THIRD PHASE OF THE ROAD DEVELOPMENT PROGRAM
Public Disclosure Authorized PROJECT PAPER
Africa Regional Office AFTTR
Date: October 27,2009 Task Team Leader: Labite Victorio Ocaya Country: Republic of Uganda Sector Manager: C. Sanjivi Rajasingham Project Name: Third Phase of the Road Country Director: John Murray McIntire Environmental category: B (Partial Assessment)
Borrower: The Republic of Uganda -Responsible agency: Uganda National Roads Authority (UNRA) Public Disclosure Authorized Revised estimated disbursements (Bank FY/US$m) FY 2009 2010 2011 2012 Annual 54.42 25.60 4.21 0.08
Current closing date: December 3 1, 2009 Revised closing date : October 3 1,201 1 _p P Indicate if the restructuring is:
Board approved - RVP approved X
- Public Disclosure Authorized Does the restructured project require any exceptions to Bank policies? Yes X No Have these been approved by Bank management? - Yes -No Is approval for any policy exception sought from the Board? - Yes X No
Revised project development objective/outcomes [If applicable] Although some project sub-components have been dropped and the scope of some components revised, the project development objectives and outcomes remain unchanged.
Does the restructured project trigger any new safeguard policies? No Revised Financing Plan (US$m.) Public Disclosure Authorized IB RD/I D A IDA GRANT FOR DEBT VULNERABLE
A. Introduction
1. This Project Paper seeks the approval to introduce changes in the Third Phase of the Road Development Program-RDPP3 (the Project) (Credit No. 3976-UG and Grant No. H122-UG) for the Republic of Uganda and the accompanying amendments to the Project’s legal documents.
2. The proposed changes are as follows: (i)dropping several sub-components such as civil works for upgrading of about 23 km of Zirobwe-Wobulenzi road; rehabilitation and regravelling of about 91 km of Atiak-Moyo road; and reconstruction and upgrading of about 57 km on Busega- Mityana road that could not be implemented due to a shortfall resulting from higher than anticipated bids received on three tendered works contracts, out of the seven originally planned for implementation under the Credit; (ii)reallocating the amounts in Category 1 (b) for reconstruction and upgrading of Busega-Mityana road of SDR 16.53 million to Category 1 (a) to meet the shortfall on upgrading Soroti-Lira road (125 km) and Kampala-Gayza-Zirobwe road (44 km); due to the above and due to the fact that the financing agreement was amended (April 25, 2007) to allow 100 percent IDA financing of civil works and consultancy services under the project resulting in cost increases; and (iii)extending the closing date by 22 months from December 3 1, 2009 to October 30, 201 1. Due to initial procurement delays, the last of three contracts for upgrading of Dokolo-Lira road contract will end on November 30, 201 1. Thus, the extension would allow for completion of the contract and defects liability period and implementation of the Technical Assistance (TA) support to the Ministry of Works and Transport (MoWT) and Uganda National Roads Authority (UNRA). The proposed changes and reallocation will help finance the deficit on the on-going contracts, caused by higher bid prices than originally envisaged at appraisal, resulting from increases in the costs of construction inputs in both local and international markets. The changes will also take into account the initial delays in the procurement of works.
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Ve, > 2 Q s Qe, * -e, 3 (li C 00 .-m e, Q -.-B *ti -B 3. The proposed changes, involving exclusion of sub-components, reallocation among categories and extension ofthe closing date would constitute a second order project restructuring.
B. Background and Reasons for Restructuring
Key Project Data as of September 2009 Ratings and Flags from last ISR Effectiveness Date 6/23/2005 Development Objective Satisfactory Current Closing Date 12/3 1/2009 Implementation Progress Satisfactory Project Age 4.9 years Problem Flags N/A YODisbursed 69.12%
5. Project Development Objectives (PDO) and Progress towards Achievement of PDO: The project development objective, namely, to “improve access to rural areas and economically productive areas and to progressively continue to build up sustainable road sector planning, design and program management capability including road safety management” is a replica of the program development objective and would remain the same. The project is the third and last phase of an originally four phased road sector Adaptable Project Lending (APL) Credit The already closed first two projects, Roads Development Program Phase 1 (RDPP1) and Roads Development Program Phase 2 (RDPP2) projects have contributed to the sector reforms, including the creation of the Uganda National Roads Authority (UNRA) and capacity expansion on a continuous stretch of about 710 km of national roads (including the rehabilitation of a 166 km bitumen standard road that was added to the RDPP1 through an amendment to the Credit).
6. Project Implementation Progress: Current project implementation progress is rated as Satisfactory. The project has six components: (i)upgrading and strengthening of three high priority national roads; (ii)detailed design of the upgrading of about 300 km of District Roads reclassified to the National Road Standard; (iii)consultancies for feasibility studies of upgrading to bitumen standard about 600 km of priority national roads; (iv) rehabilitationhegravelling of the Atiak-Moyo road; (v) construction of a proposed Road Authority headquarters building; and (vi) Institution building support to the National Road Authority, including the provision of external auditing services.
7. RDPP3 was originally planned to finance the paving and reconstruction of 249 kilometers of national roads and to regravel 91 kilometers of (national) gravel roads. Due to higher than expected bids, the paving and reconstruction of 57 kilometers of roads out of the 80 kilometers appraised could not be financed by the project and Government of Uganda (GoU) is now financing these from its own budget. The project was also supposed to finance the regravelling of a 91 km road which was planned to be financed by the IDA supported Northern Uganda Reconstruction Project (1994-1 996) but was abandoned as the insurgency in the area intensified. While the roads were appraised for regravelling, the government decided that with the increased traffic, it would be best to upgrade it to
3 a bitumen standard road. With that, the US$8.7 million allocated for the road was about 10 percent of the engineer’s estimate for upgrading the road. Hence, the government’s proposal is to finance it at a later stage through other means.
8. The outcome indicator related to the civil works for upgrading, rehabilitation and reconstruction component is “reduction in average travel time on national roads compared to baseline” and “reduction in vehicle operating costs on national roads compared to baseline”. At closure of the RDPP3, the three APLs will have upgraded and rehabilitated a total of 877 kilometers of roads, close to the original target of 886 kilometers appraised for upgrading rehabilitation and regravelling under the Program. This has resulted in reduction of travel time and vehicle operating costs between Kampala and the far off towns of Arua, Gulu and Hoima by about 40 percent. With completion of Soroti-Lira road, travel time and vehicle operating costs from the Kenya border for traffic originating from Mombasa to north eastern Democratic Republic of Congo (DRC) and southern Sudan will also be reduced by a similar amount. Further, under institutional support to the sector, creation of a roads authority, transfer of maintenance functions from the Ministry of Works to UNRA, and the creation of a road fund are major milestones. With the above background, it can be concluded that the outcome indicator related to the civil works for upgrading and rehabilitationheconstruction under the program remains fully relevant and achievable, notwithstanding deletion of the following three civil works for: (i)upgrading Zirobwe-Wobulenzi road (23 km); (ii)rehabilitation of the paved Busega-Mityana road (57 km) and regravelling of Atiak-Moyo road (91 km); and building contract for the proposed UNRA and MoWT offices as government has embarked on financing them. It would therefore not be necessary to modify the project development objectives or target values. (See also Annex 1)
9. Specific Reasons and Rationale for Project Restructuring. Designs and estimates for the project were prepared in 2003/04. Based on the estimates, the original total IDA (including both Credit SDR 45.97 million and Grant SDR 27.20 million) amount was SDR 73.17 million. The project experienced delays at the prequalification stage, mainly due to the need to clarify the information submitted by the prospective bidders and the need to verify the financial health of the recommended firms. In 2006, an update of the estimates showed that the amount on the Credit could finance only two roads (to be executed in three contracts: 2 contracts for upgrading Soroti-Lira road and 1 contract for upgrading Kampala-Gayaza-Zirobwe road) out of the planned four roads (2 for upgrading, 1 for rehabilitation and 1 for regravelling). Bids were opened on December 12, 2006 for the first two civil works contracts and on March 1, 2007 for a third contract. However, the total price of the three contracts was US$25 million over and above the Credit amount, necessitating a commitment by GoU to finance the deficit. The high bid prices were a result of considerable increases in the prices of inputs between the time of the engineers’ design and estimates in 2003/04 to the time of bidding in 2006/07 (3-4 years). A cross-check within the region (Ethiopia, Tanzania, and Kenya) showed similar escalation ofprices in the neighboring countries during the same period.
10. Originally it was planned to continue the Roads Development Program with a fourth phase (RDPP-4) that would mainly finance the rehabilitation of district roads with a credit amount of US$26 million. However, GoU decided to “mainstream” the development of district roads in its recurrent and development budgets, and urged development partners (DPs) to focus on capacity building (including capacity for the management of local roads) and on large investments in the national road networks. When RDPP-3 faced large cost overruns it was intended for a while that
4 RDPP-4 would be restructured to finance the shortfall. However, following an increased road sector allocation in its budget, GoU decided to finance the contracts that could not be financed by the Credit from its own resources. Thus, the proposed RDPP-4 was dropped. Instead, GoU requested IDA to support a new proposed series of integrated projects to be called Transport Sector Development Projects (TSDP) that would, jointly with other DPs, support the government’s Road Sector Development Program.
C. Proposed Changes
11. Changes in Project Design, Scope and Costs.
1. Component I: Civil Works for Upgrading, Rehabilitation and Reconstruction Component- this entails exclusion of civil works for upgrading of about 23 km of Zirobwe-Wobulenzi road; rehabilitation and regravelling of about 9 1 km of Atiak-Moyo road; and reconstruction and upgrading of about 57 km on Busega-Mityana road. Government is currently financing the reconstruction and upgrading of Busega-Mityana and construction of seven bridges and two ferry landings on Atiak-Moyo road. .. 11. Component 2: Civil Works for Construction of Buildings-this entails exclusion of construction of headquarters’ building for MoWT and UNRA. GoU has budgeted for the works to commence in FY09/10. ... 111. Component 3: Roads Construction Services-this entails excluding supervision services for construction of roads listed above.
12. Reallocation from Category I (b) to Category 1(a) - The entire amount of credit savings of SDR 16.53 million (approximately US$19.44 million), resulting from cancellatiodexclusion of the sub-components (as detailed in paragraph 11 above) under the civil works is proposed to be fully allocated to Category 1(a) for upgrading Soroti-Lira and Kampala-Gayaza-Zirobwe roads.
13. The proposed restructuring would accommodate the new contracts for selection of consultants worth US$3.1 million of which US$1.6 million would be for provision of much needed technical assistance to UNRA through Individual Consultants and US$l.5 million for extension of contract of a consultancy firm to collect data on additional 10,000 km of roads added to the national roads network.
14. Revised Cost Allocations - The detailed cost overview of the restructured project is presented in Table 1. Table 2 indicates the category-wise costs. Total IDA contribution remains at US$107.6 million.
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n N U 15, Revised Procurement Plan. The procurement plan has already been revised and agreed with the Bank to reflect the change in scope of the project. The revised procurement plan is attached as Annex 2 to the Project Paper. Apart from selection of Technical Assistance and the GoU financed projects for rehabilitation of bridges and ferry landings on Atiak-Moyo road and UNRA/MoWT building, there will be no further procurement activity under this credit/grant. Procurement for the GoU financed Busega-Mityana road has been completed and the works are ongoing.
16. Implementation of the Project. The project experienced delays in procurement of civil works contracts at commencement of the project. Another delay was experienced due to financing shortfall. However, project funds are now fully committed in on-going contracts (actually there is an over-commitment of US$25 million for the Dokolo-Lira contract, which will be borne by MoFEP) and works are progressing satisfactorily. The implementation plan is attached hereto as Annex 3.
17. Extension of the Closing date: The original closing date was December 3 1, 2009. Due to delay in startup of the project, the government has requested an extension of 22 months, from December 31, 2009 to October 31, 201 1. This will be the first extension of this Financing Agreement. The request for extension ofthe Closing Date complies with the requirements of OP/BP 13.30 on closing date since: (i) the project development objectives continue to be achievable; (ii) the performance of the Recipient is satisfactory with disbursement amounting to about 69 percent as of end June 2009; and (iii) the Recipient has prepared a specific action plan indicating the procurement and implementation schedules (Annex 2 & 3) satisfactory to the Association. 18. Institutional arrangements. The proposed modifications will not change the agency responsible for implementation. The Road Authority (now called UNRA) remains the implementing agency for the works included in the financing agreement.
D. Updated Economic Analysis
19. In order to verify if the project would still be economically viable, prior to award of the three contracts, an HDM-4 run was done to establish the EIRR, using the price offered by the lowest evaluated bidder for each contract. The findings were that the sub-projects are still viable, with an EIRR of 23.2 percent for Kampala-Gayaza-Zirobwe road as compared to an EIRR of 25.8 percent at appraisal while the EIRR for Soroti-Lira road was 15.2% (at commencement of the works) against 21.3 percent at design. The traffic has increased one and half times since then. The updated economic analysis is attached as Annex 4.
9 E. Safeguards Issues
20. The proposed changes do not affect the overall environmental category of the Project rated Category B or trigger new safeguard policies. The potential environmental impact of rehabilitatinghpgrading of road has been appropriately rated as a category B activity. Environmental assessments were carried out at appraisal in accordance with the requirements of OP 4.0 1 on Environmental Assessment. All EMP/EIA/SIA/RPF/RAPs were disclosed in-country and at InfoShop before appraisal.
F. Expected Outcomes
21. The proposed changes are limited to outputs and do not alter the original PDO or outcome indicators as explained earlier (paragraph 5 above).
G. Benefits and Risks
22. Benefits - Major benefit from the project restructuring would be: (i)completion of Soroti- Lira road which is on an important trade corridor to South Sudan and north eastern DRC; and (ii) completion of Kampala-Gayaza-Zirobwe road which links an important agricultural research and production area to the capital city. The outcome indicators are “reduction in average travel time on national roads compared to baseline” and “reduction in vehicle operating costs on national roads compared to baseline”. These are the same from the original project.
23. Restructuring Risks -The risks identified at appraisal are associated with the lack of skills of the staff in the Procurement and Disposal of Public Assets unit in selection of Consultants and the lack of sufficient supervision of consultants by technical/user departments. These risks have remained the same and are being addressed through the provision of technical assistance in the specific areas during the proposed time extension. Further assistance will be provided under the follow on Transport Sector Development Project.
H. Fiduciary Issues
24. There are no outstanding audit reports for this project and close-out audits for previous projects implemented by UNRA have duly been submitted.
Proposed Mitigation Measures to Ensure No Additional Cost Escalation and Implementation Delays - In order to ensure that there is no additional cost escalation or implementation delays, a technical audit is being carried out on the three contracts. From the recommendations of the audit, any anomalies noticed in interim certificates can be corrected. For cost escalations emanating from price fluctuations in the market, price adjustment formulae have been provided in the contracts.
10 ANNEX 1: Revised Key Performance Indicators
Program DO Program Outcome Program Targets Program Achievements at completion Improve access to High percentage of Upgrading and rehabilitation of 877 km of national rural and primary, secondary, 795 km of national roads and roads upgraded economically tertiary, and district (feeder) regravelling of 9 1 km of national rehabilitated. productive areas my roads in traffic worthy roads Designed for upgrading removing major conditions at all seasons. from gravel to bitumen constraints to standard of the 91 km transport services. of national road completed - GoU financing the first phase of 7 bridges and ferry landings. PDO Outcome Indicators Targets Achievements to date The PDO is to Average travel time 100 minutes travel time with 0 Will be determined at improve access to on selected national project IR12 the end of the civil rural areas and roads: Soroti-Lira works contracts slated for completion on economically Road( 123 km) productive areas and April 30, 2010 Vehicle operating costs USDIveh km 0.224 (contract CO 10) and to progressively (bus) on selected November 30,2010 continue to build up national roads for 15 yr (Contract CO 11) sustainable road design period: Soroti- 0 The civil works sector planning, Lira Road (123 km) contracts commenced design and program Increased agricultural onNovember 12007 management 380 vpd and industrial activity (Soroti-Dokolo road) capability including March 30 which is best reflected road safety 2008(Kampala- in increased traffic management. Gayaza--0Zirobwe growth road)and traffic increased by 20% and 30% respectively
Intermediate Results Indicator Revised Targets Actual Achievements Results 1. National roads a) 167 km of National 152 km of National Roads Works are 69% upgraded to Roads ( Soroti-Lira: upgraded from gravel to bitumen complete bitumen 123 km, Gayaza- standard; standard on Wobulenzi 29.8 km; time and within Kampala-Gayaza 14.6 budget. km) upgraded from gravel to bitumen standard;
b) 72 kmofdamaged 15 km of bitumen standard roads paved roads reconstructed
11 reconstructed and widened to class I (national roads standard) 2. Gravel roads 9 1 km of of roads (Atiak- DROPPED - First phase of rehabilitated on Moyo road) bridges and ferry landings being time improved financed by GoU
3. Road authority Road Authority HQ design DROPPED - Being financed by HQ completed completed end 2005; GoU on time and on occupied and functioning budget by end 2008 4. Supervision Completion of 6 Completion of 3 supervision Contracts are 69% services carried supervision contracts contracts complete out, contracts completed on time and within budget 5. designs for Detailed designs for 600 Detailed designs for 306 km All designs completed upgrading of km completed (Gulu-Nimule:104 km; Vura- gravel roads to Arua-Oraba: 98 km; Atiak- bitumen Moyo: 104 km) completed standard completed and approved 6. Feasibility Feasibility studies and Feasibility studies and detailed Designs completed studies for detailed design of 300 km design of 3 12 km completed upgrading of completed distri'ct rural roads to the national standard completed and approved 7. Road authority Road authority staffing is Road authority staffing is Targets achieved July legally complete and operational complete and operational and 1,2008 established and and development budget development budget provided operationally provided for by end of for in the June 2008 budget. functional 2005.
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A) ECONOMIC RE-APPRAISAL REPORT FOR THE UPGRADING OF SOROTI - DOKOLO - LIRA ROAD (123.0 KM)
1. INPUT PARAMETERS FOR ECONOMIC ANALYSIS
Road Length Road Sections Soroti - Dokolo 62.6 km Dokolo - Lira 60.4 km Works Commencement Project Duration Completion Cost (Based on Lowest Financial Cost Economic Cost Total Financial Bidder) (US$/km) (US$/km) Costs (mn US$) Soroti - Dokolo 640,701 608,666 40.04 Dokolo - Lira 745.109 707.854 45 .OO
Annual Cost Stream Year 1 Year 2 Year 3 3 0% 35% 35% Start Year Analysis Period 25 yrs Discount Rate 12% Salvage value 10% Base Option: Do Minimum Maintain Gravel Road o Regravelling every 10 years o Grading every 550 days o Spot regravelling with 30rn3/kmiyr Routine maintenance Alternative Option Upgrade Road in 2007 (DBST with 150mm Base) Maintain Paved Road from 201 1 onwards Last rehabilitation Traffic growth after 2007 3.4 YO- Light vehicles As forecast in economic 2.0% - Commercial vehicles evaluation report Motorized Traffic in 2006 (weighted Soroti - Dokolo Dokolo - Lira average ADT) Motorized 320 vpd 374 vpd Non-Motorized 1392 vpd 1203 vpd Motorized Traffic in 2004 (weighted Soroti - Dokolo Dokolo - Lira average ADT) Motorized 321 42 1 Non-Motorized 205 1 1428
20 Generated Traffic Assumptions used in the feasibility have been applied as fo11 0 ws : 20% of normal traffic (for PSVs, light vehicles and motorcycles; o 10% of normal traffic (for light and medium trucks; o 0% of normal traffic (for heavv trucks and buses). Exogenous benefits (producer surplus Net benefit increment of agricultural income US$ 18,338 based on assumptions made in previous per year studies)
Soroti - Dokolo Dokolo - Lira
Cars Special Hire Taxis 14 15 Pickutx / Vans / 4WD 6 8 I Minibuses I 28 I 26 I I Medium Buses / Coasters 10 11 Buses .1 1 Single Unit Truck (Dynas / Tractors) 3 3 Single Unit Truck (Fusos / Lorries) 12 15 Truck Trailers and Semi Trailers 13 10 I Motorcvcles 13 11
2. ANALYTICAL APPROACHES
Two analytical methods have been used during this evaluation:
Analysis by Section: where individual road sections are analyzed separately based on bids returned for each; Analysis by Project: where the individual sections are analyzed together as a group making up the project.
Using the above approaches, three scenarios were analyzed:
Scenario 1: including Non - Motorized Transport (NMT) effects and Agricultural Producer Surplus; Scenario 2: including NMT effects but excluding Agricultural Producer Surplus;. o Scenario 3: excluding both NMT effects and Agricultural Producer Surplus.
21 3. OUTPUTS OF THE HDM-4 ANALYSIS
output Road Sections Economic Soroti Dokolo Dokolo Lira Indicators - - NPV (m 14.953 9.971 us$> EIRR (Yo) 17.3 15.2 NPVIC 0.427 0.254
output Road Sections Economic Soroti Dokolo Dokolo Lira Indicators - - NPV (m 13.755 8.637 US$) EIRR ("/o) 16.9 14.8 NPV/C 0.393 0.221
output Road Sections Economic Soroti Dokolo Dokolo Lira Indicators - - NPV (m -15.439 - 16.724 US$) EIRR (%) 5 .O 5.4 NPVIC -0.441 -0.427
Analysis by Project (Scenario 1): Outr>utEconomic Indicators
US$) EIRR (Yo) 16.25 NPVIC 0.341
NPV (m 22.924 US$) EIRR (Yo) 15.85 NPVIC 0.307
22 NPV (m -32.163 US$) EIRR (%) 5.2 NPV/C -0.434
4. SENSITIVITY ANALYSIS
Sensitivity analysis has been carried out for three (3) scenarios using the Analysis by Project approach on the road taking into account only Motorized Traffic and Non - Motorized Traffic effects i.e. excluding Producer Surplus benefits:
Scenario 1: where Costs are 10% higher than lowest bid; and Scenario 2: where Costs are 10% higher than lowest bid and Traffic is 10% lower than current estimates.
The results from this sensitivity analysis are as given below:
(i)Analysis by Project (Scenario 1): OutDut ,Economic Indicators NPV (m 18.663 US$) EIRR (Yo) 14.67 NPV/C 0.232
(ii)Analysis by Project (Scenario 2): OutDut Economic Indicators NPV (m 9.8 16 US$) EIRR (%) 12.82 NPV/C 0.123
5. CONCLUSION
The results from this economic evaluation indicate that the investment in this road project based on the LOWEST BID is economically viable. Furthermore, the project is robust under uncertainties of traffic reduction and cost increases as evidenced from the outcomes of the sensitivity analysis.
It is worth noting also NMT benefits have a considerable impact on the viability of the project unlike Producer Surplus effects. In fact the project does not pass the economic test once the NMT effects are excluded from the analysis as evidenced by the results of scenario 3.
23 The Analysis by Section and by Project methodologies also gives good revelations about viability of the project in parts and by whole. In fact, both Soroti - Dokolo and Dokolo - Lira pass the economic viability test on their own at the present lowest bid prices for both sections.
The sensitivity analysis has been carried out for the most realistic project case i.e. including NMT effects but excluding Producer Surplus benefits. The reason for this is that the Producer Surplus benefits are for the most part speculative (based on another project area) because there is no specific data available for this project’s area of influence. The analysis indicates that the worst-case scenario (increase in construction costs and reduction in traffic) still passes the economic viability test significantly.
From the foregoing, the investment in Soroti - Lira (123 km) is still economically viable at the present lowest bid prices for each ofthe road sections.
B) ECONOMIC RE-APPRAISAL FOR THE UPGRADING AND IMPROVEMENT OF KAMPALA - GAYAZA - ZIROBWE - WOBULENZI ROAD f67.36 KM)
1. Introduction
The Kampala - Gayaza road (14.6 km) is planned for strengthening while the Gayaza - Zirobwe road (29.7 km) and Zirobwe - Wobulenzi road (22.98 km) are planned for upgrading to bitumen standard under the IDNGOUfunded Road Development Program Phase 3 Project (RDPP3). The detailed engineering design for these roads was carried out in 2003 to amongst other things determine the economic viability for strengthening and upgrading based on the following two (2) options on the six road sections: -
Section Length Traffic 1 OptionA Option B Km (2003) 1. Kampala - 1.3 10,63 8 Dual carriageway Class I single Nsooba 8m each with a carriageway 7.0 m kerbed median of and shoulders 2.6 1.8 m m including lined drains 2. Nsooba - 3.3 3,956 Class I single Class I single Kalerwe carriageway 7.0 m carriageway 7.0 m and shoulders 2.6 m and shoulders 2.0 m 3. Kalenve - 10.03 692 Class I single Class I single Mpererwe carriageway 6.0 m carriageway 7.0 m and shoulders 2.0 m and shoulders 2.0 m 4. Mpererwe - 10.67 Class I single Gavaza carriageway 7 m
24 and shoulders 1.5 m and shoulders 2 m 5. Gayaza - 19.08 294 Class I11 single Class I1 single Kiwenda carriageway 5.6 m carriageway 6 m and shoulders 1.5 m and shoulders 1.5 m 6. Kiwenda - 22.98 446 Class I11 single Class I1 single Zirobwe carriageway 5.6 m carriageway 6 m and shoulders 1.5 m and shoulders 1.5 m
The feasibility assessed three alignments i) Alignment A: - A geometric design laid over the existing road centre line; ii) Alignment B: - An upgrading of the project road within the existing road corridor; and iii) Alignment C: - Containing four deviations.
The feasibility discarded alignments A and C on grounds of safety, higher costs (alignment C) and higher negative social/environmental impacts, As such; the final detailed design was based on alignment B.
The recommended pavement structure designed in compliance with the MoWT Road Design Manual and the SATCC Pavement Design Guide comprises of:
o 225 mm lime stabilised gravel sub-base course (in case of 50 mm asphalt concrete surface); or 275 mm lime stabilised gravel sub-base course (in case of 20mm/lOmm double surface dressing); and 200 mm crushed stone base course.
The per-km unit financial costs for the above desired pavement structure for the preferred road alignment B for each of the road sections was:
Length Per - Km Investment Costs Section Km (US$) 1. Kampala - Nsooba 1.3 966,029.23 2. Nsooba - Kalenve 3.3 758,371.82 3. Kalerwe - MDererwe 10.03 476.482.65 4. Mpererwe - Gayaza 10.67 462,579.66 5, Gavaza - Kiwenda 19.08 447.71 1.89 I 6. Kiwenda - Zirobwe 22.98 459,672.85
The Economic Analysis results revealed that the strengthening and upgrading of Kampala - Gayaza - Zirobwe - Wobulenzi road based on the preferred alignment, cross-section (option B), pavement structure, etc. was economically viable with the following economic performance parameters:
25 Section IRR (%) NPV/RAC2 1. Kampala - Nsooba 58.6 6.77 2. Nsooba - Muererwe 57.8 6.70 3. Mpererwe - Gayaza 24.9 1.34 4. Gayaza - Kiwenda 20.7 0.63 5. Kiwenda - Zirobwe 13.1 0.08 6. Kampala-Zirobwe (1 -5) 27.5 1.58 7. Zirobwe - Wobulenzi 10.08 -0.08
Arising from the foregoing, the rehabilitatiodupgrading of Kampala - Gayaza - Zirobwe - Wobulenzi road at a cost ofUS$32.54 million was justified since the overall IRR of 27.5 percent for Kampala-Zirobwe and overall IRR 23.6 percent for the entire road (Kampala- Zirobwe- Wobulenzi) are higher than the discount rate of 12 percent. This was despite the fact that the Zirobwe-Wobulenzi section was marginally below the discount rate of 12 percent with an IRR of 10.08 percent.
On March 1, 2007, bids for the works implementation on Kampala - Gayaza - Zirobwe were opened. The returns from the bid opening revealed that the per-km costs for lowest bidders were 53 percent higher than those used by the detailed design study.
2. Objective of the re-assessment
The primary objective of this economic re-assessment is to determine whether it is economically viable to proceed with the implementation of Kampala - Gayaza - Zirobwe road based on the returned bids. The analysis also included the section of Zirobwe - Wobulenzi road although its evaluation was based on the returned bid values for Gayaza - Zirobwe road.
As part of this exercise, RAFU carried out 7 - day 12 - hour traffic counts on the project road from the 9 - 15 March 2007 for updating the current traffic on the road.
3 Input Parameters for the Economic Analysis
This analysis relied on the same calibration information of the HDM-4 as was used during the feasibility study apart from traffic and road upgrading unit costs. The traffic information used was based on the traffic count carried out in March 2007 while the road upgrading unit costs were based on the bid ofthe lowest bidder.
(Decrease in user costs + net exogenous benefits - increase in road agency costs) / Total Road Agency Costs
26 The table below provides the key economic appraisal parameters used by this analysis: .
Road Length 67.28 km Works Commencement 2007 Project Duration 3 years Completion Cost (Based on Lowest Financial 1 Economic I Total Bidder) Financial Costs (mn US$) KamDala - Nsooba 1.480.923 1.406.877 1.828.940 Nsooba - Mpererwe 1,162,584 1,104,455 3,644,701 MDererwe - Gavaza 730.448 693.926 6.960.074 Gayaza - Kiwenda Kiwenda - Zirobwe Zirobwe - Wobulenzi Total Annual Cost Stream 3 0% 30% 40% Start Year Analysis Period 25 yrs Discount Rate 12% Salvage value 10% Base Option: Do Minimum
Alternative Option
Traffic growth after 2007 5 % - Light vehicles as forecast in economic evaluation report Motorized Traffic in 2006 Motorized Traffic (ADT) Yon Motorized [weighted average ADT) I Traffic (ADT', Kampala - Nsooba 17920 3,947 Nsooba - Muerenve 11487 1.610 Mpererwe - Gayaza 6163 944 Gavaza - Kiwenda 1723 375 Kiwenda - Zirobwe 591 564 Zirobwe - Wobulenzi 783 1,493 Generated Traffic I Assumptions used in the feasibility have been applied as follows: n Generated traffic at 5% of normal traffic; n Diverted traffic of 20 vpd for Kampala - Gayaza - Kiwenda road and 59 vpd for Kiwenda - Wobulenzi road (Not applied); o Sensitivity analysis carried out at 10% and 20% reduction in normal traffic as well as 10% and 20% increase in constructiodrehabilitation costs.
The traffic composition in percentage terms derived from the March 2007 traffic counts that were used in this analysis are as indicated in the table below:
4. Analytical Approaches
Two analytical methods were used in this evaluation:
Analysis by Section: where individual road sections are analyzed separately based on bids returned for each; Analysis by Project: where the individual sections are analyzed together as a group making up the project.
Using the above approaches, two scenarios were analyzed:
o Scenario 1: including Non- Motorized Transport (NMT);
28 n Scenario 2: excluding NMT effects.
5. Outputs of the HDM-4 Economic Analysis
The tables below provide a tabulation of the results obtained for each of the scenarios outlined in Section 4 above:
(i)Analysis by Section (Scenario 1):
output Road Sections Economic Kampala Nsooba Nsooba Mpererwe Indicators - - NPV (m 4.67 7.66
EIRR (Yo) 63.1 44.4 NPVIC 2.877 1.860 1 output Road Sections Economic Mpererwe Gayaza Gayaza Kiwenda Indicators - - I NPV(m I 5.22 I 2.29 I US$) EIRR (Yo) 18.9 16.1 NPVIC 0.417 0.36
output Road Sections Economic Kiwenda Zirobwe Zirobwe - Wobulenzi Indicators - NPV (m -6.36 6.18 US$) EIRR (Yo) 4.8 16.3 NPVIC -0.564 0.455
(ii)Analysis by Section (Scenario 2):
output Road Sections Economic Kampala Nsooba Nsooba Mpererwe Indicators - - NPV (m 4.449 7.430 US$) EIRR (Yo) 60.9 43.5 NPVIC 2.742 1.804 I output I Road Sections Economic Mpererwe Gayaza Gayaza Kiwenda Indicators - -
29 ;.
4 NPV (m 4.788 -0.068 US$) EIRR (%) 18.4 11.9 NPV/C 0.382 -0.0 1 1
I output Road Sections Economic Kiwenda Zirobwe Zirobwe - Wobulenzi Indicators - NPV (m -8.803 -10.304 I US%\ I I I EIRR (%) -1 -0.5 NPVIC -0.78 1 -0.759
(iv) Analysis by Project (Scenario 1):
I OutDut Economic Indicators I
US$) EIRR (%) 23.2 NPVIC 5.405
6. Sensitivity Analysis
Sensitivity analysis was also carried out for four (4) scenarios using the “Analysis by Project” approach taking into account only Motorized Traffic and Non- Motorized Traffic effects:
Scenario 1: where Costs are 10% higher than lowest bid; o Scenario 2: where Costs are 20% higher than lowest bid; o Scenario 3: where Traffic is 10% lower than current estimates; Scenario 4: where Traffic is 20% lower than current estimates.
The results from this sensitivity analysis are as given below:
(i)Analysis by Project (Scenario 1):
I OutDut Economic Indicators I NPV (m US$) 18.45 EIRR (Yo) 21.5 NPVIC 2.23
30 (ii)Analysis by Project (Scenario 2):
NPV (m US$) 16.45 EIRR (%) 19.33 NPVIC 1.95
(iii)Analysis by Project (Scenario 3):
NPV (m US$) 19.05 EIRR (Yo) 21.6 NPVIC 3.21
(iv) Analysis by Project (Scenario 4):
NPV (m US$) 17.06 EIRR (Yo) 19.88 NPVIC 2.98
7. Conclusion
The results from this economic evaluation indicate that the investment in this road project based on the LOWEST BID PRICES is still economically viable despite being higher than prices used during the detailed engineering design study. Furthermore, the project is robust under uncertainties of traffic reduction and cost increases as evidenced from the outcomes of the sensitivity analysis. This is despite the fact that diverted traffic especially to the Kampala - Wobulenzi road from the project road has not been taken into account, as it will be substaritially reduced once this project is implemented.
The Analysis by Section and by Project methodologies gives good revelations about viability of the project in parts and by whole. At project level, it seems the sections with higher traffic of Kampala to Gayaza do compensate for the low traffic on the Kiwenda - Zirobwe and the high composition of traffic by motorcycles.
The sensitivity analysis has been carried out for the most realistic project case i.e. including NMT effects. The analysis indicates that even the worst-case project scenario (increase in construction costs and reduction in traffic) still passes the economic viability test significantly for “analysis by project”.
From the foregoing, the investment in Kampala - Gayaza - Zirobwe - Wobulenzi road (67.28 km) is still economically viable at the present lowest bid prices for ofthe road sections.
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