depth sector dialogue. Synergies between this Investment Lending Project and the Development Policy Loan Pro-Inclusao (P126356), approved in May 2012, and the International Finance Corporation advisory services on concessioning the BA-093 highway fostered the sector dialogue for more efficient road management and logistics in the State of Bahia. (e) Finally, Project Development Objectives and related indicators should remain commensurate to what the Project activities can achieve, within a strong enough causal link. In this case, many other factors drive the freight prices (first PDO indicator),
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among which diesel prices. Elaborate indicators, such as this one, are interesting, as they provide a more comprehensive perspective on the impacts of the project; they are also challenging to implement, as they requires comparators to evaluate how the changes of those indicators compared to other similar roads/corridors without project interventions. Finding “similar” corridors could prove challenging, as shown by recent impact evaluation studies focusing on infrastructure, whose effect materialize on a longer term.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies No particular comments were raised.
(b) Cofinanciers Not Applicable.
(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not Applicable.
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Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent, based on the average weighted - by disbursement amounts – Forex1 USD = 1.76 BRL over Project implementation
Appraisal Actual/Latest Estimate Estimate Percentage of Components (USD (USD Appraisal millions) millions) 1. Rehabilitation of State 140.6 194.07 138% paved road sections 1 (a) Roadworks: 187.08 Rehabilitation and Maintenance 1 (b) Roadworks 7.00 Design and supervision 2. Institutional Strengthening 15.6 16.80 108% (B1) Consolidating the State 6.14 road administration capacity (B2) Improving the efficiency 7.07 of logistics arrangement (B3) Strengthening local 3.60 development management (B4) Strengthening regulatory and public-private partnerships’ 0.00 modeling capacity Total Baseline Cost 156.2 210.87
Physical Contingencies 15.55
Price Contingencies 14.00
Total Project Costs 185.75 210.87 114% Front-end fee (IBRD only) 0.25 0.25
Total Financing Required 186.00 211.12 114%
(b) Financing
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Appraisal Actual/Latest Percentage Type of Estimate Estimate Source of Funds of Cofinancing (USD (USD Appraisal millions) millions) State of Bahia 86.00 112.11 129% International Bank for Reconstruction and 100.00 100.00 100% Development
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Annex 2. Outputs by Component
Original Revised Component Project/Activity Allocation Allocation Comments (US$ millions) (BRL millions) Component 1 Works contract: BA 270: 3.30 0 Rehabilitation and maintenance, Rehabilitation BA 001 (Canavieiras) - during 5 years, of 48 km of State of State pate Sta Luzia paved highway.This section was highways substituted by (BA 160 XiqueXique – Barra) as a result of the administration change in 2006 and was not executed. Works contract: BA001: 15.9 26.98 Rehabilitation and maintenance, Bom Despacho – Nazare during 5 years, of 30 km of State (90 km) highway. At appraisal, 90 km were estimated and thereafter contracted to be rehabilitated, but only 30km were executed with the loan’s funds, the remainder being paid by the State own funds. Works contract: BA052: 32.4 88.77 Performance-based rehabilitation and Xique Xique – Porto Feliz maintenance, during 5 years, of 244 (244 km) km of State highway. Works contract: BA172: 6.5 +6.0 50.17 Performance-based rehabilitation and Javi – Sta Ma. Victoria maintenance, during 5 years, of 254 (166.6 km) +BA160 : km of State highway. At the time of Xique Xique – Barra appraisal, it was foreseen for the (87.4 km) contract to only include the (Javi) – STª Maria da Vitória section (169 Km). During Project execution, the Xique–Xique - Barra section was added to the contract, during implementation. The solutions and the costs for the Javi – StaMaria da Vitoria section, were significantly underestimated at appraisal and the road conditions suffered from a rapid deterioration. Works contract: BA148: 0.2 +8.5 39.84 Performance-based rehabilitation and Irece – entr. BA432 (4.8 maintenance, during 5 years, of 139.8 km) + BA 432: Irece – km of State highway.The works for Carne Assada (135 km) these 2 sections were executed under one single contract. The solutions and the costs estimated at appraisal were based on the execution of periodic maintenance, but given the road’s rapid deterioration, the solutions were switched to rehabilitation. Works contract: BA262: 19.2 + 12 63.73 Performance-based rehabilitation and Brumado – Victoria da maintenance, during 5 years, of 180 Conquista + BA263: km of State highway. Victoria da Conquista – Itambe Works contract: BA156 – 9.7 56.93 Performance-based rehabilitation and 26
BA152 – BA148: Entr. maintenance, during 5 years, of 288 BA242 – Brumado (288 km of State highway. Solutions and km) the costs estimated at appraisal were based on the execution of periodic maintenance, but given the road’s rapid deterioration, the solutions were switched to rehabilitation. Engineering designs and 13.42 3 contracts including design + works supervision supervision covered the 1,196 km of highway rehabilitated. Component 2: Institutional strengthening B.1: DERBA’s institution 1.38 These services were contracted on Consolidating modernization towards a October 2012 and will still be ongoing the State road result-based management until to April 2014. This activity aims administration model at defining a new institutional model, capacity result-based, for Bahia’s road agency. Results have been satisfactory so far, even though the activity has not been completed at Project closing. 4 surveys on Bahia’s 3.69 These surveys are necessary inputs to highway network: the Pavement Management System for International Roughness highway rehabilitation and Index, Levantamento maintenance planning. They overall Visual Continuo – started in March 2012 and will Continuous Visual continue until March 2015, during and Survey), pavement after the road maintenance phase. The deflection and results have been satisfactory. . trafficsurveys Update of DERBA’s 0.71 These services included two contracts: Pavement management one to update the PMS software, and system the other one to update the PMS modeling hypothesis. services were satisfactory. Technical support to 0.32 These services included the hiring of DERBA’s environmental several individual consultants to: (i) management unit prepare DERBA’s environmental (GERAM) procedures manual, (ii) review and audit the environmental compliance of DERBA’s roadworks (beyond PREMAR), and (iii) provide capacity building on environment management of roadworks. Technical support to the 1.54 This activity mainly included the Project Coordination Unit hiring of two individual consultants who provided support to the Project Coordination Unit: (i) the first one on technical issues and quality control, and (ii) the second one on fiduciary issues. Services have been fully satisfactory Technical support to 0.59 These services included the hiring of DERBA’s Projects and three individual consultants to carry Design department out the quality control of
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roadworksdesigns for: (i) pavement, (ii) drainage, and (iii) geotechnics and earthworks. DERBA’s IT 1.62 This activity included the procurement modernization of IT equipment, including computers and servers. Modernization of the road agency IT equipment was key to better efficiency. B.2: Preparation of the State’s 4.14 These services were contracted in Improving the Transport and Logistics January 2013 and will still be ongoing efficiency of Plan (PELTBAHIA) until March 2014. Both the logistics procurement process and the arrangements implementation were delayed. This consultancy included the creation of a Data Warehouse, which was still being developed by Project closeout. It should be highlighted that, within the development of PELTBAHIA, the State and the Bank agreed to work together in the creation of a State Logistics Committee Council, which became one of the disbursement conditions for a new DPL operation (Bahia Socio Economic Development for Inclusive Growth, approved by the Board in May 25, 2012). By Project closeout, the Committee had been created and was in operation, therefore ensuring a good articulation between this IL Project and the new DPL operation. Preparation of the 1.13 These services were contracted in Salvador metropolitan August 2010 until July 2012. The area logistics masterplan purpose was to develop a Plan to optimize logistic impacts in the development of the Salvador Metropolitan Region. Given the low quality of the methodology adopted, the final product was not considered trustworthy and therefore not accepted. Salvador metropolitan 3.99 This activity consisted in surveying region passengers origin – the passenger transport demand in the destination survey Salvador metropolitan area. More than 10,000 households were surveyed. As the latest similar survey was carried out in Salvador more than 15 years ago, this activity has been a critical input in the Salvador mass transit system PPP design, enabling a better knowledge of transport demand patterns. While this activity was not initially (PAD) planned, it turned out to be fully successful. Logistic costs of 0.40 These services were contracted in 28
PREMAR’s road September 2012 until April 2013. The corridors purpose of this study was to estimate the reduction of freight rates on PREMAR’s rehabilitated corridors, one of the PDO indicators. This survey allowed a better understanding of the linkage between the roadworks and the freight rates. This activity has been fully successful. Intermunicipal road 3.54 These services were contracted in transport master plan August 2011 until November 2013. This large study aimed at redesigning the intermunicipal bus routes within the State of Bahia; all bus routes were (or about to) be retendered at the end of 2013. Intermunicipal public transport is critical to address the mobility needs of poor people, who cannot afford buying a car, in the State most remote areas. While this activity was not initially (PAD) planned, it turned out to be fully successful. Preparation of the Bahia 0.16 These services were contracted from State airport development August 2011 to June 2012. As part of plan the State logistics and passenger transport agenda, this study provided the analytical basis for an investment plan in the State-managed airports in Bahia, aiming at more efficient air transport. Results were satisfactory. Preparation of an updated 0.17 These services were contracted in regulatory framework for October 2011 until October 2012. This waterborne transport activity resulted in an updated regulatory framework for water-based transport. Results were satisfactory. B.3: State of Bahia 4.06 These services were contracted in Strengthening Infrastructure spatial March 2013 and will still be ongoing local database and geoportal until January 2015. At Project closing, development about 80% of the services had been management completed, fully satisfactory so far. This is a particularly innovative activity, which aims at putting online, the State infrastructure database (transport, energy, water and sanitation), so that researcher, public or private entities, researchers or the civil society at large could formulate customized queries and get an easy access to the data. Data will be georeferenced and this tool will be a collaborative effort of several public agencies in Bahia, pooling data and update procedures in on integrated tool. Development of the State 0.24 These consultancy services were
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of Bahia geoportal on contracted from March to September education and health 2010.This database, available online at http://azimute.sei.ba.gov.br/, allows users to access easily to georeferenced information on education and health services in the State of Bahia. This activity has been particularly successful and SEI held several presentation of this tool Brazil-wide. Procurement of 0.57 This activity consisted in procuring Geographic Information several GIS software licenses for the Systems software Planning secretariat’s department of economic and social studies (SEI), as part of the overall effort to make available online geographic databases. Purchase of Data Center 1.33 In line with the above-described other solutions - Lot 02/SEI activities, this activity included the procurement of faster and more powerful IT servers, aiming at modernizing SEI’s IT equipment. B.4: While no specific activity was Strengthening undertaken with the State transport, regulatory and energy and communication regulation public-private agency (AGERBA), several initiatives partnerships’ contributing to this subcomponent modeling were undertaken with other entities, capacity including: (i) the update of the waterborne transport regulatory framework, (ii) the modeling of the new intermunicipal road transport master plan; and (iii) support to PPP Projects, as described in Datasheet’s Table F (Indicator 12).
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Annex 3. Economic and Financial Analysis
Introduction This annex presents the ex-post economic analysis (methodology, results) of the PREMAR - Bahia Integrated State Highway Management Project. At appraisal, a Project-level economic analysis was undertaken for the first seven contracts to be financed by the Bank loan, comprising 1,171 km and requiring US$ 108 million for periodic maintenance and rehabilitation works. The evaluation was carried out with the Highway Development and Management Model (HDM-4), which simulates life cycle conditions and costs and provides economic decision criteria for multiple road design and maintenance alternatives. The economic analysis concluded that the main benefits were savings in road user costs and estimated a net present value19 of the investment of US$ 453 million, for and an economic rate of return of 46 percent.
Methodology The ex-post economic evaluation follows the methodology of the ex-ante evaluation undertaken as part of the Project preparation in 2005-2006 with HDM-4. HDM-4 is designed to make comparative cost estimates and economic evaluations of different construction and maintenance options, either for a single road section or for an entire network. The model simulates road infrastructure life cycle conditions and costs and provides economic decision criteria for multiple road design and maintenance alternatives. Costs considered for the analysis included construction and maintenance costs, vehicle operating costs and travel time costs. Benefits resulting from a better road safety were not included.
19At 12 percent discount rate.
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Scope The ex-ante evaluation was undertaken on the first seven contracts to be financed by the Bank, comprising 1,177.50 km of paved roads:
Km at Km Road Section appraisal Contracted BA 270: BA 001 (Canavieiras) -Sta Luzia 48.00 0.00 BA001: Bom Despacho – Nazare - Santo Antônio de 90.10 90.00 Jesus (90 km) BA052: Xique Xique – Porto Feliz (244 km) 246.40 244.00 BA172: Javi – Sta Ma. Victoria (166.6 km) 169.00 166.60 BA160 : Xique Xique – Barra (87.4 km) 0.00 87.40 BA148: Irece – entr. BA432 (4.8 km) 4.80 4.80 BA 432: Irece – Carne Assada (135 km) 134.20 135.00 BA262: Brumado – Victoria da Conquista (128 km) 138.00 128.00 BA263: Victoria da conquista – Itambe (52.3 km) 57.00 52.30 BA-156 – BA152 – BA148: Entr. BA242 – Brumado 290.00 288.00 (288 km) TOTAL 1,177.50 1,196.10
During Project implementation, the BA 270: BA 001 (Canavieiras) –Sta. Luzia section was removed and the BA160 : XiqueXique – Barra section was added. Therefore, the scope for the ex-post evaluation is comprised of 1,196 km of paved roads. Assumptions The ex-post evaluation was based on the data/information resulting from: (i) observed traffic growth between 2006 and 2013, (ii) observed rehabilitation works costs, (iii) observed type of works (solutions), and (iv)observed ex-post International Roughness Index (IRI).
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Traffic: The table below compares the anticipated20Average Annual Daily Traffics (AADTs) and the actual AADTs and fleet composition, in 2013:
Estimated PAD (*)AADT -Estimated 2013 Actual 2013 Road Section (Extention according to Contracted Km bas ed on apprais al PAD) AADT % Trucksassumptions AADT % Trucks BA001: Bom Despacho – Nazare (90 90.10 3,081 14 3,789 5,711 14 km) BA052: Xique Xique – 109.20 568 39 699 1,006 29 Jussara(104,8km) BA052: Jussara – Porto Feliz (141,6 134.80 1,204 33 1,481 1,871 33 km) BA172: Javi – Sta Ma. Victoria (169 166.62 794 34 977 1,263 45 km)
BA160 : Xique Xique – Barra (87.4 km) 87.40 500 35 615 1,089 17
BA148: Irece – entr. BA432 (4.8 km) 4.80 1,334 27 1,641 2,329 19
BA 432: Entr.BA 148 – Carne Assada 135.00 731 46 899 1,791 23 (134,2 km) BA262: Brumado – Victoria da 127.97 2,593 44 3,189 3,768 28 Conquista (131,5 km) BA263: Victoria da conquista – Itambe 52.27 1,507 40 1,853 2,652 29 (57.0 km) BA156 : Entr. BA242 – Entr. BA-152 151.95 432 50 531 939 35 (144,0 km) BA152 - Entr. BA156 – Livramento 72.30 1,132 47 1,392 1,382 27 (79,30 km) BA148: Livramento - Brumado (66,7 64.00 1,132 47 1,392 2,206 31 km) AVERAGE 2013 1,196.41 1,181 36 1,453 2,039 27
The Average Annual Daily Traffic was estimated to increase an accumulated 23% by the end of the Project, based on a 3% yearly growth rate established in the PAD, but it actually increased by 73%, equivalent to a 9.6% yearly growth rate. The table above also shows that the actual proportion of heavy vehicles is lower than expected (27% vs. 36% at Appraisal). This may stem from an overall better federal highway network that heavy vehicles are prone to use.
20At appraisal, based on the traffic growth rates assumptions.
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Works costs: The table below compares the anticipated and actual works costs, excluding design and supervision costs. All costs in the table below are financial:
Actual Appraisal Deflated to Deflated to Estimate Contracted Contract Road Section 2006 2006 (US$ M (R$M ) (R$M) (US$M)** 2006) BA001: Bom Despacho – Nazare - (A) 15.9 26.97 22.96 13.04* Santo Antônio de Jesus (90 km) BA052: Xique Xique – Porto Feliz (B) 32.4 88.15 75.92 43.14 (244 km) BA172: Javi – Sta Ma. Victoria 6.5 (166.6 km) (C) 50.17 43.21 24.54 BA160 : Xique Xique – Barra 0 (87.4 km) BA148: Irece – entr. BA432 (4.8 0.2 km) (D) 39.79 34.42 19.56 BA 432: Irece – Carne Assada 8.5 (135 km) BA262: Brumado – Victoria da 19.2 Conquista (128 km) (E) 63.73 55.13 31.32 BA263: Victoria da conquista – 12.0 Itambe (52.3 km) BA-156 – BA152 – BA148: Entr. (F) 9.7 56.92 49.00 27.84 BA242 – Brumado (288 km)
* Only 30 out of the contracted 90 Km were carried out with the loan’s funds. During execution, some of the pavement tests went wrong, due to which, the Bank requested that a more thorough study be carried out to determine the reasons behind the problem. Given that this is a touristic highway and that the thorough studies were going to take time, the Government decided to take responsibility of the execution in order to expedite the rehabilitation of this section. ** Using the 1 US$ = 1.76 BRL: average foreign exchange rate, where current forex rates, at loan disbursement dates, are weighed by related disbursement amounts. The works component suffered from a dramatic cost increase stemming from: (i) the light rehabilitation solutions that were estimated at appraisal; (ii) the significant road deterioration developed between Project preparation (end of 2005 - beginning of 2006) and the contracting of the engineering designs in May 2008;(iii) construction costs increase, compounded by theapproximately four years of inflation that passed between Project preparation and the works contract awards (March – November 2009); and (iv), for the costs in US$, the unfavorable foreign exchange rate. Types of works: The table below compares the types of rehabilitation works that were anticipated and that were actually implemented.
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Overall rehabilitation Contract solutions Appraisal Rehabilitation – CBUQ (4cm) (A) BA001: Bom Despacho – Nazare (90 km) Actual Rehabilitation – CBUQ (4cm) Appraisal Rehabilitation - DST BA052: Xique Xique – Jussara(104,8km) Actual Rehabilitation - DST (B) Appraisal Rehabilitation - DST BA052: Jussara – Porto Feliz (141,6 km) Actual Rehabilitation - CBUQ (4cm) Appraisal Periodic Maintenance- DST BA172: Javi – Sta Ma. Victoria (169 km) Actual Rehabilitation - DST (C) This section was added during Appraisal BA160 : Xique Xique – Barra (87.4 km) implementation Actual Periodic Maintenance-SS Appraisal Periodic Maintenance - DST BA148: Irece – entr. BA432 (4.8 km) Actual Rehabilitation – CBUQ (4cm) (D) BA 432: Entr.BA 148 – Carne Assada Appraisal Rehabilitation - DST (134,2 km) Actual Rehabilitation - DST / CBUQ BA262: Brumado – Victoria da Conquista Appraisal Rehabilitation - DST (131,5 km) Atual Rehabilitation - CBUQ (4cm) (E) Appraisal Rehabilitation – CBUQ (4cm) BA263: Victoria da conquista – Itambe Rehabilitation - CBUQ (7.5-9 (57.0 km) Atual cm) BA156 :Entr. BA242 – Entr. BA-152 (144,0 Appraisal Periodic Maintenance-DST km) Atual Rehabilitation - Micro+SST BA152 - Entr. BA156 – Livramento (79,30 Appraisal Periodic Maintenance-DST (F) km) Atual Rehabilitation - Micro+SST Appraisal Periodic Maintenance-DST BA148: Livramento - Brumado (66,7 km) Actual Rehabilitation - Micro
Rehabilitation – CBUQ: Reinforcement and/or partial reconstruction and a new layer of Plant Hot-Mixed, Bituminous Concrete Rehabilitation – DST: Reinforcement and/or partial reconstruction and a new layer of Double Surface Treatment Periodic Maintenance-SS: Local repairs and a new layer of Slurry seal Periodic Maintenance – DST: Local repairs and a new layer of Double Surface Treatment Rehabilitation - DST / CBUQ: Reinforcement and/or partial reconstruction and a new layer of, Double Surface Treatment or Plant Hot-Mixed, Bituminous Concrete (according to the sub-section’s needs) Rehabilitation – Micro+SST: Reinforcement and/or partial reconstruction, an overlay Micro throughout the whole section, and a layer of Simple Surface Treatment Rehabilitation – Micro: Reinforcement and/or partial reconstruction and an overlay Micro throughout the whole section.
The table above shows that most of the rehabilitation solutions that were estimated at appraisal were substituted for heavier ones during implementation. Out of the 6 contracts (each letter represents one works contract), 5 include at least one section to which the solution was upgraded. In addition, 1 of the 3 sections which maintained the type of
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solution, required the surfacing thickness to be increased in some sub-sections, such as occurred in section BA263: Victoria da Conquista – Itambe (57.0 km).
International Roughness Index (IRI): For each one of the Project’s section, the table below compares the initial IRI (average), the anticipated IRI after works, and the actual IRI after works. Anticipated IRIs were computed by HDM-4 based on rehabilitation types, and actual IRIs were surveyed after works.
IRI before IRI after works Highway - Section - (km PAD) works Anticipated Actual BA001: Bom Despacho – Nazare (90 km) 5.3 2.4 1.84 BA052: Xique Xique – Jussara(104,8km) 5.7 3.3 3.03 BA052: Jussara – Porto Feliz (141,6 km) 5.9 3.4 1.89 BA172: Javi – Sta Ma. Victoria (169 km) 3.2 4.0* 2.45 BA160 : Xique Xique – Barra (87.4 km) 4.4 3.3 3.00
BA148: Irece – entr. BA432 (4.8 km) 2.4 3.1* 2.61
BA 432: Entr.BA 148 – Carne Assada 5.6 3.4 3.07 (134,2 km) BA262: Brumado – Victoria da Conquista 4.9 3.7 1.94 (131,5 km) BA263: Victoria da conquista – Itambe 5.5 2.1 1.92 (57.0 km) BA156 :Entr. BA242 – Entr. BA-152 2.9 3.6* 2.29 (144,0 km) BA152 - Entr. BA156 – Livramento 3.0 4.1* 2.62 (79,30 km) BA148: Livramento - Brumado (66,7 km) 3.2 4.5* 2.43 AVERAGE 4.3 3.4 2.42
*The IRIs after works for these sections were anticipated to be higher than the IRIs before works because the solutionestimated at appraisalwas maintenance, for which a resulting 4.5 IRI was established as acceptable. The IRIs after works significantly improved, the actual average IRI is23% lower than the anticipated results and 44% lower than the average IRI before works. These good outcome derived from both the heavier solutions implemented, and the overall satisfactory execution of the works.
All other ex-post assumptions were maintained the same as in the ex-ante one:
Main appraisal assumptions:
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o Evaluation period:20 years o Discount rate: 12% o Financial / economic costs ratio: 10% Main vehicle fleet characteristics and economic unit costs:
Light Medium Heavy Articulated Car Bus Truck Truck Truck Truck Economic Unit Costs New Vehicle Cost (US$/vehicle) 10,000 75,000 30,000 40,000 80,000 110,000 New Tire Cost (US$/tire) 80 375 375 375 375 500 Fuel Cost (US$/liter) 0.5 0.35 0.35 0.35 0.35 0.35 Lubricant Cost (US$/liter) 2 2 2 2 2 2 Maintenance Labor Cost (US$/hour) 4 4 4 4 4 4 Crew Cost (US$/hour) 0 4 4 4 4 4 Overhead (US$) 400 500 800 800 800 800 Interest Rate (%) 12 12 12 12 12 12 Passenger Time (US$/hour) 2 1 0 0 0 0 Cargo Delay (US$/hour) 0 0 0 0 0 0 Utilization and Loading Kilometers Driven per Year (km) 25000 90000 70000 70000 100000 100000 Hours Driven per Year (hr) 500 1800 1400 1400 2000 2000 Service Life (years) 10 10 10 10 12 12 Percent of Time for Private Use (%) 100 0 0 0 0 0 Number of Passengers 2 25 0 0 0 0 Gross Vehicle Weight (tons) 1.2 10.2 13.6 19.6 28 35.3 ESA Loading Factor 0 0.73 1.51 2.26 3.05 4.6 Typical Vehicle Fleet Composition (%) 63% 8% 6% 7% 12% 5%
Scenarios:
HDM-4 estimates the benefits of an investment comparing the costs/benefits for the various stakeholders in a scenario which would have prevailed without Project (“Base case scenario”) to the ones resulting from the Project implementation (“Project scenario”). In order to compare the ex-ante and the ex-post evaluation, the Base case scenario remained the same. Besides, all assumptions from the ex-ante Project scenario were replicated to ex-post Project scenario, with the exception of traffic, costs, solutions and IRIs, as detailed above.
ITEM EX-ANTE EVALUATION EX-POST EVALUATION HDM–4 VERSION Version 1.3 Version 1.3 VEHICLE FLEET 6 types according to PAD (Annex Same as PAD (see above) CHARACTERISTICS 9A - Table 2) According to PAD (Annex 9A - FLEET ECONOMIC COSTS According to PAD (see above) Table 2)
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Maintenance costs- according to PAD; AVERAGE ROAD WORKS According to PAD (Annex 9A - Restoration costs – UNIT COSTS Table 5) According to contract values, deflated to 2006 (see above) REHABILITATION AND According to PAD (Annex 9A - Values from the actual works PERIODIC MAINTENANCE Table 10) contracts (see above) SERVICES COSTS Routine Maintenance (RM) BASELINE ALTERNATIVE starting from 2006 and RM + Same as EX-ANTE (Base Case Scenario) reconstruction when IRI>12 RM from 2006 to 2009; Restoration in 2006, with Specific restorations in specific costs by section; 2010-2011; RM + resurfacing with 4cm RM + resurfacing with 4cm PROJECT ALTERNATIVE layer of Plant Hot-Mixed layer of Plant Hot-Mixed (Project Scenario) Bituminous concrete, when Bituminous concrete, when IRI equals or is superior to IRI equals or is superior to 4.5m/Km 4.5m/Km, after 2012 Between 2006 and 2011 – same as PAD; After 2012: a) IRI – values measured in ROAD CONDITION Constant values – PAD (Annex 2012; FEATURES 9A - Table 8) b) Zero cracks and other defects ; c) Texture depth and adhesiveness – same as PAD Between 2006 and 2011 – same as PAD After 2012 – values Constant Values shown in PAD measured through the TRAFFIC VOLUME (Annex 9A - Table 9) with a 3% growth rate Pavement Management System’s survey, with a 3% growth rate afterwards
Results The table below presents the results of the ex-post economic appraisal. The resulting Economic Rate of Return (ERR) and Net Present Value (NPV) are about 74% and US$292 million, at a 12% discount rate and at a 2005 value respectively.
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Economic Evaluation Results EX-ANTE (PAD Annex 9A-Table 11) EX-POST from HDM HDM Contract Road Section Extension NPV NPV/Investment EIRR name Extension NPV EIRR (Km) (US$ M) (US$ M) (%) (Km) R$ M US$ M (%) 1 BA-270 BA-001 (Canavieiras) - Santa Luzia 48 0.9 0.3 20 L-02-1 0 0 0 0 BA-262 Vitoria da Conquista - Brumado 131.5 165.4 8.6 77 L-03-1 128 195.08 86.3 228.7 2 BA-263 Vitoria da Conquista - Itambe 57 31.5 2.6 39 L-03-2 52.3 62.17 27.5 79.5 3 BA-172 Entr. Br-242 (Javi) -Santa Maria da Vitoria 169 26.5 4.1 34 L-07-2 166.6 111.53 49.3 70.9 BA-052 Entr. BA-131 Porto Feliz - Entr. BA-148 B (Jussara) 141.6 53.1 2.9 41 L-04-1 139.2 96.59 42.7 65 4 BA-052 Entr. BA-148 B (Jussara) - Xique-Xique 104.8 4.5 0.3 20 L-04-2 104.8 20.86 9.2 31.7 BA-001 Bom Despacho - Nazare 58.1 57.3 5.5 59 L-06-1 58.1 4.14 1.8 16.9 5 BA-046 Nazare-Entr. BR-101 (Sto. Antonio de Jesus) 32 15.4 2.8 39 L-06-2 32 N/A N/A N/A BA-148 Brumado - Livramento 66.7 31.9 11.8 59 L-08-1 64 70.14 31 162.2 6 BA-152 Livramento - Entr. BA - 156B (p/Botupora) 79.3 29.7 11.9 52 L-08-2 94 35.48 15.7 62.1 BA-156 Entr. BA-156B (p/Botupora) - Entr. BR - 242 144 5.6 1.2 22 L-08-3 130.3 23.12 10.2 35 BA-148 Entr. BA - 052B (Irece) - Entr. BA-432 (p/Lapao) 4.8 1.2 7.2 40 L-09-1 4.8 0.93 0.4 25.3 BA-432 Entr. BA-148 (p/Lapao) - Entr. BA-046 (Canarana) 41.8 10.8 7.2 40 L-09-2 42 2.27 1 19.3 7 BA-432 Entr. BA-046 (Canarana) - Entr. BR-122 (Segredo) 39.4 13 2.5 35 L-09-3 40 9.64 4.3 46.2 BA-432 Entr. BR-122 (Segredo) - Entr. BR-242 53 6.2 3.3 30 L-09-4 53 10.1 4.5 25.7 8 BA-161 Xique-Xique - Barra - - 0 0 - 87.4 18.23 8.1 59.2 Total 1,171.00 453.00 72.20 46 - 1,196.50 660.28 292.00 74.30
The table below compares the Project ex-ante and ex-post economic appraisal.
Economic Analysis Result Comparison
Economic Internal Net Present Value US$ M,
Rate of Return 2005 (discounted 12%) Ex-ante (Appraisal) 46% 453.3 Ex-post (ICR) 74% 292.0
Overall, this ex-post evaluation confirms that the investments under the PREMAR have been economically sound; most benefits: (i) road users operating costs savings and (ii) savings from the Road agency in infrastructure maintenance. The ex-post EIRR is significantly higher than the ex-ante one, despite substantially costlier investment. This could be explained by the dramatic differential traffic increase between the ex-ante and ex-post evaluations, as well as the better results obtained in terms of IRIs. Yet, the investment Net Present Value is actually about a third lower than expected, due the delays in initiating the works.
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Annex 4. Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Rodrigo Archondo-Callao Sr Highway Engineer ECSTR Jacques L. Cellier Consultant CEUPP Elena Correa Consultant LCSSO Marianne Fay Chief Economist SDNCE Elisabeth Goller Sr Transport. Spec. LCSTR Jose C. Janeiro Senior Finance Officer CTRLA Marc H. Juhel Sector Manager, Transport TWITR Aymeric-Albin Meyer Operations Adviser OPSPQ Alexandre Borges de Oliveira Senior Procurement Specialist EASR1 Juan D. Quintero Consultant SASDE Jean-Claude Sallier Consultant LCSTR
Supervision/ICR Gregoire F. Gauthier Sr Transport. Engr. LCSTR Susana Amaral Financial Management Specialist LCSFM Cassia Coutinho Barreto Consultant LCSTR Joao Vicente Novaes Campos Financial Management Specialist LCSFM Flavio Chaves Natural Resources Mgmt. Spec. AFTN3 Elisabeth Goller Sr Transport. Specialist LCSTR Eric R. Lancelot Sr Transport. Engineer LCSTR Jose Ricardo Marar Consultant LCSHE Aymeric-Albin Meyer Operations Adviser OPSPQ Jean-Claude Sallier Consultant LCSTR Sivan Tamir Operations Officer SECPO Adrien J. Veron Consultant LCSTR Elisabet Vila Jorda Junior Professional Associate LCSTR Virginia Maria Henriquez Consultant LCSTR Fernandez
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Tatiana Cristina O. de Abreu Finance Analyst CTRLN Souza
(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY06 117.62 FY07 7.69 FY08 0.00
Total: 125.31 Supervision/ICR FY06 0.00 FY07 40.69 FY08 114.72
Total: 155.41
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Annex 5. Beneficiary Survey Results
Not applicable.
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Annex 6. Stakeholder Workshop Report and Results
Not applicable.
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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR
This Annex summarizes the Borrower Implementation Completion Report, submitted to the Bank on Dec. 20, 2013.
The PREMAR program (Programa de reabilitação e manutenção rodoviario) went through different phases throughout its implementation, such as: A slow start due to specific delays in procurement and in the conclusion of the engineering designs, which finally occurred in the second semester of 2008. Thereafter, the bidding processes for the execution of the works began. 2009-2010 Satisfactory Performance: Due to the contracting of the works in 2009, the Program began to take off, despite procurement delays for the Institutional Stengthening component and issues related to the State’s counterpart financing. 2012-2013 Slow implementation: from the end of 2011, with the conclusion of the rehabilitation works, the performance went back to a slow pace, mainly because of the procurement delays for the Institutional Development activities. Nevertheless, by the end of the Program’s effectiveness, all the key activities had been contracted.
PREMAR enabled the Performance-Based Contracts (PBC) concept in the State’s road Administration. This contract modality is innovative and includes, among others, the following benefits: Optimizes the management structure, reducing the number of contracts and management efforts; Reduces the need of the agency’s supervisory staff and their efforts for the measurement and supervision of contracts and services; Decreases the agency’s flexibility to modify the contract’s established objectives and quantities, dramatically reducing the need for contractual additives; Avoids constant complaints from contractors, because the rules are very clear and the constructor's role is well defined. The constructor is made accountable for all the phases of the services, and responsible for setting the location, the timing and the manner in which things need to be carried out, as well as the workplan, quality control and the maintenance of the services performed. This allows the development of new technologies, the acquisition of new and more efficient equipment, etc. Adopts less detailed engineering designs, but with sufficient technical elements necessary to define the adequate solutions, based on a pre-established solutions catalogue;
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Allows the adoption of simple, easy to measure and monitor performance standards.
This type of contract however shows some peculiarities that may be restrictive, if they are not conveniently and timely taken into consideration, such as: Does not include possibilities to undertake emergency maintenance services, which were not included in the cost of routine maintenance, such as the damage caused by exceptional rains resulting in large erosions or barrier falls. Requires a solid financing system that counts with credibility throughout the contract period, to avoid disruption of services or lack of credibility, which are fatal to such types of contract, because they involve higher risks and disbursement needs by the contractors; Reduces competition opportunities for small contractors, who must enter in joint ventures with other constructors or work with sub-contractors in order to be able to participate.
The overall technical quality of the 1,196.41 km of works and routine maintenance services was satisfactory, as expected through the program’s implementation. The main difficulty was that the contrators were not accustomed to perform planning and monitoring activities for maintenance services. The companies submitted the measurement of the IRI performance indicator, maintenance plans and monthly reports with delays. Yet, the outcomes obtained from the execution of the PREMAR works promoted the inclusion of a new works quality standard for the State of Bahia. On this basis, a second phase funding program is being prepared to increase the State’s road network under performance-based contracts. Furthermore, the existence of the institutional component enabled the State to advance in some critical topics related to planning and management, such as the GEO-portal, Origin- Destination Surveys, DERBA’s Macroprocesses and organizational structure study, the State’s Transport and Logistics Program, and DERBA’s Pavement Management System, although the latter one has not been fully deployed and operational. All these actions have been identified and implemented to modernize the State’s infrastructure management.Notwithstanding delays in implementation, the Institutional Strengthening activities were all contracted and concluded for the most part. The activities that were still being implemented by project closeout, will be concluded with the State’s Treasury Funds, in accordance to the established in the Loan Agreement.
In conclusion, the State of Bahia ranks PREMAR’s results and the partnership established with the World Bank for this program as totally satisfactory.
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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders
Not applicable.
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Annex 9. List of Supporting Documents
1. Project Concept Note, August 2005 2. Project Appraisal Document, October 2006 3. First restructuring Project Paper, September 2010 4. Second restructuring Project Paper, April 2013
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IBRD 34712R
46° W 44° W 42° W 40° W 38° W PERNAMBUCO
Rodelas BRAZIL Curaçá BAHIA INTEGRATED PIAUÍ Paulo Afonso Juazeiro ALAGOAS STATE HIGHWAY MANAGEMENT PROJECT
Sobradinho Geremoabo 10° S 10° S Reservoir Monte FIRST PHASE OF THE REHABILITATION Senhor do Bonfim Santo AND MAINTENANCE PROGRAM: Cícero Dantas Buritirama SERGIPE IMPLEMENTED AS ORIGINALLY PROPOSED Umburanas Xique-Xique Itiuba IMPLEMENTED BUT NOT ORIGINALLY PROPOSED Juçara Tucano Barra Ribeira do Amparo NOT IMPLEMENTED AS ORIGINALLY PROPOSED Jacobina o c Irecê Capim Olindina s i Grosso c Morro do To Aracaju n Lapão a Chapéu r EXISTING PAVED ROADS F
o Várzea Barra do Canarana ã do Poço Serrinha Apora SELECTED CITIES AND TOWNS
S Mendes
Porto Feliz Baixa o
i Ipupiara TOCANTINS Grande STATE CAPITAL Angical R Barreiras 12° S 12° S Javi Ibotirama Feira de STATE BOUNDARIES Santana Alagoinhas BAHIARui Barbosa Pirajiba Oliveira dos Pojuca Brejinhos Paraguaçu Seabra S. Amaro Itaberaba io INTERNATIONAL BOUNDARIES (INSET) R Candeias Simões Filho Andara Milagres S. Antônio de Jesus Lauro de Freitas Macaúbas Marcionílio Nazar Sousa SALVADOR Santa Maria Bom Jesus da Lapa da Vitória Maracás Valença Paramirim Itaquara Livramento Jaguaquara Riacho de Santana de Contas Jequié Coribe Igaporã io R Camamu Caetité 14° S
14° S GOIÁS Sussuarana Guanambi Brumado Cocos Carinhanha Ipiaú
To Brasília Tuiú Anagé This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Floresta shown on this map do not imply, on the part of The World Bank Nova Azul Ilhéus GSDPM Group, any judgment on the legal status of any territory, or any Vitória da Canaã Itabuna Map Design Unit endorsement or acceptance of such boundaries. Conquista Tremedal ATLANTIC Itambé R.B. DE GUYANA FRENCH VENEZUELA GUIANA SURINAME Santa Luzia RORAIMA Atlantic Ocean OCEAN COLOMBIA AMAPÁ Canavieiras
O 16° S 16° S Ã AMAZONAS H PARÁ N CEARÁ RIO GRANDE A DO NORTE R
A TO PARAÍBA To Teófilo M CANT PIAUÍ Otoni BRAZIL PERNAMBUCO ACRE ALAGOAS MINAS GERAIS Itabela Porto Seguro INS Guaratinga RONDÔNIA SERGIPE MATO BAHIA PERU GROSSO Brasília Itamaraju GOIÁS BOLIVIA MINAS MATO GERAIS Prado GROSSO ESPÍRITO DO SUL SANTO SÃO Alcobaça Teixeira PAULO RIO DE PARAGUAY JANEIRO de Freitas CHILE Caravelas PARANÁ 0 50 100 150 200 18° S SANTA 18° S CATARINA ARGENTINA KILOMETERS RIO Atlantic Ocean
Pacific Ocean GRANDE ESPÍRITO DO SUL To Vitória 46° W 44° W 42° W SANTO 38° W URUGUAY OCTOBER 2013 IBRD 34712R
46° W 44° W 42° W 40° W 38° W PERNAMBUCO
Rodelas BRAZIL Curaçá BAHIA INTEGRATED PIAUÍ Paulo Afonso Juazeiro ALAGOAS STATE HIGHWAY MANAGEMENT PROJECT
Sobradinho Geremoabo 10° S 10° S Reservoir Monte FIRST PHASE OF THE REHABILITATION Senhor do Bonfim Santo AND MAINTENANCE PROGRAM: Cícero Dantas Buritirama SERGIPE IMPLEMENTED AS ORIGINALLY PROPOSED Umburanas Xique-Xique Itiuba IMPLEMENTED BUT NOT ORIGINALLY PROPOSED Juçara Tucano Barra Ribeira do Amparo NOT IMPLEMENTED AS ORIGINALLY PROPOSED Jacobina o c Irecê Capim Olindina s i Grosso c Morro do To Aracaju n Lapão a Chapéu r EXISTING PAVED ROADS F
o Várzea Barra do Canarana ã do Poço Serrinha Apora SELECTED CITIES AND TOWNS
S Mendes
Porto Feliz Baixa o
i Ipupiara TOCANTINS Grande STATE CAPITAL Angical R Barreiras 12° S 12° S Javi Ibotirama Feira de STATE BOUNDARIES Santana Alagoinhas BAHIARui Barbosa Pirajiba Oliveira dos Pojuca Brejinhos Paraguaçu Seabra S. Amaro Itaberaba io INTERNATIONAL BOUNDARIES (INSET) R Candeias Simões Filho Andara Milagres S. Antônio de Jesus Lauro de Freitas Macaúbas Marcionílio Nazar Sousa SALVADOR Santa Maria Bom Jesus da Lapa da Vitória Maracás Valença Paramirim Itaquara Livramento Jaguaquara Riacho de Santana de Contas Jequié Coribe Igaporã io R Camamu Caetité 14° S
14° S GOIÁS Sussuarana Guanambi Brumado Cocos Carinhanha Ipiaú
To Brasília Tuiú Anagé This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Floresta shown on this map do not imply, on the part of The World Bank Nova Azul Ilhéus GSDPM Group, any judgment on the legal status of any territory, or any Vitória da Canaã Itabuna Map Design Unit endorsement or acceptance of such boundaries. Conquista Tremedal ATLANTIC Itambé R.B. DE GUYANA FRENCH VENEZUELA GUIANA SURINAME Santa Luzia RORAIMA Atlantic Ocean OCEAN COLOMBIA AMAPÁ Canavieiras
O 16° S 16° S Ã AMAZONAS H PARÁ N CEARÁ RIO GRANDE A DO NORTE R
A TO PARAÍBA To Teófilo M CANTINS PIAUÍ Otoni BRAZIL PERNAMBUCO ACRE MINAS GERAIS Itabela Porto Seguro ALAGOAS Guaratinga RONDÔNIA SERGIPE MATO BAHIA PERU GROSSO Brasília Itamaraju GOIÁS BOLIVIA MINAS MATO GERAIS Prado GROSSO ESPÍRITO DO SUL SANTO SÃO Alcobaça Teixeira PAULO RIO DE PARAGUAY JANEIRO de Freitas CHILE Caravelas PARANÁ 0 50 100 150 200 18° S SANTA 18° S CATARINA ARGENTINA KILOMETERS RIO Atlantic Ocean
Pacific Ocean GRANDE ESPÍRITO DO SUL To Vitória 46° W 44° W 42° W SANTO 38° W URUGUAY OCTOBER 2013