Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14688 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (LOAN 2418-PH) JUNE 27, 1995 Infrastructure Operations Division Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their ofMicial duties. Its contents mav not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS SAR March 1987 Completion December 1993 Currency Unit = Pesos (P) At Appraisal: P14 = US$ 1 At Completion: P25 = US$ 1 FISCAL YEAR January 1 - December 31 UNITS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank DPWH - Department of Public Works and Highways MPWH - Ministry of Public Works and Highways CIAP - Construction Industry Authority of the Philippines EMK - Equivalent Maintenance Kilometer ICR - Implementation Completion Report IMF - International Monetary Fund MLG - Ministry of Local Government SAR - Staff Appraisal Report SOE - Statements of Expenditure FOR OFFICIAL USE ONLY Table of Contents Preface . . . . . . . . . . . . . .. Evaluation summary ................ Part 1: Third Highway Sector Project Implementation Assessment A. Statement/ Evaluation of Objectives .1 B. Achievement of Objectives .4 C. Major Factors Affecting the Project .6 D. Project Sustainability .6 E. Bank Performance .7 F. Borrower Performance .10 G. Assessment of Outcome .1 H. Future Opration .11 I. Key Lessons Learned .12 Part II: Statistical Annexes Annex A: Statistical Tables Table 1: Summary of Assessments .15 Table 2: Related Bank Loans .16 Table 3: Project Timetable 17 Table 4: Loan Disbursements: Cumulative Estimated and Actual .18 Table 5: Key Indicators for Project Implementation .19 Table 6: Key Indicators for Project Operation .22 Table 7: Studies Included in Project ....................................... 23 'Iable 8: Project Costs ........................................................................................................................... 24 Table 9: Economic Costs and Benefits .25 Table 10: Status of Legal Covenants .26 Table 1 1: Compliance with Operational Manual Statements .28 Table 12: Bank Resources: Staff Inputs .29 Table 13: Bank Resources: Missions .................................. 30 Annex B: Sector Specific Data Table 1 Local Roads and Bridges Maintenance Allocation .32 Table 2: Design standard for National Highways .33 Table 3: Vehicle Fleet by Type, 1981-1990 .34 Table 4: Public Network 1995 .35 Table 5: Revenue from Road Transport and Expenditure on Roads, 1981-1990 .36 Table 6: DPWH Medium -Term Financial Plan (1993-1998) ....................................,.,.,.,.,.,37 Appendixes...38 Completion Mission's aide-memoire . . .39 Borrower's Contribution to the ICR . . . 42 Map (IBRD 17013) .54 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. IMPLEMENTATION COMPLETION REPORT PHILIPPINES FlFTH HIGHWAY PROJECT (Ln. 2418-PH) Preface This is the Implementation Completion Report (ICR) for the Fifth Highway Project (Ln. 2418-PH) in the Philippines for which US$ 102.0 million equivalent was approved on May 17, 1984 and made effective on September 27, 1984. The loan was closed on December 31, 1993 compared to the original closing date of December 31, 1989. A cancellation of US$ 7.0 million took place, at the Borrower's request, effective June 18, 1993. Final disbursement took place on May 23, 1994. The final transaction took place on June 7, 1994, at which time the unused funds remaining in the special account were recovered and the remaining loan balance of US$ 4,052,941.28 was canceled. The ICR was prepared by Ephrem Asebe, Consultant, EA1IN, and reviewed by Mr. Vineet Nayyar, Infrastructure Operations Chief and Mr. Mohammad Farhandi, Acting Project Adviser, EAIDR. The Borrower provided comments that are included as Appendix B to the ICR. Preparation of this ICR was begun during the Bank's final supervision nission in October 1993. It is based on material in the project file. The Borrower contributed to the preparation of the ICR by contributing views reflected in the mission's aide-memoire, and by preparing its own evaluation of the project's execution. I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I ii IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Ln. 2418-PH) Evaluation Summary Introduction i. During the 1970s, in response to a strong transport growth averaging 9% per annum, the Philippines Government invested heavily in the road sector. Between 1970 and 1982, the road network expanded rapidly, from 65,000 km to 154,813 km (although most of this expansion was the result of additions to the local (barangay) road network). The network comprised of 23,835 km of national highways, 29,954 km of provincial roads, 15,638 km of city and municipal roads, and 85,264 km of barangay roads. Despite the high level of investments made during this period, the overall condition of the Philippines road network was poor. In 1982 only 43.5% of the national highway system, 11.2% of the provincial roads, 55.5% of the city and municipality roads and 1.6% of the barangay roads were either asphalt or concrete, while the rest were either gravel or earth. Further, the heavy investment, which rapidly expanded the network, was carried out without the benefit of a corresponding increase in routine and periodic maintenance funding. As a result, by the 1980s, sustainability of the network was in question. ii. Since the first Highway Project (Ln. 731-PH) was approved in 1971, Bank-Philippines relations had been focused on improving the self-sustaining activities of the road transport sector by raising the quality of construction and assigning a higher priority to maintenance through the provision of adequate maintenance funding. However, sustainability has remained elusive. The Bank had financed four prior highway projects designed to build maintenance institutional capacities, restore and reconstruct roads, bridges and culverts, and introduce weigh-bridges. Further, the Bank had supported the enforcement of axle-load control regulations, improvement of design and construction supervision, and development of the construction industry. The implementation of the physical components of these projects were generally delayed, though results were satisfactory. However, efforts to increase institutional capacity, particularly for maintenance, were less successful, resulting in the general backward slipping of the improvements, with the departure of the consultants. Project Objectives and Description iii. The specific objectives of the Fifth Highway Project were to: a) improve the existing network of national highways and bridges; b) raise maintenance to adequate levels and in the process remove the backlog of restoration works on national highways; c) improve general highway management, particularly execution of maintenance, and thus further strengthen the institutional framework of the MPWH and its field organization; and d) further develop the domestic construction industry. The project also assisted in a review of the transport industry in order to improve its operations, and in the formulation of a proposal for the deregulation of inter-island shipping; and to further the Bank's efforts iii to strengthen the institutions responsible for the transport sector in the Philippines. The project components were: a) a reconstruction program for some 435 bridges and culverts on the national highways; b) improvement of an 83 km section of national highway (Baguio-Mt. Data); c) restoration of some 1,223 km of national highways; d) consulting services for i) detailed engineering and construction supervision; ii) preparation of future projects and iii) studies related to highway management, traffic safety and domestic construction industry; e) technical assistance to MOTC, MPWH and CIAP; and f) training of MPWH and CLAP staff. The Loan Agreement for the Project was amended on two occasions. The first occasion was to use the surplus realized with the devaluation of the Peso. The second time was to allow for a force account in areas of the country where private contractors were not interested in participating because of the threat of civil disturbance. iv. In retrospect, the specific project objectives were too broad, especially considering that the sectoral objective of increasing funding for maintenance and new roads was somewhat at odds with the Government's macroeconomic objective of cutting overall government expenditure. While this was identified during preparation and appraisal, a further delay of the project to balance these conflicting objectives may have been desirable. In any event, the project was delayed in order that the Third and Fourth Highway Projects, which were also slowed for lack of counterpart funding, could be completed. Implementation Experience and Results v. The project has achieved most of its specific objectives and is likely to achieve satisfactory results, provided considerable institutional reform in highway management is undertaken beyond the ongoing project, which has only began to address the need for systems and monitoring, as well as issues in the contracting industry. vi. Project implementation was delayed by four years. At closing, the total cost of the project was US$ 237.75 million, including the cost of the additional projects implemented following an amendment to the legal agreement to utilize the cost savings following the Peso devaluation, compared to the original appraisal estimate of US$ 187.98 million. The major factors which affected implementation, include the 1990 earthquake and the following typhoon, the eruption of Mount Pinatubo, the unpredictable peace and order situation, as well as the lack of timely provision of counterpart funds, and the capacity to handle the large number of contracts. vii. The Bank's performance during identification and appraisal was satisfactory. The project was technically very sound and timely, as funding was sorely needed, especially for the bridge component. Although lack of counterpart funds turned out to be a greater problem than expected, the severe resource constraints were acknowledged in the SAR. Also, in retrospect, the stated project objectives were too broad to be useful for project evaluation. Supervision was satisfactory, as it focused on identifying and correcting the underlying causes of the premature failures of civil works and at improving the work quality during implementation. iv viui. Operating under the difficult conditions of the 1980's, the Borrower on the whole has performed satisfactorily. There remain, however, lingering problems regarding the quality of civil works and weaknesses in the institutional capacity for maintenance. Summary of Findings, Future Operations, and Lessons Learned ix. The project is likely to be sustainable. The benefits derived from the improved, reconstructed, and restored roads and bridges will be positive during the operational phase of the project. The sustainability of these works is likely based on the government's demonstrated commitment to increase the Equivalent Maintenance Kilometer (EMK) since 1991, and the switch from force account to maintenance contracts, in spite of the political opposition. Further, support to the government under the ongoing Highway Management Project should increase the growing recognition that greater professionalism in highway management, including timely pavement strengthening, better initial designs, coupled with increased quality of construction and supervision will improve the situation in the road sector, and that lack of the above elements in the past has contributed to the deteriorated condition of the road network in the Philippines. x. A recent DPWH survey of the National Highways (26,100 km) indicated that only 18% were in good condition, 48% were in fair condition and 34% were in poor condition. Many bridges were also considered to be substandard for the current level of traffic and vehicle weights. The Government's main operational plan for future operations focuses on the provision of adequate maintenance funding to prevent further deterioration. A similar traffic survey on the condition of the roads related to the Fifth Highway Project may help in assessing whether or not Bank-financed roads have proven to be more sustainable than similar roads financed by other loans. xi. The ICR identifies two issues that need to be resolved. The first issue concerns quality. The Bank sees the quality issue in the implementation of civil works to be a generalized problem. Judging from the Borrower's contribution to the ICR, it is apparent that this view is not shared by all members of the DPWH. Since the issue is fundamental, both Bank and the Borrower should undertake the appropriate research to resolve the issue. xii. Second, throughout the 1980's, the Borrower had to make tradeoffs between making counterpart funding available for the timely achievement of the project, and for meeting the requirements of fiscal stability by reducing expenditures. The timely implementation of future projects may depend on harmonizing the conditions for achieving sectoral and macroeconomic objectives. Research in this area may provide a better approach to resolving the problems of tradeoffs between these two competing objectives. IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Ln. 2418-PH) A. Statement/Evaluation of Objectives 1. Prior Bank Involvement: During the 1970s, in response to a strong transport growth averaging 9% per annumn, the Philippines Government invested heavily in the road sector. Between 1970 and 1982, the road network expanded rapidly, from 65,000 km to 154,813 km (although most of this expansion was the result of additions to the local (barangay) road network). The network comprised 23,835 km of national highways, 29,954 km of provincial roads, 15,638 km of city and municipal roads, and 85,264 km of barangay roads. Despite the high level of investments made during this period, the overall condition of the Philippines road network was poor. In 1982 only 43.5% of the national highway system, 11.2% of the provincial roads, 55.5% of the city and municipality roads and 1.6% of the barangay roads were either asphalt or concrete, while the rest were either gravel or earth. Further, the heavy investment, which rapidly expanded the network, was carried out without the benefit of a corresponding increase in routine and periodic maintenance funding. As a result, by the 1980s, sustainability of the network was in question. 2. Since the first Highway Project (Ln. 731-PH) was approved in 1971, Bank-Philippines relations had been focused on assuring the self-sustaining activities of the road transport sector by improving the quality of construction while assigning a high priority to maintenance through the provision of adequate maintenance funding. However, sustainability has remained elusive. The Bank had financed four prior highway projects designed to build maintenance institutional capacities, restore and reconstruct roads, bridges and culverts, and introduce weigh-bridges. Further, the Bank had supported the enforcement of axle-load control regulations, improvement of design and construction supervision, and development of the construction industry. The implementation of the physical components of these projects were generally delayed, though results were satisfactory. However, efforts to increase institutional capacity, particularly for maintenance, were less successful, resulting in the general backward slipping of the improvements, with the departure of the consultants. 3. A review of the findings of the Bank Project Performance Audit Reports of the first four Bank supported highway projects provides a clearer understanding and an appreciation of the problems and issues confronting the Fifth Highway Project. Implementation of the earlier projects also faced problems of delays and a lack of adequate local counterpart funding, though they satisfactorily accomplished their objectives. Due to civil disturbances in the project area, the (first) Highway Project (Ln. 731-PH) was delayed, though the economic rate of return at completion was satisfactory. Also, some progress was made in introducing adequate maintenance and axle-load control. In the Second Highway Project (Ln. 950-PH), the road rehabilitation works were mostly 2 implemented as planned, though in some cases with difficulties and delays of about 18 months, due to the poor performance of one contractor. However, the economic rate of return at project completion was again satisfactory. 4. The Third Highway Project (Ln. 1353-PH), approved in 1976, focused more broadly on addressing the causes of inadequate highway maintenance in the Philippines. The project targeted: the reconstruction of national and minor roads which had deteriorated because of poor maintenance, heavy traffic conditions and inferior designs; the implementation of a road maintenance program, which included the large scale restoration of dilapidated roads; new investment in workshops and maintenance equipment; and various other types of maintenance related technical assistance. From the 1977 start, a lack of local funds and poor contractor performance caused extensive delays in the Third Highway Project. Despite these delays, the project was evaluated to have achieved most of its objectives, although the maintenance improvement efforts, introduced by the Bank were not sustainable. 5. The Fourth Highway Project (Ln. 1661 -PH), approved in 1979, was basically a continuation of the Third Highway Project. This project implementation coincided with a serious economic crisis in the Philippines. The Government was implementing a strict program of economic stabilization, having reached an agreement with the IMF on an austere financial program, which required a substantial tightening of both monetary and fiscal policies. In line with this program, and in order to reduce the budget deficit, substantial cuts in the budget were made. Additionally, as a part of the stabilization program, the Peso was substantially devalued in October 1983. Under these circumstances, it was quite difficult for the Government to increase its budget to implement the full schedule. As a result, the project closed four years late, on June 30, 1987 compared to the originally scheduled closing date of December 31, 1983. The post implementation economic evaluation showed that the eight national and six feeder roads, originally included in the project, had rates of return ranging from 16% to 32%. The maintenance components were expected to have a return of 68% and the restoration component a 25% return. The project was expected to have an overall average economic rate of return of about 50%. Again in retrospect, the maintenance improvements proved not to be sustainable. The implementation of the institutional capacity, particularly for the maintenance component was less successful; generally the accomplished improvements diminished over time, with the departure of the consultants. 6. Statement of Objectives: The Bank's overall lending objectives for highways were to assist in (a) providing an adequate road network; b) executing proper maintenance and removing the backlog of restoration works; c) improving the project preparation and implementation capabilities of MPWH; d) developing the institutional framework of MPWH; e) improving general highway management (planning, design, construction supervision, maintenance and cost accounting); f developing the domestic construction industry; g) improving the system of cost recovery from road users; and h) improving the efficiency of transport operations. 3 7. The specific objectives of the Fifth Highway Project were to: a) improve the existing network of national highways and bridges; b) raise maintenance to adequate levels and in the process remove the backlog of restoration works on national highways; c) improve general highway management, particularly the execution of maintenance, and thus further strengthen the institutional framework of MPWH and its field organization; and d) further develop the domestic construction industry. The project also assisted in reviewing the transport industry in order to improve its operations, and in formulating a proposal for the deregulation of inter-island shipping; and in the process, to further the Bank's efforts of strengthening the institutions responsible for the transport sector. 8. Evaluation of Objectives: The objectives of the project were not specific enough, thereby making evaluation more difficult. While the objectives of the Bank's highway lending (para. 6) should be broad, the specific objectives (para. 7) should be narrower and specific enough in both scope and time frame to monitor and measure the progress, and the results achieved during the project implementation, as well as its sustainability. For example, a specific objective of the project plan is to improve the existing (emphasis added) network of the national highways and bridges, whereas the Bank's loan was designed to finance only a small fraction of the entire network. The evaluation of the broad objectives would require a review of the entire network, which would be a difficult undertaking. The conclusions, reached within this ICR are therefore based upon the evaluation of the progress made towards the achievement of those specific objectives. In other words, even if all the components of the project were successfully implemented, it should be realized that their contributions would only provide a step forward towards the achievement of the overall lending objectives. 9. The specific objectives of this project were endorsed by the Government and were consistent with the Bank's strategy to assist the country. The national highways, totaling 25,000 km in the mid- 1980's with an estimated asset value of some $5 billion, carried most of the road traffic, which itself accounted for about 80% of the country's passengers and 60% of the estimated freight traffic. They were in danger of being lost, for lack of periodic and routine maintenance and reconstruction efforts. The Fifth Highway Project was a continuation of the Bank's involvement in the prior four highway sector projects to improve the country's deteriorated road network, and to establish a self- sustaining institutional capability to manage the network. 10. The project components expected to achieve the development objectives were: a) a reconstruction program for some 43 5 bridges and culverts on national highways; b) the improvement of an 83 km section of national highway (Baguio-Mt. Data); c) the restoration of some 1,223 km of national highways; d) consulting services for i) detailed engineering and construction supervision; ii) preparation of future projects; and iii) studies related to highway management, traffic safety and domestic construction industry; e) provide technical assistance; and, f) promote training. 11. During the turbulent 1980's in the Philippines, the project was extremely demanding both on the government and the Department of Public Works and Highways. The country was experiencing social, economic and political upheaval, as well as natural crises. The economic growth which had 4 averaged 6% during in the 1970's had slowed down and the Peso was continually depreciating. A critical shortage of counterpart financing was being experienced as the government sought to decrease the mounting budget deficit and stabilize the Peso. Moreover, along with the economic crisis, the country was in the midst of social and political crises. There was an unpredictable peace and order situation in some project areas. Following the February 1986 revolution, there were frequent changes in the administration coupled with the introduction of new procedures. It was difficult to attract skilled technical and managerial staff to the public sector. The earthquake in 1990 and subsequent volcanic eruption in 1991, were serious natural calamities, compounded the existing crisis situation, and adversely impacted the timely implementation of the project. 12. In retrospect, the timing of the project was premature. At appraisal, neither the Bank nor the Borrower were optimistic in their assessment of the economic situation of the country. The Government was trying to stabilize its economy. Already, the Third and Fourth Highway Projects were experiencing inadequate counterpart funding. It was problematic for the Government to make the necessary tradeoff between the macroeconomic stabilization objectives of the Ministry of Finance on one hand, and to provide for an adequate and a timely provision of local counterpart funding for the ongoing highway projects, and for the start of a follow-on project of the MPWI on the other hand. Nevertheless, the Bank, to prevent the further deterioration of road assets, sought and reached agreements, first regarding: (i) a revised Equivalent Maintenance Kilometer (EMK) formula for the national highway maintenance allocations, (ii) the timely implementation of the EMIK; and, (iii) for its (MPWH's) biannual consultation review with the Bank. Second, to assure the adequate preparation of the reconstruction program for bridges and for the restoration program of national highways, agreement was reached on a schedule for submission of a list of sub- projects. B. Achievement of Objectives 13. The project has achieved most of its specific objectives and is likely to achieve satisfactory results, provided that considerable institutional reform in the area of highway management continues to be undertaken. The project began to address the need for systems improvement and monitoring, as well as issues within the contracting industry. The physical objectives of improving the existing bridges and highways within the scope of the project were exceeded. The actual physical accomplishment of the bridge reconstruction program was 9,422 linear meters, which exceeded the appraisal estimate by 140 linear meters. The length of roads restored was 2492.61 km -- significantly more than the 1223 km appraised. Actual accomplishment exceeded the appraisal level for gravel roads by 871.34 km, for bituminous by 298.83 kin, for concrete by 53.37 km and for overlay by 46.07 km. Furthermore, only 83.00 km of construction was planned for the National Highways, while actual accomplishment was 225.08 km. 14. Civil works sub-projects with an ERR of 10% or greater were identified by the DPWH based on the economic and technical criteria previously agreed upon. Despite the unavoidable delays, these 5 civil works were successfully completed. Since the project's maintenance and restoration components were numerous (over 800 contracts) the post evaluation of the economic rates of return was limited to two major projects: The Tagum-Mati and Escalante-Vallerhermoso roads showed rates of return of over 30% and 20%, respectively, both of which are higher rates than appraisal projections. A post economic evaluation of all the restoration roads and bridges was not carried out, though traffic has grown significantly, far more works were carried out, and the overall cost of the project did not increase. Feasibility studies and detailed engineering required for the civil works were completed. 15. The functional road classification study which was an important first step in improving the general highway management was completed in 1986. However, the study was overtaken by political events and the needed interdepartmental consultations were not carried out after the study. In 1994, the study was updated vith technical assistance from the Asian Development Bank (ADB). It is reportedly being reviewed for legislative process. 16. The local technical assistance to the Construction Industry Authority of the Philippines (CIAP) provided under the loan for the further development of the construction industry appears to be bearing fruit. Substantial work has been done in the areas of updating, improving, expanding and creating monitoring systems and expanding the CIAP management infomiation system. The first Philippines Construction Industry Congress (CIC) was conducted. Some good came out of this support. The consensus formed by the CIC led to resolutions now being implemented. The frequent changes in the administration and the fiscal austerity measures the country had imposed on itself to achieve fiscal stability made the training program difficult to implement. However, the project did finance a Study of the Human Resource needs of DPWH, carried out by the Development Academy of the Philippines, and some on the job training was done through the participation of the DPWH's staff in the supervision of the ongoing projects, under the general coordination of an internationally recruited consultant. 17. With respect to the objective of raising the level of maintenance, per the main loan covenant, the Government continues to increase the level of funding allocated for maintenance per km - the basic equivalent maintenance kilometer was raised to Pesos 20,500 per km for 1991. Net income in real terms for 1992, 1993 and 1994 were reportedly increased by 13.2%, 15.79% and 17.17% respectively. Although improved maintenance was a condition of the loan negotiation, there was no way that the Bank could assure that the maintenance funds be used for their intended purpose. Nevertheless, the level of expenditure allocated was considered reasonably adequate for routine maintenance. In the Philippines most periodic maintenance activities such as pavement overlays are included in the investment budget. 6 C. Major Factors Affecting the Project 18. The major factors affecting the cost and timely implementation of the project can be divided into those outside the control of the government, those within its control and those specific to the implementing agencies. The major factors outside of government control include the July 16, 1990 earthquake and the following typhoon, which caused extensive damage to the Baguio-Data Road (after an overall accomplishment of 83%, the three packages were mutually terminated, physical accomplishment though was 52 km of concrete road and 52.5 km of sub-base) and the eruption of Mt. Pinatubo, which affected some restored or improved roads and bridges. Added to these natural calamities were the unpredictable peace and order situation in a few project areas, which ultimately resulted in an amendment to the Loan Agreement to revert to a force account due to a lack of interest of the private sector to participate in these areas. The 1986 Revolution also contributed to setbacks in project implementation, due to the frequent changes of administration, and the introduction of new procedures. The execution of the training program was especially affected. 19. One factor subject to the Government control was the implementation of macroeconomic policies designed to create stability. The Government decision to do this by cutting back on spending (rather than raising revenue) made timely and adequate provision of counterpart funds difficult. Immediately after the loan was made effective on September 27, 1984, the implementation of the civil works was deferred for one year due to the realignment of funds to support the completion of the ongoing Third and Fourth Highway Projects. 20. Practically all of the factors which caused the significant delays in time and cost variations were outside the control of the implementing agency. However, there were delays caused by the administrative burden of managing over 800 contracts as well as administrative difficulties in the correction of poor quality works. Occasionally, insufficient equipment to carry out tasks was also observed to have impacted the progress of implementation. D. Project Sustainability 21. The benefits derived from the improved, reconstructed and restored roads and bridges will be positive during the operational phase of the project and, thus, the project is likely to be sustainable. The main reason is the government's demonstrated commitment to provide adequate funds for maintenance in the past few years. Since 1991, the Government has increased the level of EMK in real terms by 13.3%, 15.8% and 17.2% for each of the succeeding years. A second reason is that the switch to maintenance by contract, in spite of political opposition, is likely to help utilize the resources for maintenance more efficiently. This, coupled with the Government's plan to give priority to maintenance instead of to new construction activities, whenever fiscal stability of the economy allows, is likely to support sustainabiity. Furthermore, after a decade of experimentation in macroeconomic stabilization, the Government now recognizes that the goal of fiscal stability itself depends, among other things, on an increased expenditure in the areas of public investment 7 and road network maintenance. This recognition of the mutually reinforcing relationship between macroeconomic/fiscal sustainability and public investment/maintenance for infrastructure should induce the Government to give due attention to allocating sufficient funds for maintenance, even while it strives to maintain the fiscal deficit at a sustainable level. 22. The lessons of the past are also being heeded. It is now recognized that in the past, a lack of timely pavement strengthening and upgrading, poor initial road design, inferior construction quality and inadequate construction techniques and poor supervision have contributed to the deteriorated condition of the road network in the Philippines. Since 1990, greater efforts have been made to assure a higher work quality in the execution of the Fifth Highway Project, after an initial attempt by the Regional Offices had proven to be ineffective. As a result, the quality of civil works has improved significantly compared to the previous projects, though there is still a lot of room to achieve even higher quality. Thus, in addition to the provision of adequate maintenance funds, the special attention paid to the quality of the execution of the works from feasibility to design and implementation is likely to contribute to the sustainability of the project's benefits over its operational life. Finally, creating a culture of excellence in highway management is the only sure way to achieve sustainabiity. In this regard, the on-going follow-on project, Highway Management Project (Ln. 3430-PH), which focuses on establishing a sustainable institutional capability to manage the network while providing support for the efforts of the DPWH to improve the condition of the country's deteriorated arterial highway network, is also likely to contribute to the sustainability of the benefits resulting from the Fifth Highway Project. E. Bank Performance 23. Identification and Preparation. The Bank's performance during the identification phase was satisfactory. The works and institutional aspects of the project were technically sound and timely, especially those related to bridge rehabilitation. The issue of counterpart funds was identified and the project's preparation period was extended to allow progress in the implementation of the Third and Fourth Highway Projects. The long preparation period had the added benefit of not bunching the projects so as to overburden the implementation capacity of either the Ministry of Public Works and Highways (MPWH) or the Ministry of Local Government (MLG). The proposed program for national highways was split into two stages, the first of which to be financed under the project and the second under a subsequent highway project. In addition, with respect to the assistance for the rural roads component, a decision was reached wherein the assistance would be processed as a Second Rural Roads Project. While these actions did not completely avoid the problem of counterpart finding in the Fifth Highway Project, the additional preparation time allowed time to fully prepare many of the components. By appraisal, ten prototype bridges were completed providing the designs for the bridge component, the first year preparation work was progressing, and an engineering design for the Baguio-Mt. Data national highway was completed. In fact, because of the macroeconomic situation, the scope of the project was in constant flux, ultimately leading to revisions of the project even during implementation. Nonetheless, following preparation 8 missions in October 1982, the project objectives became focused more on restoration and improved maintenance of existing projects. The Bank, by taking advantage of the elongated implementation phase, was able to define a more focused project directed to support the most important objective of the sector - the preservation of existing assets in the road sector. 24. Appraisal. Bank performance during appraisal process was also satisfactory, especially as related to the desperately needed improvements to the road network. On the economic side, efforts were made to trade off between the Borrower's objective of achieving fiscal stability and the availability of local counterpart funding for the timely implementation of the project. Various schemes to ameliorate the burden on the implementing agency due to the potential shortage of local counterpart funds were explored, including front loading the loan, increasing the share of the Bank loan to 65% and retroactive financing. In retrospect, however, the timing was premature. At that time the Government, facing serious macroeconomic difficulties, was on an economic stabilization program with the IMF, which required substantial tightening of monetary and fiscal policies. The program required the government to reduce the budget deficit to an acceptable level. This resulted in substantial cost cuts in the 1984 budget for new capital outlays, particularly for infrastructure projects. The Bank Loan Committee, while it did not question the timing of the project, supported the proposed loan and recommended that adoption by the Government of the revised Equivalent Maintenance Kilometer (EMK) formula be a condition of negotiation. After a series of considerations, including dropping two highway sub-projects and a reduction of the initial loan recommended by the loan committee, an agreement was reached on the revised EMK and its biannual consultation review with the Bank. The revised EMK formula was to be submitted to the Congress for legislative approval in July 1984, and the Minister of the MPWIH committed not to finance new projects in a region, unless maintenance was a priority activity, 25. Supervision: The Bank's performance during supervision has been satisfactory, especially since 1990. The Bank was particularly concerned that works, which should last for 20 years, exhibited signs of premature failures. In addition to expressing concern about the general level of project quality under the construction sector in the Philippines, supervision missions took serious measures to assure improved quality in the sub-projects under implementation. The aide memoirs of many supervision reports record instances during site visits in which design or construction quality was poor. Premature pavement failures were uncovered on several occasions. On the Baguio-Mt. Data Road, the supervision mission pointed out that the original design did not include adequate preventive measures for the frequent and massive slope slides that occurred during the rainy season, and, subsequently, construction delays were experienced. Cracks on newly constructed cement concrete pavements were also noticeable and workmanship quality on side ditch work was reportedly poor. Use of sub-base material that did not comply with design was also observed. With respect to the restoration component, the site visit to Tarlac and Batangas Provinces found that while the quality of work was acceptable in the former, in the latter the quality of work was reportedly poor. In particular, the restored pavement showed indications of premature failures as evidenced by various types of cracks and deflections. On another occasion, supervision of selected sites in five regions revealed that the quality of work varied between regions. While the roads 9 restored in two regions were in good condition and were acceptable, the quality of final work in the remaining regions also showed premature failures, as evidenced by the type of cracks, potholes and deformation. With respect to the bridge components, four sites were visited and one showed some instances of corrosion of reinforcement caused by the close proximity to the sea. 26. The Bank was not satisfied merely with the corrections of these failures. It requested that the DPWH research the concerns to determine the causes of the premature pavement failures. The causes of these failures were identified by the Bank mission and by the DPWH, and included: under designed pavement (vehicle loads were more than the design load); inadequate drainage; limited width of roadway shoulders; non-unifornity of asphalt concrete mixes and the lack of attention to vibration and curing; narrow road right of way; oversize gravel found in sub-base; and, poor road restoration scheduling caused by delays in the release of funds resulting in work being pushed into the rainy season. While quality issues were addressed when discovered, there is still reason for concern that high quality standards in design and construction are not maintained systematically. As a result of the findings, DPWH instituted Quality Assurance Units to carry out physical audits. 27. In other areas of Bank performance, the Bank was flexible, but firm during implementation. The Loan Agreement was amended on two occasions. The first amendment, in 1989, was allowed in order to utilize the surplus realized from the Peso devaluation and include construction of two additional roads: (i) the Escalante-Vallenhermoso Road in Negros Oriental, and (ii) the Tagum- Mati Road in Davo del Norte and Davo Oriental. Because of civil disorder, and the subsequent lack of contractors willing to work in certain areas, the Loan Agreement for the Project was amended a second time to allow for the use of a force account to address a limited part of the of the program covering the reconstruction of bridges and culverts, although, in fact, this was little used. The addition of Metro Manila Urban Roads, and of additional bridges requiring restoration and periodic maintenance, as well as the repackaging of the Road Restoration Project components into three clusters (Cluster A: Region I, II, III, and CAR; Cluster B: Region IVA, and IVB, NCR and V; and Cluster C: region VI to XII) were accommodated within the legal agreement without requiring an amendment. Thus, the scope and size of the project was significantly expanded during the implementation. 28. The Bank's follow up of the Borrower's compliance with the legal covenants was firm, but judicious. To use cost savings which resulted following the devaluation of the Peso, the Bank required amendments in the legal agreement. When the Borrower requested the approval of awards after the announcement of the winner, but before the-Bank examined the bid evaluation report, the Bank gave its consent only on an exceptional basis. On the other hand, the Bank declined to participate in sub-projects in which the Borrower had earlier negotiated to change certain unit prices and also because the bids were opened in two different places. Though the Borrower presented an accounting of its decision, the Bank remained firm. Failing to persuade the Bank, the Borrower withdrew its request and subsequently requested the cancellation of US$ 2.0 million as part of an overall cancellation of US$ 7.0 million on June 18, 1993. The Bank was also firm regarding audit report compliance. For example, when the Bank did not receive an audit report for 10 1992, it refused to accept applications for disbursement based on the statement of expenditure (SOE) for the project, until it received all of the required audit reports. F. Borrower Performance 29. Preparation: Overall, the Borrower has performed satisfactorily considering that: the preparation phase of the project extended well into the implementation of the project cycle, the uncertainties of the availability of counterpart funds, and the generally difficult conditions under which the Borrower had to operate. In the 1980's, faced with an elusive macroeconomic performance with an episode of rapid growth followed by periodic crises and a period of consolidation, the Borrower made a number of difficult choices which had a serious impact on the quality, cost and timely implementation of infrastructure projects. The first choice was to pursue macroeconomic stability through budget cuts (rather than revenue increases), which negatively impacted the availability of counterpart funding for timely implementation of the projects. Often, the budget cuts made to reduce the fiscal deficit made it necessary to slash expenditure for the public infrastructure and for maintenance, thereby impacting the performance and the quality output of the implementing agencies. A second issue, which affected quality and timely implementation, was in project packaging. Because of the desire to spread the available funds over all the political jurisdictions (bottom-up policy), the restoration projects identified were short sections of road, which increased the contract management burden. Further, decentralization favored small local contractors with inadequate equipment and experience, whose performance was often poor. 30. Implementation: Operating under the difficult conditions of the 1980's, the Borrower, on the whole, has performed satisfactorily. However, there are still lingering problems regarding the quality of civil works and weaknesses in the institutional capacity for maintenance. The DPWH was particularly responsive to activities within its jurisdiction and cooperated with the Bank's suggestion to improve the quality of road work. The Bank requested the DPWH to undertake in depth research to identify the causes of poor material and work quality, find solutions to solve the pre-mature pavement failures, and provide a report for the Bank's review of the findings and solutions proposed to solve the premature pavement failures. The DPWH immediately acted upon these requests and established Quality Assurance Units to conduct physical audits of works. When the packaging for the restoration projects was found to be as low as 0.3 km, the DPWI cooperated and raised the threshold to include only projects of 3 to 10 km for the contract packages. Managing over 800 contracts in different parts of the country was not an easy task, though in the end, with the assistance of an internationally recruited consultant, performance was strengthened and the overall result was satisfactory. 31. With respect to procurement involving some contracts, differences in the interpretation of the conditions of the legal agreement were experienced during implementation. The Borrower took submission of bids at two locations and conducted negotiations with the lowest bidder. The 11 Borrower's position on both issues was that the procedures adopted were not seriously irregular. However, the Bank held an opposite view and did not finance such contracts. 32. The other implementing agency, the Construction Industry Authority of Philippines (CIAP) also performed satisfactorily, utilizing its allocated resources for the purpose intended and within a reasonable time frame. G. Assessment of Outcome 33. The overall outcome of the Project was satisfactory. The project has achieved most of its major objectives and is likely to achieve satisfactory results, with only a few shortcomings. The national highway improvement program was completed. While the Baguio-Data (83 km) was dropped after the completion of 52 km due to the damage caused by the 1990 earthquake, and because of the need to incorporate seismic resistance, two additional sub-projects, the Tagum-Mati (68.52 km) and the Escalante-Vallehermoso Road (80.83 km) were added, after an amendment was made to the legal agreement to utilize the cost savings following the devaluation of the Peso. Both of these sub-projects have post appraisal ERRs higher than those estimated at appraisal. The remainder of the restoration and reconstruction programs are expected to have no less than the ERR calculated at appraisal. 34. Under the national road restoration program, many more kilometers of roads were restored than originally planned at appraisal. Similarly, the accomplishment in reconstruction of bridges in linear meters was greater than planned. With respect to the training component, the DPWH's effort was thwarted by the frequent changes in the administration, and by the fiscal austerity measures the country imposed on itself to achieve macroeconomic stability. However, an overall review of DPWH's Human Resources needs was completed. Several studies were also completed under the project to assist the construction industry. Further, TA was provided to DOTC and there has been significant progress in deregulation of inter-island shipping. H. Future Operation 35. A recent DPWH survey of national roads (26,100 km) indicated that only 18% were in good condition, 48% were in fair condition and 34% were in poor condition. Many bridges were considered to be substandard for the current volume and weight of traffic. Although the restored and reconstructed national roads and bridges under the Fifth Highway project represent a small fraction of the total need, the assurance of adequate maintenance funds and quality maintenance for the sub-projects financed under the project, as well as the rest of the road network are essential, if a higher proportion of good roads are to be achieved. To this end, the government's operational plan for the project is dependent upon the provision of adequate maintenance funds. Accordingly, the base Equivalent Maintenance Kilometer (EMK) was revised upward in 1991, with increases in real 12 income having been made since then. In addition, the follow-on ongoing Highway Management Project (Ln. 3430-PH) is expected to contribute to the Government infrastructure policy reforms necessary to develop sustainable institutional capability to manage the network. 36. With respect to monitoring, no specific plan was made available. But, in view of the special focus of Bank supervision to improve the quality level of the projects financed under the Fifth Highway Project loan, the Bank should urge the Borrower to carry out a survey at some future date, to determine the condition of these roads compared to other road projects financed under different loans. The DPWH should also make regular surveys to evaluate the condition of its roads. These surveys could provide the data base to evaluate progress being made in terms of the overall condition of the road network in the Philippines. L. Key Lessons Learned 37. The ICR identifies two main issues that need to be resolved. The first issue concerns quality. The Bank sees the quality issue in the implementation of civil works to be a generalized problem. Judging from the Borrower's contribution to the ICR, it is apparent that this view is not shared by all members of the DPWH. Since the issue is fundamental, both the Bank and the Borrower should undertake the appropriate research to resolve this issue. 38. The second issue concerns the consistency of the sectoral and macroeconomic policies during the 1980's which consistently retarded the timely implementation of Bank-financed highway projects. As pointed out earlier, in the 1980s, the Philippines Government was undertaking the MV's macroeconomic stabilization program at the same time it was negotiating a sectoral loan for the Fifth Highway Project.. A condition of the Bank loan for the Fifth Highway Project required the assurance of sufficient counterpart funds for project implementation between 1984 to 1989, while the IMF conditions required that the Government reduce its budget deficit to stabilize its macroeconomy. The Government determined that providing the planned counterpart funds for the project would undermine the implementation of its macroeconomic program, given its revenue generating constraints. In the end, the lack of counterpart funds contributed to the postponement of the closing date by four years. In retrospect, the Bank should consider whether it would have been possible to work out a tradeoff in which the macroeconomic and sectoral objectives could have been optimized, instead of remaining elusive throughout the decade. 13 P PART EII: STATISTICAL ANNEXES 14 ANNEX A: Statistical Tables 15 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negligible Not applicable Macroeconomic policies El E [l Sector policies 0 Financial objectives El E ,l Institutional development E El Physical objectives El E a Poverty reduction a o O Gender concems E El Other social objectives E E El E,nvironmental objectives E E El Public sector management El El El Private sector development El El Other (specify) aEl El B. Project sustainability Likely Unlikely Uncertain (/) (/) (/) 0 0 0 Highly C. Bank performance Satisfactory Satisfactory Deficient (I) (/) (eI) Identification n El Preparation Assistance a El Appraisal E El Supervision E El Highly D. Borrower perfonnance Satisfactory Satisfactory Deficient (I) () () Preparation l E l Implementation E E l Covenant compliance E E l Operation (If applicable) E El Highly E. Assessment of outcome Satisfactory Satisfactory Deficient (e) ( () El El0 16 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Ln. 2418-PH) Table 2: Related Bank Loans Loan Purpose Year of Status Approval Preceding Operation First Highway Project Construction of Cotbato-Digos Rd. 160km 1971 Project Completed Ln. 731-PH 30-Jun-76 (PPAR No.2249) Second Highway Project Reconstruction of about 700km of trunk roads on the 1973 Project completed Ln. 950-PH island of Luzon & about 700km of secondary roads Jul-80 (PPAR No.. 4757) Third Highway Project Road maintenance/ restoration to several 1977 Project Completed Ln. 1353-PH deteriorated sections of the national road network May-86 (PPAR No. 7316) Fourth Highway Project Build up maintenance capabilities of the Ministry 1979 Project Completed Ln. 1661 -PH of Public Works by supporting highway Dec-87 maintenance program and constancy service (PCR No.3053) technical assistance and overseas training. Following Overations Second Rural Roads Project Poverty alleviation, provision of infrastructure, 1986 Project ongoing Ln. 2716-PH institutional capacity building. Highway Management Project To Improve the quality of vitally important arterial 1991 Project ongoing Ln. 3430-PH highway network and thereby to reduce transport costs and increase the country's economic competitiveness. Earthquake Reconstruction Reconstruction of infrastructure damaged by the by 1991 Project ongoing Project the earthquake. Ln. 3263-PH 17 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/ latest estimates Identification (Executive Project Summary) n/a 1-Jan-81 Preparation May-81 Oct-82 Nov-81 1-May-82 Appraisal Apr-82 Sep-82 Nov-82 Jan-83 Sep-83 Aug-83 1-Feb-83 Negotiations Apr-83 Jun-83 Sep-83 Oct-83 6-Apr-84 Board Presentation Jul-83 Sep-83 Nov-83 Jan-84 17-May-84 Signing 4-Jun-84 Effectiveness 27-Sep-84 Project completion 31-Dec-87 Loan closing 31-Dec-89 31-Dec-93 Note: In a letter dated July 7, 1975 the Director General requested the Bank to finance a list of highway projects but, on March 30, 1982, the Minister of Public Works officially requested the Bank to finance the Fifth Highway Project. 1 8 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 4: Loan Disbursements: Cumulative Estimates and Actual (US$ million) FY 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Appraisal estimates 12 28 50 74 94 102 102 102 102 102 Actual 0.65 7.51 11.16 16.22 20.86 30.89 38.38 60.3 75.58 90.95 Actual as % of estimates 27% 22% 28% 33% 38% 59% 74% 89% 8 9%/ Date of final transaction: June 7, 1994 Disbursements (Estimated vs. Actual) 1 2 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 100 ............. ...................:::.... ..... .. ............................................................... ......... - E s U m a t ed.. . . . . .. . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . .. . . . . . . ................. . 6180~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... .... .................. .. .............................. ..................... ~~~~~~~~. . . . . . . . . . ..6 0. : . . :, , ', , , . . . .2 ~ ~ ~ ~ ~ ........................ .... . . .................... ...........4........ 20 ....... .................. . .. .. ..... ................... .. ............. .......... 0 ............... ............ ... .. ........ ..... .. ........... .......... ... 1985 1986 1987................... ...... 198 1989............ 1990... 1991................ 1992...... 1993............ 1994....... . 19 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 5A: Key Indicators for Project Implementation Physical Performance Indicators Appraisal Estimates Estimated at Completion 4-Jun-84 12/31/94 A. Improvement of National Highways (km) Baguio (ACOP) - Mt. Data 83.00 52.00 Escalante - Vallermoso - 82.18 Tagum - Mati Road 67.50 Metro Manila Urban Roads - 23.4 Total 83.00 225.08 B. Bridges Reconstruction Program (I m) Calendar Year 1985 1,718.00 1,913.33 Calendar Year 1986 2121.00 2471.78 Calendar Year 1987 2138.00 3075.47 Calendar Year 1988 3305.00 1962.36 Total 9282.00 9,422.94 C. Restoration Program of National Highways: Roads (km) Calendar Year 1985 224 187.32 Calendar year 1986 393 380.58 Calendar Year 1987 380 327.49 Calendar Year 1988 226 457.24 Calendar Year 1989 - 510.52 Calendar Year 1990 - 363.91 Calendar Year 1991 - 180.97 Calendar Year 1992 - 149.83 Total 1223 2557.86 D. Restoration Program of National Highways: Bridges (I m) Calendar Year 1986 2,892.04 Calendar Year 1987 4,885.03 Calendar Year 1988 4,300.38 Calendar Year 1989 2,968.85 Calendar Year 1990 297.86 Total 0.00 15,344.16 IMPLEMENTATION COMPLETION REPORT PHlIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 5B: Key Indicators for Proiect Imnlementation Road Restoration Projects Physical Accomplishment (km) Gravel Bituminous Concrete verlay Total Program As As As As As As As As As As Year Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual 1985 87.00 178.53 126.36 137.00 78.04 60.96 - 224.00 256.57 187.32 1986 105.00 219.41 178.02 214.00 141.77 108.59 - 5.20 4.28 74.00 14.20 14.20 393.00 379.66 305.09 M 1987 98.00 196.47 218.58 213.00 113.75 107.99 - 0.92 69.00 - - 380.00 311.14 327.49 1988 48.00 420.84 201.04 138.00 396.48 173.51 - - 40.00 82.69 82.69 226.00 900.01 457.24 1989 - 98.80 273.17 - 200.07 237.35 - - - - - - 298.87 510.52 1990 - 93.79 74.67 - 58.72 190.09 - 19.91 13.28 - 85.87 85.87 0.00 251.66 363.91 1991 - 1.50 94.22 - 10.00 71.71 - 13.47 11.86 - 8.56 3.18 0.00 26.54 180.97 1992 - - 43.28 - 2.00 50.63 - 14.79 22.33 - 37.75 33.59 0.00 57.92 149.83 1993 - - - - - - - - 0.70 - - 9.54 0.00 10.24 10.24 Total 338.00 1209.34 1209.34 702.00 1000.83 1000.83 _ 53.37 53.37 183.00 229.07 229.07 1223.00 2492.61 2492.61 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 5C: Bridee Restoration Projects Physical Accomplishment (I m) Concrete Steel Timber Bailey Total Program As As As As As As As As As As Year Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual Appraised Budgeted Actual 1986 - 731.32 240.70 - 3782.86 2724.25 - 17.09 17.09 - - - - 4531.27 2982.04 1987 - 2462.80 2041.49 - 2740.07 2625.58 - 66.30 66.30 - 185.00 151.66 - 5454.17 4885.03 1988 - 2095.41 2207.00 - 1575.36 1641.94 - 949.54 170.00 - 838.41 281.44 - 5458.72 4300.38 M 1989 - - 790.34 - -1106.52 - - 481.68 - - 590.31 - - 2968.85 1990 - - - - - - 279.86 - - - - 279.86 Total 0.00 5289.53 5279.53 0.00 8098.29 8098.29 0.00 1032.93 1014.93 0.00 1023.41 1023.41 0.00 15444.16 15416.16 22 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 6: Key Indicators for Proiect Operation A: Highway Maintenance Expenditure/a (in million of Pesos) Estimate Fiscal Year at appraisal Actual 1984 1,252 1,049 1985 1,346 1,231 1986 1.531 1,377 1987 1,580 1,565 1988 1,790 1,776 1989 1,783 1,860 1984-1989 9,282 8,858 a/ National expenditure only B. Condition of National Highways (26100 km) b/ Recent Condition Actual (%) Plan (%) Good 18% (+) Fair 48% (-) Poor 34% (-) Total 100% 100% b/ DPWH should carry out a survey at future date to find out real performance in preservation of assets. C. Local Roads and Bridges Maintenance Allocation Basic maintenance Increase (%) Calendar Year l cost per EMK l 1984=100% 1984 P 11, 342.00 100% 1985 P 11, 342.00 100% 1986 P 14, 745.00 130% 1987 P 14,754.00 130% 1988 P 17,104.00 151% 1989 P 17,104.00 151% 1990/91 P 20,500.00 181% 1992 P 28,049.00 247% 1993 P 31,517.00 278% 1994 P34,000.00 300% 23 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWVAY PROJECT (Loan 2418-PH) Table 7: Studies Included in Proiect Purpose as deftned Study at appraisal/redefined Status Impact of study A. Feasibility study and Undertake feasibility studies PMO in coordination The study served as a detailed engineering for and detailed engineering with Renardent S.A basis for implementation future National Highway for about 500km of national Consulting Engineers under the ongoing Projects highways identified under the & Hoff & Overgaard Highway Management NTI'P Study. a/s, Planning Program & other overseas Consultants prepared Development assistance a prioritized listing of the funded civil works whole arterial network construction B. Functional Road Assist MPWH and MLG in Functional road The recommended system Classification Study reviewing the classification of classification system would modify the existing the national and provincial was produced in 1986. classification . It was not road network was again updated in possible to confirm its 1994 and developed general acceptability further under TA from through consultation in ADB. view of political events. The updated study is being reviewed with a view to to bc enacted. C. Road Traffic Safety Review the adequacy of the Program covered two Considerable amount of data Study laws and regulations governing pilot regions, namely: was gathered, including data traffic safety, accident reporting Region III Central Luzon, on fatalities, and economic procedures, Ilighway Police Region VII Central Visayas costs of accidents which were activities, and inter linkages of Study completed Aug. 1986 estimated to be about 0.2% highway design and safety, and of GDP. recommend improvement. D. Construction Industry Preparation of Study -Construction Industry Data Bank -Construction Technology Program to support Government programs Published the results Results of the studies and in areas of housing, shelter etc., of the studies researches are being made - Construction Industry need available for users in relation to National Shelter Program - Streamlining of prequalification bid , and award and payment procedures 24 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 8: Proiect Costs (As of June 7,1994, in USS million) Ap raisal Estimate Actual Foreign Foreign % of Total Category Local Exchange Total Local Exchange Total Actual to Cost CostlI Cost Cost Cost2/ Cost Appraisal A. Civil Works 60.72 56.02 116.74 110.83 74.01 184.84 1.58 National Roads 9.29 8.57 17.86 22.25 17.12 39.37 2.20 Bridge Reconstruction 19.31 17.80 37.11 33.29 19.12 52.41 1.41 Restoration (Roads & Bridges) 32.12 29.65 61.77 43.96 32.02 75.98 1.23 Metro Urban Roads - - - 11.33 5.75 17.08 B. Constancy Services 0.46 10.86 11.32 4.59 13.97 18.56 1.64 Detailed E.ngineering 0.22 5.28 5.50 0.23 0.90 1.13 0.21 Construction Supervision 0.17 4.09 4.26 3.86 9.79 13.65 3.20 Feasibility Study 0.07 1.49 1.56 0.50 3.28 3.78 2.42 C. Technical Assistance 0.10 2.25 2.35 0.24 2.30 2.54 1.08 D. Training - 0.44 0.44 - 0.10 0.10 0.23 E. Land Acquisition - - - 31.94 - 31.94 * F. Contingencies 24.70 32.18 56.88 - - - - G. Fees - 0.25 0.25 - 0.25 0.25 1.00 Total 85.98 102.00 187.98 147.60 90.63 238.23 1.27 1/ Exchange rate US$1= P14.00 2/ Exchange rate US$1= P25 to P28 25 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 9: Economic Costs and Benefits EIRR EIRR Appraisal Actual Tagum - Mati Road Mabini - Pantukan - Banaybanay 27.1 34.6 (Sections: 1& 2 (37.37kms)) Banaybanay - Lupon - Cubao Jct. Mati 15.4 21.4 (Sections: 3,4 & 5 (30.78kms)) Escalante - Vallehermoso Road Old/New Escalante Toboso - Calatrava 31.8 38.9 (Sections 1,2,&3 (42.17kms)) Calatrava - San Carlos City - Vallehermoso 21.3 30.5 Sections 4&5 (41.48km)) 26 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 10: Status of Leffal Covenants Loan Original Revised Description Agreement Convenient Present fulfillment fulfillment of Section type status date date convenient Comment 3.02 5 C N/A N/A Employ consultants whose None qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. 3.04(a) 9 C N/A N/A Furnish to the Bank the plans, None specifications, reports and contract documents as the Bank shall reasonably request. 3.04(b) 1,9 CD N/A N/A Maintain records and After initial non-compliance, procedures adequate to record this was complied with. and monitor the progress of the Monitoring system has project and furnish to the Bank been set up and satisfactory information as the Bank shall quarterly reports were produced reasonably request. by DPWH and submitted to the Bank 3.04 (d) 9 CD 6/30/94 After completion of the project furnish to the bank a Project Completion Report( now ICR) of such scope and such detail as the Bank shall reasonably request. 3.05(a) 10 CP N/A N/A Take action as necessary to Generally complied w%ith. There acquire land as required prior were some instances, particularly to awarding any contract for in Metro Manila, where land work. required for the works was not acquired before contract. In some cases, the planned works were reduced to avoid these areas. There were no outstanding cases. 3.06(a) 10 C (i) 2/1/85 & N/A Furnish to the Bank for its None (ii) 7/1/85 & review and approval the list of yearly there- (i) bridges and (ii) national after. highway sections to be included in the following year's Program 3.06(b) 10 CP N/A N/A Cause to be applied, for the Generally complied with, except roads and bridges under the that seismic resistance is project, design standards generally not adequate in light of satisfactory to the Bank. modern practice. Some lapses have been corrected. 27 Loan Original Revised Description Agreement Convenient Present fulfillment fulfillment of Section type status date date convenient Comment 4.02(a) 1,3 C N/A N/A Maintain records adequate to IRevised format for project reflect resources and accounts required a revision to expenditures in respect of the the way records are maintained project. by DPWH. This revision has been corrected. 4.02(b) 1,3 C N/A N/A Maintain separate accounts Format of project accounts was reflecting all expenditures on not in accordance with Bank account of which withdrawals requirements. This has been are requested from the loan implemented account on the basis of SOE's. 4.02(c) I CD 6/30/85 N/A Furnish to the Bank not later Generally complied with. After and than six months after the end 1992 &;1993 while the project yearly of each fiscal year a copy of accounts were refornatted in thereafter the Audit Report. accordance with the Bank instructions, auditing was delayed but finally submitted. 4.03(a) 11 C N/A N/A Cause the funds for None maintenance of the National highways to be allocated in accordance with the EMK formula 4.03(b) 11 C N/A N/A Furnish to the Bank the result Since 1988 the EMK formula has of biannual review of the EMK been revised annually. formula to be implemented as revised 4.04 10 N/A N/A N/A Take all actions to adequately This type of Convenant is not maintain the road and bridge enforceable and is no longer network in accordance with included in loan documents. sound engineering practices. Kev: N/A = Not Applicable Convenient Type Present Status I = Accounts/Audits C = Convenant complied with 3 = Flow and utilization of project funds CD = Complied with after delay 5 = Management aspects of the project or executing agencies CP = Complied with partially 9 = Monitoring, review, and reporting 10 = Project implementation not covered in categories 1-9 11 =Sectoral or cross sectoral budgetary or other resource allocation 28 IMPLEMENTATION COMPLETION REPORT PEIILEPPINES FIFTH HIGHWAY PROJECT (Loan 2413-PH) Table 11: Compliance with Onerational Manual Statements Statement number and title | Description and comment on lack of compliance None. No significant lack of compliance with an applicable Bank manual statement. 29 IMPLEMENTATION COMPLETION REPORT PHILEPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Tablel2: Bank Resources: Staff Inputs Stage of project cycle Staffweeks US$ Preparation to appraisal 27.7 79.7 Appraisal 33.8 98 Negotiations through Board approval 17.8 51.6 Supervision 102.6 259.6 Completion 6 11.25 Total 187.9 500.15 30 IMPLEMENTATION COMPLETION REPORT PHILIPPINES Fifth Highway Project (2418-PH) Table 13: Bank Resources: Misions Stage of Performance Rating Project Cycle Month/ Number of Days in Specialized Implemen Develop Type year Persons Fields Staff skill tation ment of ________ man-days represented Status Objectives Problems** Through appraisal Feb-82 1 21/3 Hwy. Eng Jun-82 1 32/2 Hwy. Eng Sep-83 1 5 Hwy. Eng Appraisal - Board Jan-84 1 18 Hwy. Eng Board-effectiveness Aug-84 1 7 Hwy. Eng. (start up) Supervision I Feb-85 1 7 Hwy Eng. 2 1 4 II May-85 1 7 Hwy Eng. 2 1 4 III Oct-85 2 10 Hwy Eng. 2 1 4 Const. Industry IV May-86 1 7/2 Hwy Eng. 2 1 5 V Oct-86 1 7 Hwy Eng. 2 1 n/a VI Feb-87 1 14/4 Hwy Eng. 2 1 5, 10 VII Nov-87 1 15 Hwy Eng. 2 1 10 VIII Mar-88 1 15/2 Hwy Eng. 2 1 5,10 IX Aug-88 1 24/3 Hwy Eng. 2 1 5,10 X Feb-89 1 20/2 Hwy Eng. 2 1 5,10 Xi Jul-89 2 15 2 Hwy Eng. 2 1 5,10 XII Apr-90 2 18/3 2 Hwy Eng. 2 1 10 Hwy Eng. XiII Jun-90 1 18/2 Hwy Eng. 2 1 3,10 XIV Apr-91 1 20/3 Hwy Eng. 2 1 10 XV Mar-92 1 21/2 Hwy Eng. 2 1 4,5,10,13 XVI Oct-92 1 3,5 2 Hwy Eng. 2 1 1 XVII Jun-93 1 23/2 Hwy Eng. 2 1 1 XIX Feb-94 2 22/2 2 Hwy Eng. 2 1 Satisfactory since last supervision *Days in the fields The data is for total mission (X/Y), X=number of days on mission, Y= number of projects ** Type of Problems: I = Accounts/audits 10 = quality problems 3 = Flow and utilization of project finds 13 = delays 5 = Management aspects of the project or executing agen n/a = no specific problem identified 31 ANNEX B: Sector Specific Data 32 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 1: Local Roads and Bridges Maintenance Allocation CY 1980 - CY 1992) CALENDAR LOCAL ROADS AND BRIDGES MAINTENANCE ALLOCATION (Pesos 1,000) YEAR Barangay Road Municipal Road Provincial Road City Road Basic Maintenance Cost 40% Of EMK 30% Of EMK 50% of EMK 33 1/3 of ENK_ Per EMK 1980 P 11,324.00 1981 378,233 37,467.00 169,460.00 13,464.00 P 11,342.00 1982 383,154.00 38,953.00 168,732.00 13,952.00 P 11,342.00 1983 386,824.00 38,953.00 170,941.00 14,139.00 P 11,342.00 1984 386,824.00 41,312.00 167,545.00 14,139.00 P 11,342.00 1985 389,474.00 41,698.00 168,512.00 14,090.00 P 11,342.00 1986 512,347.00 55,002.00 212,318.00 19,148.00 P 14,745.00 1987 532,080.00 56,737.00 209,572.00 19,148.00 P 14,754.00 1988 595,959.00 65,891.00 242,311.00 22,729.00 P 17,104.00 1989 582,791.00 65,891.00 247,390.00 22,715.00 P 17,104.00 1990-1991 701,901.00 77,727.00 299,040.00 27,184 P 20,500.00 1992 * 848,289.00 * 92,300.00 * 349,876.00 * 31,562.00 P 28,000.00 * Estimates 33 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 2: Design Standards for National Highways Class Minor l/a 2/b 3/c 4/d Roads/a Average Daily Traffic 200 200-400 400-1000 1000-2000 >2000 Mini Desir Mini Desir Mini Desir mum able mum able mum able Design Speed (kph) Flat topography 60 70 70 90 80 95 90 100 Rolling topography 40 50 60 80 60 80 70 90 Mountainous topography 30 40 40 30 50 60 60 70 Radius (m) Flat topography 120 160 160 280 220 320 280 350 Rolling topography 55 85 120 220 120 220 160 280 Mountainous topography 30 50 50 80 80 120 120 160 Grade (%/6) Flat topography 6 6 3.0 5.0 3.0 4.0 3.0 4.0 Rolling topography 8 7 5.0 6.0 5.0 5.0 4.0 5.0 Mountainous topography 10.0-12.0 9 6.0 6.0 6.0 7.0 5.0 7.0 Pavement width (m) 4 5.5-6.0 - 6.1- -6.7- 6.7- 7.3 Shoulder width (m) 0.5 1.0 1.5 - 2.0 2.5 30 - 3.0 - Right-of-way width (m) 20 30 - 30 - 30 30 - 60 - Superelevation (m/m) ................ ............... ............................ 10 (max) .................................. Nonpassing Sight Distance (m) Flat topography 70 90 90 135 115 150 135 160 Rolling topography 40 60 70 115 70 115 90 135 Mountainous topography 40 40 40 60 60 70 70 90 Passing Sight Distance (m) Flat topography 420 490 490 615 560 645 615 675 Rolling topography 270 350 420 560 420 560 490 615 Mountainous topography 190 270 270 350 350 420 420 490 /a Gravel, crushed gravel or crushed stone; bituminous surface treatment or bituminous macadam pavement /b Bituminous macadam pavement; or bituminous concrete surface course /c Bituminous concrete surface course /d Bituminous concrete surface course; or portland cement concrete pavement 34 IMPLEMENTATION COMPLETION REPORT PHILPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 3: Vehicle Fleet by Type, 1981-1990 Year CARS JEEPNEYS BUSES TRUCKS MC/TC TOTAL 1981 318,086 364,706 17,821 108,140 186,990 995,743 1982 342,878 384,481 17,358 106,874 218,443 1,070,034 1983 367,062 427,926 16,714 111,369 216,425 1,184,496 1984 360,728 416,721 15,279 102,467 253,333 1,148,528 1985 347,949 405,830 14,736 93,938 242,990 1,105,443 1986 356,698 416,554 14,974 95,218 288,625 1,172,069 1987 358,768 441,757 15,123 97,752 249,568 1,162,989 1988 376,646 475,899 15,883 108,027 289,602 1,266,057 1989 412,998 536,406 16,959 118,662 358,975 1,444,020 1990 454,654 615,602 20,141 138,894 427,406 1,656,697 Average Annual Changes (%/6) 1981-83 7.4 8.4 3.2 1.5 18.2 9.1 1983-85 2.6 2.6 6.1 8.2 3.6 3.4 1985-87 1.5 4.3 1.3 2 2.6 2.6 1987-88 5 7.7 5 10.5 16 8.9 1988-89 9.7 12.7 6.8 9.9 24 14.1 1989-90 10.1 14.8 18.8 17 19.1 14.7 Changing Composition (%/O) 1986 30 36 1 8 5 100 1987 31 38 1 8 21 100 1988 30 38 1 9 23 100 1989 29 37 1 8 25 100 1990 27 37 1 8 26 100 35 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 4: Public Road Network 1995* CONCRETE ASPHALT GRAVEL EARTH TOTAL National Roads 7,431 6,376 12,637 173 26,617 Provincial Roads 803 2,563 20,731 5,060 29,156 City Roads 658 2,000 1,143 148 3,949 Municipal Roads 1,820 1,503 6,417 3,080 12,819 Barangay Roads 346 676 87,341 - 88,363 TOTAL 11,058 13,118 128,269 8,461 160,905 NATIONAL PROVINCIAL CITY/MUN. CALENDAR YEAR ROADS ROADS ROADS BARANGAY TOTAL 1990 26,155 29,156 16,769 88,363 160,443 1991 26,155 29,156 16,769 88,363 160,443 1992 26,273 29,156 16,769 88,363 160,561 1993 26,345 29,156 16,769 88,363 160,633 1994 26,593 29,156 16,769 88,363 160,831 1995 26,617 29,156 16,769 88,363 160,905 TOTAL 158,138 174,937 100,613 530,178 963,866 Note: All local roads data remained unchanged since 1991 when these roads were transferred to Local Govermment Units (LGU). *Source: Staff Appraisal Report (updated) 36 IMPLEMENTATION COMPLETION REPORT* PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) Table 5: Revenue from Road Transport and Expenditure on Roads, 1981-1990 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Revenue/a Fuel taxes 4,499 2,842 3,063 5,305 7,195 8,345 9,487 10,831 11,914 - Motor vehicle registration fees 505 541 577 568 876 926 921 985 1,103 - License and plate fees 47 28 29 80 79 64 65 72 72 Otherrevenue 98 125 126 141 161 191 235 244 272 Total 5,149 3,536 3,795 6,094 8,311 9,526 10,708 12,132 13,361 - Expenditure/b Construction 2,948 3,694 3,909 2,514 3,182 4,180 4,679 5,772 8,645 11,395 Maintenance 1,139 1,229 1,158 1,252 1,346 1,531 1,580 1,790 1,783 2,920 Total 4,087 4,927 5,067 3,766 4,528 5,711 6,259 7,562 10,428 14,315 /a Excludes revenues from import duties on roads transport sector. /b National govemrnent expenditures only. Sources: Bureau of Internal Revenue, Land Transportation Office and DPWH. (Staff Appraisal Report - updated) 37 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2413-PH) Table 6: DPWH Medhin - Term Fnandal Pbn (1993 - 1998) (Curret Prices, in Thoumd Pm) Fbnaal Plan (Calendar Years) TOWl Expenditures 1993 1994 1995 1996 1997 1993 (1"3-1998) Capital Outlays DPWH Total 17,049,119 20,453,1S1 24,508,325 21,077,000 27,753,000 32,203,000 143,043,625 of which Highways and Roads 10,760,667 11,194,240 12,722,471 17,634,000 22,479,000 25.713,800 100,504,173 of which New Highways & Road Projeot to sta in 1993-1998 period 9,087,432 7,743,082 7,131,192 10,127,246 21,379,9S5 25,3S1,033 S1,356,970 Other Projects 1,673,235 3,451,15S 5,584,279 7,506,754 599,015 332,767 19,147,20S 38 APPENDIXES 39 IMPLEMENTATION COMPLETION REPORT PHILIPPINES FIFTH HIGHWAY PROJECT (Loan 2418-PH) AIDE MEMOIRE 1. The Fifth Highway Project, Loan 2418-PH, was approved by the Board on May 17, 1984 and declared effective on September 27, 1984. The closing date was originally planned for December 31, 1989. Unfortunately due to a number of factors, extemal and intemal to the project management, the project implementation period was extended and the project officially closed after four extensions on December 31, 1993. 2. A World Bank mission consisting of Ephrem Asebe (Engineer/Economist) visited the Philippines from March 6 to March 12, 1995, to solicit the views of the borrower and implementing agencies, to provide advice and support to the govemment's efforts to make its own contribution to the ICR, and to collect additional data for the preparation of the ICR. The mission is grateful for the cooperation received and would like to thank DPWH. 3. During the mission the objectives of the newly introduced ICR formal was explained to a team designated by the Govermment to undertake the task of organizing and overseeing the preparation of the ICR. Discussions were held on the Govemment's draft ICR. The mission encouraged the team to focus on: a) experience, b) evaluation of the Govemment's and the Bank's performance during the implementation phase of the project with the objective of drawing appropriate lessons from the implementation and operation experience. The team appreciated the guidance and support offered by the mission in preparing the ICR. 4. The various views expressed on implementation and operation phases of the Fifth Highway Project can be summarized as follows. Both the Bank and the implementing agencies perfommed satisfactorily well under difficult circumstance. The Bank's flexibility to restructure the project components was crucial to the overall success of the project. From the start the project faced a number of difficulties. These include: (a) initial delay by one year due to need for realignment of funds in support of the completion of the ongoing Third and Fourth Highway Projects; (b) political difficulties due to the EDSA February 1986 Revolution, and the subsequent changes in administration resulting in the introduction of new procedures with rapid tumover of senior staff which made it particularly difficult to plan and execute the human resource development project; (c) law and order problems in some project areas, the earth quake in July 2990 and eruption of Mt. Pinatubo in 1991 which resulted in abandonment of some contracts and caused damage to roads and bridges; 40 (d) critical shortage of counterpart funding due to cutbacks in local funding as the government sought to decrease the mounting budget deficit in order to regain economic stability; and (e) the practice of contracting out very short sections of road for restoration led to very large number of small contracts which became unwieldy for adequate supervision and management; attracted inadequately equipped contractors and resulted in poor quality. In 1991 program longer contracts were let following Bank's advice. 5. Despite these difficulties, the overall outcome of the project was satisfactory. Most of the physical targets were met and in some cases exceeded. The planned bridges were all replaced. Accidents were reduced. Accessibility was made more reliable and about twice the total appraised length of roads were restored to routine maintenance with no increase in the total dollar cost of the project because of the devaluation of the peso, but with resulting delays in implementation time. Also the project is considered likely to be sustainable given current Government commitment to road maintenance. Economic rates of return calculated for improvement of asphalt concrete projects show in all cases to be much higher than at appraisal. The economic rates of return for roads under restoration are known to be even more higher. 6. There is no specific operational plan for the sub-projects financed under the loan. The optimization of the benefits of the country's road assets largely depends on government's commitment to road maintenance and the amount of resources the government makes available for maintenance. However, there are signs for optimism. Since 1990, the Government has adopted a revised Equivalent Maintenance Kilometer (EMK) formula for the allocation of Highway Maintenance Funds. The net increase in real EMK since 1991 was 13.32% (1991), 15.79% (1993) and 17.17% (1994). Also in 1990, the Government has implemented the privatization of national road (maintenance by contract). The FY 1995 budget for maintenance was increased by 86% over FY 1994. Further, the Fifth Highway Project enhanced institutional capacity of a large number of national contractors by providing opportunity to perform under more strict supervision of the engineering staff of Project Management Office. The experience gained under the project would thus further enhance the quality of the maintenance work as more and more maintenance work is contracted out. The promotion of regional, district and maintenance engineers based on the performance and quality of works in their jurisdiction is expected to further assure quality and timely completion of project. 7. At the Government level there were concems about the general poor quality of works referred to in a number of Bank side memoirs. One result was the institution by the Secretary of Quality Assurance Units. There was also appreciation for the significant contribution made by the international consultant in helping to improve the quality of programming, design and construction. It was affirmed that in the future the government should continue to promote quality of work by strengthening the contracting and consulting industry, tightening up on the pre-qualification of bidders, and provide incentives for early completion. 41 8. Among the lessons that need to be drawn from the implementation experience of the Fifth Highway project include: (a) quality of works should not be compromised; (b) bonuses for completion to higher than specified standard and before the stipulated contract time should be considered; and (c) competent and adequately equipped local contractors competing with foreign firms could help improve the standard of quality of works in the construction industry. 9. The Government's contribution to the Fifth Highway Project ICR will be formally made available to the Bank by March 31, 1995. 42 Appendix B IMPLEMENTATION COMPLETION REPORT P H I L I P P I N E S FIFTH - IBRD ASSISTED HIGHWAY PROJECT LOAN 2418 - PH PART It PROJECT REVIEW FROM BORROWER'S PERSPECTIVE A. Introduction 1. A strong and growing demand for transport services by 9% a year between 1970 and 1980 was generated due to the growth of the Philippines economy at 6.0% per year. To meet this demand, the Government undertook investments totalling around P20 billion (US$1.4 Billion), principally in highways, and also in other transport modes. As a result, the public road network grew from 65,000 km in 1970 to 155,000 km in 1982. With the majority of the national highways either already improved or under improvement, the Philippine Government turned its attention to improving highway maintenance and upgrading rural roads while limiting highway investments to strengthening weak bridges and highways sections in generally satisfactory network. 2. The transport sector of the Philippine Government began seeking assistance from the World Bank to finance the upgrading of road transport infrastructure under the previous four Highway Projects: Loan 731-PH, First Highway Project; Loan 950-PH, Second Highway Project; Loan 1353-PH, Third Highway Project and Loan 1661-PH, Fourth Highway Project. 3. The Fifth Highway Project Loan amounting to US$ 102 Million was approved on June 04, 1984. B. Project Objectives 4. Project objectives were to a) improve the existing network of national highways and bridges; b) raise maintenance to adequate levels and in the process remove the backlog of restoration works on national highways; c) improve general. highway management,-. particularly execution of maintenance and thus further strengthen the institutional framework of MPWH and its field organizations; and d) develop further the domestic construction .ndustry. 4 3 Appendix B B.1 Project Description 5. The project scope was designed to include the following components. a) Restoration program for some 435 bridges and culverts on national highways with an estimated total span in length of 9,282 LM; b) Improvement of national highway section totalling about 83 km; c) Restoration program for some 1,223 km on national highways; d) Consulting services for i) detailed engineering and construction supervision; ii) preparation of future projects and iii) studies related to highway management, traffic safety and domestic construction industry; e) Technical assistance to strengthen MPWH highway maintenance capabilities, to help MOTC in carrying out a review of the road transport industry in order to improve its operation, and developing plan for the deregulation of road transport and interisland shipping, and help CIAP in further developing the domestic construction industry; and f) Training of MPWH and CIAP staff. B.2 Project Design 6. In 1982, the National Transportation Planning Project (NTPP) study indicated that the deteriorating condition of the national highway network was a critical issue facing the transport sector as a result of inadequate maintenance. The study also stated that inadequate maintenance funding might be a factor, although it was not only a problem to be addressed. NTPP's main recommendation were that MPWH should: a) emphasize that maintenance of existing facilities has priority over any expansion or improvement project; b) carry out a detailed survey of the conditions of national highway network and identify roads that can be adequately maintained that are to be restored, and that need to be reconstructed, then raise. the road restoration program to a level that will bring the network to a maintainable condition within a reasonable time span; and c) upgrade its maintenance organization, provide for adequate maintenance funding (including a permanent calamity fund) and institute a monitoring and cost accounting system. 2 44 Appendix B B.3 Assessment 7. The objectives of the Project were substantial and consistent with the macro policy objective of the Philippine Government to foster economy through institutional strengthening and reduction of transport costs. Generally, the objectives were attained as conceived considering that the condition of the road network of national highways and bridges had improved. The timely adoption and implementation of the revised Equivalent Maintenance Kilometer IEMK) formula for the allocation of Highway Maintenance funds indicated Government's commitment to further improve maintenance policy. In 1990, the Government implemented the privatization of national road maintenance or Maintenance by Contract IMBC) as provided for in the General Appropriations Act. C. Project Implementation C.1 Civil Works 8. The Loan Agreement was signed on June 4, 1984, and the project became effective three months later, on September 05, 1984. Implementation of Civil Works was deferred for one year after loan effectivity due to realignment of funds in support of the completion of on-going Third and Fourth IERD Highway Projects. 9. The Project made a good start in 1985, however, due to political and economic crises that beset the country after the EDSA February 1986 Revolution, the project suffered another set-back in the implementation. 10. In 1989, the Project was able to recover and gain momentum in the execution of its projects, however, for a short time. Unfortunately, the project experienced further delays caused by external factors which are beyond the control of the implementing office, namely: a) critical shortage of counterpart financing (cutbacks in the local counterpart as Government sought to decrease the mounting budget deficit); (b) Force Majeure: i) Baguio - Mt. Data Road suffered damages caused by an earthquake in July 1990 which resulted to 'mutual termination" of the contracts. As of termination the total physical accomplishment consists of approximately 52.00 km. of concrete roads (PCCP and-. 52.53 Km. of subbase) ; and ii) eruption of Mt. Pinatubo in 1991 affected some restored or improved 3 45 Appendix B roads and bridges ; c) unpredictable peace and order situation in some project areas ; d) frequent changes of administration coupled with introduction of new procedures. 11. Further delays were avoided by simplifying the process of bidding for the Second and Third Year Program. 12. Revisions to the Project The Loan Agreement for the Project was amended on various occasions, viz: a) With the devaluation of the Peso in 1989, surplus funds were realized and reconstruction and improvement of additional roads was requested for funding under the Restoration Program Component. The loan was amended to include the following : i) Escalante - Vallehermoso Road, Negros Oriental; ii) Tagum -Mati Road, Davao del Norte and Davao Oriental ; iii) Metro Manila Urban Roads: iv) Additional Bridges for restoration; and v) Periodic Maintenance. The Project Cost increased from P3.1 Billion to P4.1 Billion, however, in terms of US Dollars, it is still within the appraisal estimate. b) In the Third and Fourth Highway Projects, detailed engineering and construction supervision of Restoration projects was carried out by the Regional Office concerned, while the Bureau of Maintenance was responsible for the overall project management. In 1990, however, as desired by the Bank Mission that more attention be given to the aspect of detailed engineering and construction supervision of restoration works program, local Consultants were hired to carry out such function. The Road Restoration Projects were repackaged to three clusters, viz: i) Cluster A Region l,II,III and CAR); ii) Cluster B (Region IVA and IVB, NCR and V)and iii) Cluster C (Region Vl, VI[, VIII, IX, X, Xi and XI[). c) Amendment of Part B of Schedule 4 of the Loan Agreement - Procurement of Civil Works related to the construction of Bridges and culverts under Reconstruction Program for bridges on National roads through Force Account. 4 46 Appendix B C.2 Feasibility Study and Detailed Engineering for Future National Highway Projects. 13. The Feasibility Studies-PMO in coordination with Renardet S.A. Consulting Engineers and Hoff & Overgaard a/s, Planning consultants prepared a prioritized listing of the whole arterial road network which serve as the basis for implementation under the on-going Highway Management Program and other Overseas Development Assistance (ODA) funded civil works construction. C.3 Functional Road Classification Study. 14. The DPWH has the benefit of reviewing the existing road classification system in the Philippines with the conduct of the Functional Road Classification Study. The study, which aims to rationalize the classification of the public road network in the Philippines recommended a system of classification to be adopted. However, since the recommended system would modify the existing system classification, its implementability and the political and general acceptability need to be confirmed. Unfortunately, the needed consultations with the different sectors were not carried out after the study in view of the political events, and changes that took place in 1986 to 1992. Nevertheless, this initial study has recently (1994)been updated and continued further (thru a separate T.A. for the ADB) into its final form which is now the subject of legislative process. C.4 Road Traffic Safety Study. 15. BCEOM in association with R.C. Gaite Consultant, recommended in their Report an interim phase of two years which would be essentially preparatory, the launching of a 5-year Road Safety Program which initially cover Region IIl (Central Luzon) and Region VIl (Central Visayas). It is anticipated that the Program would achieve on a yearly basis over a 7-year period in the pilot regions: (see Appendix 13) - 30% reduction in the number of accidents; - 67% reduction in the number of fatalities, and - 30% reduction in the number of injuries. 5 47 Appendix B C.5 Construction Industries Study. 16. The long term objective of further developing the domestic construction industry under the Fifth Highway Project was continued under loan 2418-PH. The Construction Industry Authority of the Philippines. (CIAP) took the lead in advancing Construction Industries in the Philippines and has completed Studies which will have a positive effect - enhancing quality standard on both locally and Bank financed projects. Also, CIAP developed construction industry monitoring system and expanding its management information system through its Construction Industry Data Bank (CIDB). Please refer Appendix 12. C.6 Training. 17. The original proposal was to send the Department Staff for training abroad, however, this program was shelved after the February Revolution due to government reorganization and economic constraints. However, the Department requested that the training program be conducted in-house in order to have a wider participation of technical people, particularly those who are involved in the implementation of Foreign assisted projects. A study on this regard was conducted by NEDA and DPWH to be implemented under loan 3430-PH. C.7 Assessment 18. Against bleak background brought about by political, economic crises and natural calamities, etc., the Government through the responsible agencies, continued its commitment and perseverance enabled them to achieve its objectives. The project proved to be a potentially important instrument for regional development. 19. The Physical Accomplishment exceeded the appraised estimates, as shown in Tables 5, 5. 1, 5.2 & 5.3. Accessibility was made more reliable. 20. Generally, the quality of works executed under the Project was above average and in some cases very good. There can be no denying that there were instances the quality of works reflected some deficiencies as cited- in the Aide Momoires's. However, these occurrences were localized and should not be considered as representing the overall quality of the works carried 6 48 Appendix B out. These deficiencies were remedied whenever observed and brought to the attention of the Supervising consultants who ensured that the specifications were met. 21. The experience of the 1990 earthquake that hit Baguio City provided an opportunity to review approaches in design and construction so that the infrastructure are seismic resistant. 22. The Technical Assistance for MPWH, MOTC and CIAP were successful, considering that required manuals in accordance to Project objectives have been produced and now being adopted by the construction industry. Please see Appendix 12. D. Operation Experience 23. The sustainability of the benefits derived from the improved, reconstructed and restored road and bridges under the project will depend on the Government's commitment to carry out both routine and periodic maintenance. D. 1 Assessment 24. The Philippine Government ensured timely adoption and Implementation of the revised Equivalent Maintenance Kilometer (EMK) formula for the allocation of highway maintenance funds. The funds allocated for maintenance is a reflection of the Department of Public Works and Highways' commitment to improve maintenance and restoration efforts and its intention to reduce new construction activities as necessary during the period. Since 1991, the EMK basic cost has been increased considerably, as shown below 1991 1992 1993 1994 Increase in EMK 100% 136.82% 153.74% 165.85% Cost (P20,500) (P28,049) (P31,517) (P34,000) base year (+36.82%) (+53.74%) (+65.85% Increase in cost 100% 123.50% 137.95% 148.68% undertaking road ( 0 ) (+23.50%) (+37.95%) (+48.66%) maintenance base year Net Income in real terms _ 13.32% 15.79% 17.17% 7 49 Appendix B E. Government Performance 25. The definition of Projects scope and its implementation schedule were predicted on assumption that the required funds would be available to the project in a timely manner. Unforeseen needs compelled the government to divert funds and there were instances when it was not able to meet the obligation on time which caused a set- back to the project. 26. As stated in the Staff Appraisal Report (SAR) restoration works are to be of the nature of regravelling, asphalt concreting and DBST. E.1 Assessment 27. The Bank realized this problem and was properly addressed when a joint review of Bank's portfolio with NEDA was conducted aimed to reduce counterpart funds in the future projects. 28. Although there was a program for DBST, it was not carried out considering that the size of the sub- projects were not large enough to encourage contractors to invest in the necessary equipment as most of the contractors did not have necessary equipment. Hence, it was agreed that this component will be undertaken in the follow-up Highway Management Project, where the contract packages were expected to be large, and experienced international contractors having the necessary equipment were expected to participate. F. Bank Performance 29. Between the MPWH and the Bank, the relationship was productive. Bank supervision missions were fielded regularly. G. Lessons Learned 30. In implementing the IBRD assisted Fifth Highway Project, the DPWH was able to benefit from the experience gained during implementation. The following are noteworthy: a) The packaging of the projects was substantial to encourage qualified domestic contractors to participate and offered opportunities for them to exercise their skills and capabilities. 8 50 Appendix B This type of strategy had a positive impact to the development of the local construction industry. b) The use of consultancy firms for the design and preparation of plans and bidding documents provided much flexibility and independence to the PMO without being too dependent on the Department's Bureau of Design. Further, construction supervision by private consultants (firms) ensured regular availability of qualified and experienced personnel whose activities are not hampered due to the unavailability of essential support services, viz: transport, equipment etc. The Consultants being obliged to submit reports on a regular basis, ensures that the PMO receives well compiled and well documented progress reports indicating the actual position of the works at the different sites. c) The Project implementation when carried out with direct involvement of PMO staffs/engineers provides opportunities to develop their managerial skills. Thus, it strengthened the capability of the PMO. d) The offer of an incentive bonus to the contractor as the implementation of Tagum - Mati Road was a success wherein the contractor was induced to complete the project on time. Completing the work on time despite the odds served as an indicator of competence as the contractor is concerned. The adoption of such practice is recommended for future projects. e) Whilst there would. be a need for engaging international consultants and international contractors to undertake very large road rehabilitation projects, optimum institution building could be achieved in respect of DPWH contractors by maintaining sub-project sizes at a reasonable level which is not too high to shut out the experienced large scale local contractors, and at the same time be attractive to encourage the participation of competent foreign contractors. The best method of developing the local construction industry is to offer them-. opportunities to perform, which in turn would encourage them to invest in better types of equipment which they lack. 9 51 Appendix B f) As stated in the Staff Appraisal Report (SAR), the restoration works are to be of the nature of regravelling, asphalt concreting or DBST, but the general demand from the Regional Directors and the public is that PCCP be adopted in most cases. Project designs must fit local conditions and should therefore be concieved in consultation with the local residents & beneficiaries. 10 52 Appendix B Table 1: Summary of Assessment A. Achievement of objectives Substantial Partial Negligible Not applicable (/ M/ (1) M1 Microeconomic policies F D o Sector policies [1D [ a Financial objectives [ [ LI° Institutional developmzent L ° [Z Physical objectives 'I L LO Poverty reduction Er I OI 6ender issues L L O [ Other social objectives [ ° LI Environmental objectives L ° O L Public sector management - V [ ° Private sector management L] F'I FI Other (Specify) L°I L LI LIIO B. Project sustainability Likelv Unlikely Uncertain 1/) (I) (1) C. Bank perforeance HiQhly Satisfactory Satisfactory Deficient (I) (U) (I) Identification [L LI Preparation asisstance I °I Appraisal F7I ° I Supervision ED' ] D 1 :' 53 Appendix B Hiqhly D. Borrower performance Satisfactory Satisfactory Deficient (/) (I) t/) Preparation O Implementation F i ° Covenant compliance °ll Operation (if applicable) F Hinhl y Hiohlv E. Assessment of outcome Satisfactorv Satisfactory Unsatisfactory uncatisfactory 1 2M Ir IEr I lI. 1~4 IEC PHILIPPINES FIFTH HIGHWAY PROJECT ~>lars by 7 17 't JPrevious Highway Project Components r~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- 1~-C,.w. 1/, \| -, -drelrEwaF 'I \ ---_ FAiILITE STUDIES ANEIQE EIRST OIIAOIOSA E3DJECT LAOA Tr-PU- - at EtboaE..t ~~~~~~~~~~~~~~~~~~~~~~~OIAft G r.ME aTE. erEh., tnte - / t ih ' - COESTPIJCTIOU USE IU,RIVEUEST S YCOTRDEIUUR4UU TEJECEICEAR PHE- oT r a Y v_] _ ! A3~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SER WURUSUoPS ! E JTHzR UIU8IEU PROJEUTIIOAS rEEl-Rn as,l Isatyol, '. . _ _RE _ ERIOESSO t' \ _;/ JS, 1~~~~~~~~~~~~~~~~~~~ E XISOIRO EKIOR EIGWFTATS PANAYIWAY , < / t a ! 6~~~~~~ INTEERATIOSUL AIRPORT _ ~ ~ ~ ~~~ ~~~~~~~~~~~~~~~~ A ;; RPORTs Ie... 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