Ecuador - Fifth Highway Project

Document of The World Bank FOR OmCIL USE ONLY Repot No. 8161 PROJECT COMPLETION REPORT ECUADOR FIFTH HIGHWAY PROJECT (LOAN 1429-EC) NOVEMBER 6, 1989 Infrastructure and Energy Division Country Department IV Latin America and Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the perfonmsoce of their offcida duties Its contents may not othenwise be disclosed without World Rank anthorization.  FOR OFFICIAL US ONLY THE WORLD SANK Washington. D.C. 20433 US.A. Olfike of DiEtGct~ November 6, 1989 MEHOPANDMUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJFCT: Project Completion Report on Ecuador Fifth Highway Pro_ect (Loan 1429-EC) - Attached, for information Is a copy of a report entitled "Project Completion Report on Ecuador Fifth Highway Project (Loan 1429-EC)" prepared by the Latin America and Caribbean Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment 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 authodation.  FOR OMCIUL USE ONLY ECUADOR PROJECT COMPLETION REPORT FIFTH HIGHWAY PROJECT (LOAN 1429-EC) Table of Contents Page No. Preface- ...................................................... (i) Evaluation Summary .................................. .............. (ii) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE ...................... 1 Project Identity ................. 1 Project Background, Objectives and Description ................... 1 Project Design and Organization .................................. 1 Project Implementation ................................... . 2 Project Results and Sustainability ............................... 3 Bank Performance .................................. 4 Borrower Performance .................................. 5 Project Relationship .................................. 6 Consultant Services .................................. 6 Project Documentation and Data .................................. 6 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .................. 7 PART III: STATISTICAL INFORMATION ................................... 8 Related Bank Loans ............................................... 8 Project Timetable ................................................ 9 Project Implementation ............................................ 10 Project Cost and Financing .......................... 11 Project Results ......................... 13 Status of Loan Covenants ......................... 14 Use of Bank Resources............... ........... 15 This document has i estcted distribution and may be used by recipients only in the performanc of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorzation.  (4) ECUADOR PROJECT COMPLETION REPORT FIFTH HIGHWAY PROJECT (LOAN 1429-EC) PREFACE This is the Project Completion Report (PCR) for the Fifth Highway Project in Ecuador for which Loan 1429-EC in the amount of US$17.5 million was approved on May 19, 1977. The loan was closed on June 30, 1985 four years behind schedule. An amount of US$3,200,000 was cancelled on October 21, 1986. An additional amount of US$329,774.97 was cancelled on February 4, 1987, the same date the last disbursement was made. The PCR was prepared by the Infrastructure and Energy Operation Division of-Country Department IV of the Caribbean Regional Office. in accordance with the 'Guidelines for Preparing Project Completion Reports" of June 1989. following the special instructSons for long overdue PCRs. Given the time elapsea since closing of the loan (more than four years), and the fact that MOP staff involved in project execution has disbanded, Part II was not prepared. However, MOP sent in October 1987 a draft PCR according to the old instructions, the conclusions of which were essentially the same outlined in paragraphs 15 and 16 of Part I of this report. Preparation of this PCR was based on the Staff Appraisal Report, the Loan Agreement, supervision reports, correspondence between the Bank and the Borrower, and internal Bank memoranda.  tii) ECUADOR PROJECT COMPLETION REPORT FIFTH HIGHWAY PROJECT (LOAN 1429-EC) EVALUATION SUMMARY Obiectives 1. The Fifth Highway Project shared with the preceeding Fourth Highway Project, Loan t231-EC, the same sector development objectives of upgrading the transport system and correcting institutional deficiencies within a broad plan of fostering economic growth and de7elopment of public investment. (Para. 1 of the PCR) Implementation Experience 2. Implementation of the civil work component (98Z of the estimated project cost) was marred by persistent difficulties: (1) conceptual differences on the type of roads to be constructed; (ii) slow contracting; (iii) defective engineering; (iv) poor performance of contractors; (v) ineffective MOP management; (vi) labor conflicts affecting the main contractor; and (vii) rain-induced extensive floods during two successive years. The combination of all these difficulties delayed execution of the project by four years, impeded implementation of the roads in the Puerto Ila-Doblones area and prevented completion of the Duran-Boliche road within the extended project period. (Para. 6 of the PCR). Implementation of the Feeder Roads Program Study (2X of the estimated project cost) was carried out satisfactorily by well selected foreign consultants. (Para 10 and Table 6C of the PCR). Results 3. The only component that reached fully its objectives was the Feeder Roads Program Study which established criterias and standards for selection and design of feeder roads, prepared manuals for the design, economic studies and construction of feeder roads, prepared a regional program for secondary and feeder roads (1500 Km) and recommended organizational arrangements for the implementation of this and further regional programs. (Para. 10 of the PCR). 4. Construction of the main and feeder roads in the Puerto Ila- Doblones area, totalling about 100 Kms, was suspended in 1984 because an accumulation of errors, weaknesses and unforseen events impeded further implementation (Paras. 7, 8 and 11 of the PCR). A similar combination of negative factors delayed for several years construction of the Duran- Boliche four-lane highway (25 Kms), which was completed by the Government in December 1988, more than three years after Loan Closing date, at a total cost 68X higher than evaluation estimates (Para. 12 of the PCR).  Sustainabilitv 5. Sustainability of the wll prepared Rural Roads Study was impaired by MOP's lack of capability, or willingness to implement the organizational and desigr recommendations of the study during the Implementation of the succeeding Rural Roads Program initiated in 1982 (Para. 10 of the PCR). The roads in the Puerto Ila-Doblones area were not completed and will most probably never be built as designed (Para. 11 of the PCR). Feasibility of * the Duran-Boliche expressway has been seriously diminished by the much higher construction cost and lower rate of traffic increase, which have reduced the internal rate of return from 20? estimated at appraisal to 5?. Moreover, design errors in both the urban and the rural sections of this road have denied its sustsinability as an expressway. (Para. 12 of the PCR). FindinRs and Lessons Learned S5. During preparation of the project, the Bank should have made a better assessment of unfavorable conditions affecting design ane implementation of both roads. as well as the shortness of the construction period available each year. (Para. 13 of the PCR). During implementation the Bank should have been willing to take strong corrective actions, such as suspension of disbursements. (Para. 14 of tha PCR). In preparation of possible future investment projects in Ecuadot. the Bank should ensure that all potential unfavorable conditions have been taken into account properly, and should design the project in tranches with precisely defined targets to be achieved in given time-frames to facilitate timely application of corrective measures. (Para. 17 of the PCR). 7. MOP's weakness during project preparation and implementation were caused mainly by: (i) discontinuity of high and mid level assignment; (ii) chronical shortage of qualified personnel; (iii) reluctance of mid level staff to assume administrative and technical responsibilities; and (iv) extreme delays in the processing of payments to contractors and consultants. (Para. 15 of the PCR). To attain greater effectiveness in the preparation and implementation *of road projects, MOP would have to correct the ingrained weaknesses described above by (i) ensuring greater permanency of managerial and technical staff; (ii) upgrading the technical capacity of its staff through increased salaries and better use of the technical assistance in highway planning, design, .onstruction and maintenance received under Loan 1231-EC; (iii) fostering decision taking capacity of mid level staff; (iv) streamlining administrative procedures; and (v) making high level technical decisions more independent from political interests. (Para. 16 of the PCR). To allow expeditious and effective processing of medium and large investment projects. the Government would have to streamline its administrative procedures, strengthen collaboration between public agencies, free technical decisions from political interference, and ensure firm commitments to the project in timely provision of counterpart funds (Para. 18 of the PCR).  ECUADOR PROJECT COM4PLETION REPORT FIFTH HIGHWAY PROJECT LOAN 1429-EC PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity - Project Name: Fifth HighwayProject - Loan Number- 1429-EC - RVP Unit: Latin America and Caribbean Region Country Department IV - Country: Ecuador - Sector: Transport - Subsector: Highways Project Background Objectives and Description 1. The Fifth Highway Project emerged from components of the Fourth Highway Project, Loan 1231-EC, which had been substantially delayed in their preparation by the time of appraisal of that project (February 1975). Therefore, both projects shared the same sector development objectives of upgrading the transpoit system and correcting institutional deficiencies within a broad plan of fostering economic growta and development of public investment. These objectives were achieved only to a small degree, in the Fifth Highway Project, because of defective design and poor execution of the civil works components. 2. The project included: (i) execution and supervision of civil works for the construction of a four-lane paved highway (25 Km) between Duran and Boliche, and a development road (29 Km) between Puerto Ila and Doblones, including 75 Km of lateral feeder roads; and (ii) pre-investment and organizational studies for the Dreparation of a secondary and feeder roads program in the provinces of Guayas, Los Rios and El Oro. Project Design and Organization 3. The project was designed as an infrastructure project to be prepared and implemented by the Ministry of Public Works (MOP) with an additional innovative component for the organizational study of feeder roads, demanding close liaison with other Government and regional agencies involved in agricultural development programs. This component was successfully carried out, whereas implementation of the civil works components stumbled over conceptual discrepancies between MOP and the Municipality of Guayaquil on the right of way acquisition for adequate execution of the four-lane highway through the urban area of Duran, and between MOP and the Ministry of Agriculture on the area of influence and function of the Duran-Boliche road.  4. Although an agreement between MOP and the Municipal Council of Guayaquil on the required right-of-way acquisition for the urban section of the Duran-Boliche road was signed as a condition for negotiations, the Municipal Council, confronted by population and political pressures. later backed off and MOP never had the power nor will to enforce compliance of the agreement. These discrepancies caused serious delays in work execution and, coupled with cost considerations, led finally, in September 1983. to the deletion of the 1.8 Km urban section of the road from the project scope. 5. Preparation of the Puerto Ila-Doblones road and its lateral feeder roads had been delayed by long discussions on the extent of the area to he served (64,000 Km high yield hectares versus 200,000 partially low yield hectares). length of the road (29 Km versus 86 1(), and type of road (penetration road versus secondary road). At appraisal, agreement was reached on the lower scope for the project, however, the type of road, described as *development road", was not defined precisely. This confusion, coupled with other factors discussed in paragraphs 7 and 8 below, led finally to the suspension, in September 1983, of road construction under the project in this area, except for the north-south La Bramadora-La Palizada feeder road (15Kms), and to the transfer of loan funds to the Duran-Boliche road. This actdon wa. also prompted by the Government's decision to raise the level of the huge Daule-Peripa dam under construction (with IDB financing), which resulted in a substantial expansion of the flood area and, consequently, in a reduction of the area to be served by the proposed road system. Project Implementation 6. Implementation of the project was marred by persistent difficulties, affecting particularly execution of the roads in the Puerto Ila-Doblones area: (i) the above discussed conceptual differences; (ii) slow contracting; (iii) defective engineering; (iv) poor performance of contractors; (v) ineffectiv3 MOP management; (vi) labor conflicts affecting the main contractor; and (v4i) rain-induced extensive floods during two successive years. The combination of all these difficulties delayed execution of the project by four years, impeded implementation of the roads in the Puerto Ila-Doblones area and prevented completion of the Duran- Boliche road within the extended project period. Measures foreseen at appraisal to prevent some of these difficulties were not effectively implemented by MOP, several difficulties were unexpected. 7. Although satisfactory contracting procedures had been agreed at negotiations, unexpected delays occurred because of undue interference of the administrative and the legal state controlling agencies (Contraloria and Procuraduria). Design modifications introduced during implementation of the Duran-Boliche road, due to unfavorable soil conditions encountered along a 2 Km stretch and to the addition of major culverts and cattle- underpasses initially not included in the project scope, produced substantial delays and cost increases. A first Bank review, before appraisal, of the Puerto Ila-Doblones road engineering showed that MOP had chosen too high standards and that the consultant (local) had made a number of serious errors. MOP agreed to contract a revision of the engineering, which was not completed until after appraisal. The later execution of the  3 works revealed further critical deficiencies of the revised engineering: (i) failure to detect unstablti soil conditions due to the existence of thick layers of expansive clays a few meters under the surface; and tii) inadequacy, and partially non-existence, of sources of materials foreseen. imposing the use of sources outside the project area with much larger hauling distances and thus increasing project cost by about 402. 8. The contractors, the consultants and MOP revealed a continuous lack of ability to deal adequately with these technical difficulties, which were used by the contractors to try to obtain undue administrative advantages. The weakness of MOP to deal with these problems was 'urther exacerbated by: (i) constant policy shifts because cf frequent changes of MOP Ministers and high and medium level staff: and (ii) persistent delays of payments to the contractors and consultants because of cumoersome bureaucratic procedures, lack of timely availability of counterpart funds, and difficulties, extending over three years, in the application of the price escalation formulas agreed at appraisal, and later of similar formulas established by law. These compounded difficulties engendered a labor strike that paralyzed for over a year construction activities by the contractor of two of the three sections of the Duran-Boliche road and of the Puerto Ila-Doblones road. In addition, the abnormal rains brought about by the 'El Nino" current phenomenon from mid 1982 to mid 1984 decreased even more the short dry season during two successive years, further delaying project implementation. 9. Some risks and measures correctly identified at appraisal were not satisfactorily taken into account or acted upon 'y MOP: arrangements needed with other Government agencies; need for satisfactory engineering, adequate contracting procedures and timely counterpart financing; and efficient use of agreed price escalation formulas. The effect of the six month annual rainy season preventing construction activities during that period was not adequately considered in the planning of work execution, and was further worsened by the unexpected abnormal rainfa:l during two successive years. Another unforeseen factor was that MOP's administrative effectiveness, which was at a fairly high level at the tine of appraisal, would start to deteriorate progressively, resulting in failures to take timely corrective action on the multiple technical and administrative difficulties discussed above, despite constant recommendations for action submitted by successive Bank missions and by constantly repeated Bank communications. The question remains open if a timely suspension of disbursements by the Bank would have prompted effective remedial action by MOP. Project Results and Sustainability 10. The only component that reached fully its objectives was the study for the 'Preparation of a Regional Secondary and Feeder Road Program". which was contracted, with some delay, with a joint venture of the Israeli Institute for Transport Planning and Research and the local consultant firm Protecvia and successfully carried out, within the foreseen time period, with cost savings of about 10%. It established cr4:erias and standards for selection and design of feeder roads, preparea manuals for the design. economic studies and construction of feeder roads, prepared a regional  program for secondary and feeder roads construction and improvement (1.500 Km) and recomended organizational arrangements for the implementation of this and further regional program. Sustainability of this well prepared Rural Roads Study was impaired by Hot. lack of capability, or willingness, to implement the organizational and design recommendations of the study. during the implementation of the succeeding Rural Roads Program initiated in 1982. MOP's organization seems to be unfit to reasonably carry out programs for engineering and construction of feeder roads and it appears that implementation of such programs should be entrusted in the future to more flexible agencies having a direct interest in them. 11. Project objectives did not change during project implementation. however, there was a substantial variance in the results of the civil works components. The Puerto Ila-Doblones road and its lateral feeder roadc were not completed and will most probably never be built as designed, affecting seriously and even endangering implementation of the Puerto Ila-Chone Rural Development Project (Loan 1991-EC) and delaying economic development of that area for many years. 12. The economic deterioration suffered by Ecuador after the collapse of the oil boom affected negatively the net benefits to be obtained from the construction cf the Duran-Boliche road (70% of total project cost) by reducing the average annual rate of increase of the compounded benefit streams derived from predicted traffic flows over a 20-year period from 8.4Z forecasted at appraisal to a present estimate of only 5Z. This, coupled with the fact that the road was not completed under the project. but three years later with Government financing at a final economic cost in 1976 constant sucres 682 higher than the economic cost used for economic evaluation at appraisal, resulted in a decrease of the economic rate of return from 20? foreseen at appraisal to 5?. In addition, construction of the road had a negative impact on agricultural exploitation of the area it traverses, because it interrupted transversal flows needed to maintain and increese agricultural production. The urban section (1.8 Kms) constructed by MOP, independently of the project. was not provided with standards adequate for a main urban artery affected by extensive side friction. This section is already heavily congested and will deteriorate further in the near future because of the rapid growth of the Duran urban area. In addition, the remaining 23 Kms were not provided with lateral service roads, therefore, this four-lane highway has lost from the beginning its character as an expressway. Given MOP's ingrained weakness to enforce necessary traffic regulations, this road will be progressively congested by uncontrolled accesses and at random level crossings. Sustainability of the original project concept is therefore seriously impaired. Bank Performance 13. Although the civil works components of this pro,ect emerged from recommendations of the Highway Master Plan financed under Loan 379-EC, and the preparation of their engineering took several years, in retrospect, it must be recognized that during identification and preparation of the  S project, the Bank should have made a better assessment of unfavorable conditions affecting both roadli closeness to a parallel main road and need for transversal crossings in the urban and rural sections of the Duran. Boliche road, and conceptual and geotechnical problems in Puerto ila. Doblones, as well as the shortness of the available construction period each year (betweer rainy seasons) demanding adequate planning of the * construction sequence and of the total period. At appraisal and negotiations many potential problems were correctly taken into account and acted upon, however, the Bank failed to obtain a proper definition of the t-pe of road to be built from Puerto Ila to Doblones and to enforce preparation of satisfactory engineering of that road. 14. Supervision of this project was carried out simultaneously with supervision of the Fourth and/or Sixth Highway Projects and was therefore not very time-consuming. However, the Bank followed closely the difficulties progressively arising in project implementation, and presented timely and repeated recommendations to prevent deterioration and improve project implementation. Eventual stronger measures to induce more expeditious project implementation, such as suspension of disbursements, were not applied considering that each successive new MOP administration promised to take adequate corrective action. In retrospect, it would have been helpful if the project would have been designed in tranches with clear targets to have been achieved in a given timeframe. Borrower's Performance 15. MOP's execution and managerial weakness during project preparation and implementation, already pointed out in paragraphs 4 through 8 above, were caused mainly by (i) discontinuity of high and mid level staff assignment, newcoming unexperienced administrators and technicians slowed down the process, took wrong decisions and often insisted in the same errors that had been previously corrected; (ii} a chronic shortage of qualified technical personnel, due to low government salaries, which resulted in inadequate capacity to resolve technical problems in a timely and effective manner; (iii) reluctance of mid level staff to assume administrative and technical responsibilities leaving all decision-taking to high level, mostly politically minded, administrators; and (iv) extreme delays in the processing of payments to contractors and consultants, resulting from the Borrower's overly complex proceduras and documentation, particularly in the Ministry of Finance. Compliance with Loan covenants were mostly transferred to Loans 1882-EC and 1991-EC. 16. To attain greater effectiveness in the preparation and implementation of road projects. MOP would have to correct the ingrained weaknesses described above by (i) ensuring greater permanency of managerial and technical staff: (ii) upgrading the technical capacity of its staff through increased salaries and better use of the technical assistance in highway planning, design, construction and maintenance received under Loan 1231-EC; (iii) fostering decision taking capacity of mid level staff; (iv) streamlining administrative procedures; and (v) making high level technical decisions more independent from political interests.  6 Project Relationship 17. The Bank's consistent and repeated efforts to improve project preparation and implementation did not succeed, because of weak MOP performance. On the other hand, the repeated assurances by incoming new MOP authorities to take adequate corrective actions, induced the Bank not to apply starner measures, such as suspension of disbursements. and even to concur with four extensions of the loan Closing Date. In preparation of future investment projects in Ecuador, the Bank should ensure that all potential unfavorable conditions have been taken properly into account. and should design the project in tranches with precisely defined targets to be achieved in given timeframes to facilitate effective application of corrective measures. The only other Government agency with which the Bank related under this project was the Ministry of Finance. The Bank's efforts to ensure more expeditious processing of payments to contractors and consultants did not have positive results. 18. The lack of a clear understanding between MOP and the Ministry of Agriculture on the scope of an agricultural project in the Puerto Ila- Doblones area. had a detrimental effect on the implementation of this project component. In addition, MOP did not succeeds in ensuring compliance by the Guayaquil Municipal Council and the Guayas Provincial Council with their agreements on timely acquisition of right of way and on the location of the bridge toll collection facilities, respectively. Finally, the implementation of the project was seriously affected by excessive interference from both the administrative and the legal state control agencies (Contraloria and Procuraduria), and by the Ministry of Finance complex procedures. To allow expeditious and effective processing of medium and large investment projects, the Government would have to streamline its administrative procedures, strengthen collaboration between public agencies, free technical decisions from political interference, and ensure firm commitments to the project in timely provision of cousnterpart funds. Consulting Services 19. The joint foreign-local consultants who carried out the rural roads study played a key role in the successful completion of that study. Whereas the local consultants deployed in the engineering and supervision of civil works did not perform well and. lacking adequated MOP guidance, were a main factor in the implementation failures of the project. Project Documentation and Data 20. As stated before, the legal agreerents for this project should have defined more specifically the type of road to be built from Puerto Ila to Doblones, and should have taken into consideration the climatic constraints in project execution. The appraisal report's usefulness as a tool for project implementation and supervision could have been enhanced if its structure would have followed the new guidelines established shortly after its preparation, and if it had addressed several problems that were not detected at appraisal. Data relevant to the preparation of the PCR was readily available. The Aide Memoires prepared after each Bank mission were particularly helpful in the preparation of this report.  7 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE (Prepared by Borrower) 1. Following the old guidelines for preparation of Project Completion Reports (PCR), the Borrower prepared a draft PCR in January 1987 and followed it up with detailed cost tables in October 1987. The conclusions of the draft PCR were essentially the same outlined in paragraphs 15 and 16 of Part I of this report. 2. Given the time elapsed since closing of the loan, and the fact that MOP staff involved in project execution has disbanded, it is proposed that Part II should not be prepared.  8 PART III. - STATISTICAL INFORMATION 1. - RELATED BANK LOANS L.oan Year of Title Purpose Approval Status Comments 379-EC Construction of 730 Km of 5/26164 Completed US$9.0 million Loan roads, execution of a coupled with IDA, IDS five-year maintenance and USAID financing. program, technical Completed with six assistance for preparation years delay. The of a Highway Master Plan. Highway Master Plan was used in the preparation of Loans 1231-EC and 1429-EC. 1231-EC Upgrading of a 49 Km high 3/30176 completed US$10.5 million Loan. priority road, and Civil works and improving planning and technical assistance management in the successfully transport sector. completed with two years delay. 1882-EC Improvement of 1,500 Km of 6/24/80 Completed US$55.0 million Loan. feeder roads, technical Emerged from the assistance and procurement study financed under of equipment for Loan 1429-EC. strengthening of road Execution was delayed maintenance, transport by more than three planning and personal years due to training. ineffective administration. Road improvement program was reduced to about 700 Km. 1991-EC Improving the standard of 5/12181 Ongoing US$16.9 million Loan. living of about 10,000 This project was rural families by desinged to develop increasing agricultural the area where roads production and were to be productivity in an area of constructed under about 170,000 Ha. Loan 1429-EC. Execution delayed by two years. partially because of failure of the implementation of the required road network under Loan 1429-EC.  9 2. - PROJECT TIMETABLE Date Item Planned Actual Comments/Issues Raised Identification Not in files The civil works components of this project were originally considered for inclusion in the Fourth Highway Project, Loan 1231-EC, but their preparation was insufficiently advanced for timely inclusion. Executive Project Not in files Summary Preparaticn 7/15/76 Engineering still insufficient, reduction of the proposed 86 Km Puerto Ila-Garrapata road to 29 Km. Appraisal 10/14/76 Additional engineering required. Agreements required with Guayaquil's Municipal Council on timely acquisition of right-of-way, and with Guayas Provincial Council on bridge toll collection facilities. Negotiations 4118t77 Additional soil studies and design revisions of the Puerto Ila-Doblones road, scope, engineering and execution of lateral feeder roads. acceptability of performance bonds under Ecuatorian law. Board Approval 5124177 5/19/77 Priority sectors in Government investments, lack of transport coordination, inbalance of road user charges, loss of trained manpower in MOP and allocation of oil revenues. Loan Signature 7/24177 9120177 Loan Effectiveness 9(24/77 1/10178 Delayed because of legal problems in Ecuador. Loan Closing 6/30(81 6/30/85 Closing Date was repeatedlv postponed because implementation delays due i.e. to defective project design, slow contracting, poor performance of cont.racts and ineffective HOP mtanagement. Loan Completion 12(31(80 12(31/85  10 3. - LOAN DISBURSEMENTS Cumulative Estimated and Actual Disbursements (USS Million) FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY83 FY86 FY87 Appraisal 2.5 6.4 12.8 17.5 17.5 17.5 17.5 17.5 17.5 17.5 Actual - 2.9 5.8 8.3 10.3 11.0 11.3 12.1 13.7 14.0 Actual as I of Estimate - 45.3 45.3 47.4 58.8 62.9 64.8 69.1 78.3 80.0 Date of Final Disbursement: February 4; 1987 4. - PROJECT IMPLEMENTATION Appraisal Indicators Estimate Revised Actual (NOT AVAILABLE) NOTE: As discussed in Part I of this PCR, implementation of the project was marred by ingrained difficulties, affecting particularly execution of the roads in the Puerto Ila-Doblones area: (i) concept al discrepancies on the type of road; (ii) defective engineering; (iii) sl4w contracting; (iv) poor performance of contractors; (v) ineffective HOP m magement exacerbated by frequent changes of MOP Ministers and high and mid evel MOP.staff; (v) labor conflicts affecting the main contractor; and (vi rain-induced extensive floods during two successive years. The combination of all these adverse facts delayed execution of the pro.ject by four and a half years, impeded implementation of the roads in the Puerto Ila-Doblones area and prevented completion of the Duran-Boliche road within the extended project period.  S. - PROJECT COSTS ANP FINANCINC A. - Project Cost (US$ Million) Appraisal Estimato Revised Estimat Actual Local Foreign Local Foreign Local Foreign Cost Exchang Cost Total Cost Exchange Cost Tot l Cost Exchange Cost Total Civil Works 18.00 18.00 84.40 17.42 16.46 82.87 18.90 12.36 26.29 a) Duran-Boliche Road 10.98 10.48 21.44 10.98 9.76 20.73 11.61 10.21 21.72 1/ b) Puerto Ila-Doblones Road 6.50 S.60 9.22 4.70 4.18 8.8B 1.87 1.66 8.65 c) Lateral Feeder R>ads 2.28 1.4, 3.74 1.74 1.64 8.28 0.66 0.49 1.04 Consultant Services 1.80 1.90 2.70 1.24 1.64 2.78 1.08 1.01 2.87 d) Supervision of a) 1.07 0.99 2.00 0.45 0.60 0.9C 0.67 0.78 1.43 1/ *) Supervision of b) 0.47 0.43 0.90 0.28 0.82 0.60 0.27 0.30 0.57 f) Preparation Feeder Roads Program 0.26 0.48 0.74 0.23 0.40 0.83 0.12 0.66 0.67 TOTAL PROJECT 20.80 1?.-L9 a.1Q 8 .99 8t.76 14-99 L3!9' COMUENTS: The equivalence in US dollars expected at appraisal was based on 1 US dollor = 25 sucres. Actual costs in US dollars derive from strem of disbursements over 1978/85 resulting from the following average annual exchange rates: 1978 through 1031: 26, 1982: 80.03, 1983: 44.12, 1984: 82.64; and 1986: 89.58. The increas of work quantities and unit costs of works executed in the Duran-Boliche Road wore more than offset by the reduction of other works finaneed under the loan, resulting in a 24! de rease in tot l USS project cost. 1/ After Loan Closing Date (0/30/86) MOP lnitiated, under own financing, the construction of two major interchonges at Km. 1.8 and 4.7 and completed them late in 1988 at an additional cost, including supervision, of 179 million constant 1976 sucrea, equivelent to US37.2 million. The total cost of the Duran-Boliche road US3711 million constant 1978 sucros is 681 above the base cost used for economic evaluation (423 million) and 22X above appraisal estimate including physical and prlce contingencies (583 million).  12 B. - Proiect Financins Source Planned Revised Final USS 2 USS 2 USS 2 IBRD 17.5 45.9 - - 14.0 48.3 Civil Works 11.4 29.9 - - 12.4 42.8 Consultants 1.6 4.2 - - 1.6 5.5 Unallocated 4.5 11.8 - - - - Co-financing Institutions - - - - - - Other External Sources - - - - - - Domestic Financing 20.6 54.1 - - 15.0 51.7 Civil Works 13.1 34.4 - - 14.0 48.3 Consultants 1.4 3.7 - - 1.0 3.4 Unallocated 6.1 16.0 - - - - Total 38.1 100.0 - - 29.0 100.0 COMMENTS: Total expenditures under the project were reduced by about 202 because of the reduction of scope of the works financed under the project. The percentage of foreign financing of civil works (47Z) and related supervision services (532) remained fairly constant during project implementation, because the reduction of the rates of disbursements to 20 and 25? respectively, agreed in May 1982 considering eventual cost overruns, was cancelled in Septen,ber 1983, based on the reduction of the project scope, and did not affect the total percentage of foreign financing since no disbursements were done in that period using the reduced rate. The percentage of foreign financing of the rural roads study increased from 65 to 82 percent because of higher participation of foreign consultants than originally expected.  13 6. - PROJECTS RESULTS A.- Direct Benefits No benefit indicators were established at appraisal B. - Economic Impact Economic Rate of Return of Appraisal Estimate Actual Duran Boliche Road 20? 5? 1/ Puerto Ila-Doblones Road Have not been and lateral feeder roads 182 completed Comments: 1/ This abnormal drop in the ERR reflects the impact of the economic deterioration suffered by Ecuador after the collapse of the oil boom. Its direct causes are: (i) the 68Z increase of economic costs, including supervision, in constant 1976 sucres between appraisal estimate (SI 354 million) and actual final cost (SI 595 million); and (ii) much lower rates of the annual increases of benefit streams derived from traffic flows (a compounded average of 8.42 over 20 years estimated at appraisal against a present estimate of only 5Z). C.- Studies Purpose as Defined Impact of Item at Appraisal Status Study Pre-investment and (a) Assess existing Completed in This study was the organizational study arrangements for November 1979. basis for the for the preparation of preparation and preparation of the a secondary and feeder implementation of feeder Sixth Highway roads program. roads projects. Project (Loan (b) Prepare manuals for 1882-EC). However. selection and design of in the feeder roads. implementation of (c) Formulate and that project, MOP prepare a secondary and did not follow the feeder roads program for studies' the provinces of Guayas, recommendations. Los Rios and El Oro.  14 7. - STATUS OF LOAN COVENANTS Status of Special Covenants in the Loan Agreements Loan Agreement Sections Covenant Status 3.01(b) Liason with other After two years delay, liason was designated established and resulted in the Government agencies appraisal of the Puerto Ila-Chone in the preparation Rural Development Project, Loan and future 1991-EC. Coordination later implementation of a desintegrated causing serious regional feeder road difficulties in project execution. program in the Puerto Ila-Chone area. 3.03 Presentation to the Presentation was made with over two Bank before December years delay; the Bank concurred by 31, 1977 of list of cable dated 7/11/80. lateral feeder roads in the Puerto Ila- Doblones area and of final engineering of these roads. 3.04(a), (b) and Provision of These covenants were later included (c) extension services under the Puerto Ila-Chone Rural and credits to Development Project, Loan 1991-EC. farmers, and review of land tenure patterns in the Puerto Ila-Chone area. 4.03(al and (b) Adequate maintenance This general covenant was amplified of paved and gravel under Loan 1882-EC, but was not roads. adecuately complied with. 4.03(c) Enforcement of axle- A study on enforcement of axle-load load limits. limitations was carried out under Loan 1882-EC, but never implemented. Schedule 1, para Completion of By cable dated March 31, 1978s the 4(c) engineering and Bank concurred with these documents. bidding documents however, during works execution the for the Puerto Ila- engineering proved to be inadecuate Doblones road. causing paralization of work execution.  1S 6 - USE OF SAWO RESOURCES A. - Staff Inputs (staff-weeks) Stage of Project Cycle FY76 FY77 FY78 FY79 FY6O FY31 FY62 FY63 FY64 FY95 FY66 FYT87-9 Total Through Appesical 1.2 9.3 10.5 Appraisel through Board presentation 51.6 51.6 Board Approval through Effective- 20.0 20.0 no" Supervision 2.9 8.7 0.8 3.1 5.0 4.6 9.0 8.6 4.1 1.8 0.8 60.0 Completion 3.0 3.0 1.2 84.0 6.7 6.6 8.1 6.0 4.5 9.0 38. 4.1 1.6 83.8 185. 8. - Mission* Stage of Month/ Number of Dajc In Specializations Performance Types of Project Cycle Year Persons Field Reprented 1/ Rating/ Statum 2/ Problea 3/ Through Approisol 7/76 1 8 En 9/76 3 a Ec, Agr, En 10/76 3 20 Ec, Agr, En Appraisal through Board Presenttion 1/77 1 11 En 3,7? 2 6 Ec, En Board Approval through 6/77 2 4 En, En 2 U Effectiveness 10/77 1 3 En 2 F, U Supervision 3/78 1 6 En 2 U 6/78 1 6 En 2 m 2/79 2 8 En.En 2 m 9/79 2 4 Ec, En 2 F, M 7/60 1 3 En 2 M, T 11/80 a 5 Ec, En, En 2 M, T 8/61 2 5 Ec, En 3 M, T 6/61 8 4 Ec, En, En 3 i, T 9/61 1 3 En 8 M, T 3/82 a 5 Ec, En, F.A. 3 M, T 8/62 1 5 En 3 M, T 3/68 4 S Ec, En, F.A. 3 M, T 6/83 2 4 Ec, En 2 M, T 11/83 1 3 En 2 M, T 3/84 2 6 En, En 3 M, T 9/64 2 3 Ec, En 2 M, T 12/84 2 a Ec, En 2 M, T 6/86 2 3 Ec, En 2 M, T 11/85 2 2 Ec, En 3 F, M, T 8/Sb 2 1 Ee, En 2 u 6/86 1 1 En 8 f, M, 0 t2/66 1 a En 3 F, M. 0 1/ Ee Economist; En a Engineer; Agr. Agricultural *xpert; F.A. a Financial Analyst. 2/ 1 Minor Problems; 2 a Moderate Problems; 8 a Major lroblems. 8/ F u Financial; U a Managerial; T a Technical; P a Political; 0 a Other.