Peru - Transport Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 21501 IMPLEMENTATION COMPLETION REPORT (CPL-37170; SCL-3717A; SCPD-3717S; TF-23012; COFN-04180) ON A LOAN IN THE AMOUNT OF US$ 150 MILLION TO THE REPUBLIC OF PERU FOR A TRANSPORT REHABILITATION PROJECT December 22, 2000 Finance, Private Sector and Infrastructure Sector Management Unit Bolivia, Ecuador, Paraguay, Peru Country Management Unit Latin America and the Caribbean Region 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.  (Exchange Rate Effective) Currency Unit = Sol Nuevo 1 Sol Nuevo = US$ 0,284 US$ 1 = 3,52 Soles FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS CEPRI - Special Privatization Committee CMCPL - Lima Municipal Bank for Popular Credit COPRI - Commission for the Promotion of Private Investment CORPAC - Peruvian Airport and Commercial Aviation Corporation DGC - General Directorate of Roads DGTA - General Directorate of Air Transport ECLAC - U.N. Economic Commission for Latin America and the Caribbean ENAFER - National Railway Company FCC - Central Railway FCS - Southern Railway FCSO - South-eastern Railway GDP - Gross Domestic Product GTZ - German Agency for Technical Assistance ICAO - International Civil Aviation Organization ICB - International Competitive Bidding IDB - Inter-American Development Bank IERR - Internal Economic Rate of Return IMP - Metropolitan Planning Institute IRI - International Rouglmess Index KfW - German Development Bank LCB - Local Competitive Bidding LIB - Limited International Bidding MEF - Ministry of Economy and Finance MLM - Municipality of Metropolitan Lima MTCC - Ministry of Transport, Communications, Housing and Construction NGO - Non-Governmental Organization NMT - Non Motorized Transport PCU - Project Coordination Unit PPF - Project Preparation Facility SINMAC - National Highway Maintenance System SOE - Statement of Expenditure UCPP - Loan Coordination and Preparation Unit Vice President: David de Ferranti Country Director: Isabel Guerrero Sector Manager Jeffrey Gutman Task Team Leader Paul Guitink  FOR OFFICLAL USE ONLY PERU TRANSPORT REHABILITATION CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings I 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 10 6. Sustainability I 1 7. Bank and Borrower Perfornance 12 8. Lessons Learned 13 9. Partner Comments 15 10. Additional Information 18 Annex 1. Key Performance Indicators/Log Frame Matrix 19 Annex 2. Project Costs and Financing 23 Annex 3. Economic Costs and Benefits 25 Annex 4. Bank Inputs 26 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30 Annex 8. Borrowers Report of Completion of the First Transport Rehabilitation Project 33 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   Project ID: P008045 Project Name: TRANSP.RHB Team Leader: Paulus A. Guitink TL Unit: LCSFT ICR Type: Core ICR Report Date: December 27, 2000 1. Project Data Name: TRANSP.RHB L/C/TFNumber: CPL-37170; SCL-3717A; SCPD-3717S; TF-23012; COFN-04180 Country/Department: PERU Region: Latin America and Caribbean Region Sector/subsector: TH - Highways; TW - Railways; TY - Other Transportation KEY DATES Original Revised/Actual PCD: 01/16/92 Effective: 07/26/94 Appraisal: 01/17/94 MTR: 02/24/96 Approval: 03/17/94 Closing: 12/31/99 06/30/2000 Borrower/lmplementing Agency: GOVERNMENT/MINISTRY/TRANSPORT Other Partners: Empresa Nacional de Ferrocarriles S.A. (ENAFER), Municipality of Lima, Kreditanstalt fuer Wiederaufbau (KfW), OPEC, Japanese Trust Fund STAFF Current At Appraisal Vice President: David De Ferranti Shahid Javed Burki Country Manager: Isabel M. Guerrero Yoshiaki Abe Sector Manager: Jeffrey Gutman Asif Faiz Team Leader at ICR: Paul Guitink Gerhard Menckhoff ICR Primary Author: Oswaldo Patino 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L-=Likely, UN=Unlikely, HlJNHighly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: M Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: Yes  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project was the first investment loan to Peru since 1986 and was designed to address needs that were critical to achieve a renewed economy and social development. Its main objectives were to: (1) rehabilitate essential transport infrastructure; (2) assist Government in implementing institutional reforms in the road and railway subsectors, aiming at improved resource use and sustainable development; and (3) lay the ground work for future projects focussing on strengthened road management, increased private participation in the transport sector, and improved mobility of the poor. 3.2 Revised Objective: There were no revisions of the project objectives, which remained clear and unchanged over the life of the loan. 3.3 Original Components: To achieve the objectives described above, the project included the following components: 1. Roads. This component comprised (i) the rehabilitation of six national road sections, totaling 725 km in length (45% of total project cost); (ii) a bridge rehabilitation program involving the acquisition of a minimum stock of Bailey bridges, recovery of Bailey bridges and the reconstruction of derelict old bridges; (iii) execution of a pilot road maintenance program on about 620 km of roads feeding directly into Corral Quemado-Rioja Tarapoto corridor; (iv) equipment to strengthen the national road laboratory; (v) a traffic safety program to fornulate a comprehensive traffic safety strategy, followed by the acquisition and use of urgently needed safety materials in accordance with the strategy established; and (vi) a design of future road rehabilitation schemes to strengthen transport planning capabilities and design packages of future investment projects; 2. Railway Rehabilitation and Restructuring. This component had as an objective to prepare ENAFER, the national railway company, for privatization through the execution of the most urgently needed investments to keep ENAFER operating during the preparation of its privatization including: track rehabilitation, locomotives and wagons rehabilitation, lengthening of switchbacks, telecommunications works and acquisition of track maintenance equipment; 3. Runway Rehabilitation at Lima Airport. This component included the rehabilitation of the main runway with a projected 20-year lifetime of new pavements, the installation of new airfield lighting and instrument landing system, and the rehabilitation of the parallel taxiway; 4. Pilot Project for Non-Motorized Transport in Lima. This component consisted of constructing four trunk bicycle ways together with bicycles-lanes to provide connections to low- and middle- income residential areas and parking facilities, providing sub-loans for the purchase of low-cost bicycles, and canying out educational and promotional campaigns; 5. Technical Assistance and Training. Two main areas were identified for policy assistance: (i) improvements to road administration and finance and (ii) organizational reform of MTC. Also, the TA included resources for advisory services and training for the agencies responsible for the highway, railway and non-motorized transport components and for the project management program. 3.4 Revised Components: Without changing the project objectives, the project cost components and physical targets were revised and funds reallocated in March 1996. The reallocation was required because of an increase of road rehabilitation costs reflected in the bids and a restructuring of the proposed runway rehabilitation componet. The road component was increased from the original appraisal estimate of US$153.32 million to US$227.94 million, while the airport component was reduced to US$11.65 million from the planned US$30.2 million. In addition, the road maintenance works program was cancelled and funds in the amount of US$10.8 million were reallocated. Only US$300,000 of this subccmponent was disbursed to finance a pilot road maintenance program study. -2 -  3.5 Quality at Entry: Quality at entry is satisfactory. The project objectives were consistent with the CAS, which supported policies and investments aimed at sustaining stabilization and consolidating structural reforms, fostering private development and public sector reform, and rehabilitating key infrastructure and redefining policies related to its operation, maintenance and finance. However, being the first investment loan to Peru since 1986, the project was demanding, complex and risky. It was demanding because it required coordination between several implementing units and government institutions to execute physical activities and institutional reforms; it was complex because it addressed multiple modes such as road, railway and airport sub sectors, and it was risky because there was a lack of institutional capacity of the implementing agencies arising from a long period of inactivity and because the infrastructure services were deteriorated enormously, during the 1980s, due to years of under investments, neglected maintenance, and inability to make long-term plans. In the road sub-sector, this resulted in insufficient quality of feasibility studies, basic engineering designs and final designs for the roads to be rehabilitated. The designs did not take into account the challenging terrain and climatic variables in the project area which resulted in inadequate designs for critical sections of the roads. To address these problems variation orders and additional works were required in the implementation phase of the works, resulting in significant cost overruns. Despite its complexity, the project was generally well designed, although the limited amount of information and lack of Bank staff experience in the Peruvian road sub-sector at preparation phase of the project was evident in the limitations of the road feasibility studies and final designs. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The first objective, to rehabilitate essential transport infrastructure, was achieved satisfactorily. The second objective, to assist Government in implementing institutional reforms, was only partially achieved because the Government Plan for "Reform of the State" was never undertaken during project implementation period. And the third objective, to lay the ground for future projects focusing on strengthened road management, increase private participation in the transport sector, and improved mobility of the poor, was achieved satisfactorily. Rehabilitate Essential Transport Infrastructure. The project achieved its aim satisfactorily. At project completion, the project had addressed the core infrastructure deficiencies through rehabilitation components in the road, railway and airport sub sectors. In the transport sub-sector, the project supported the rehabilitation of six key roads linking agricultural areas in northern and central Peru with the Coast. Only five out of the six road subprojects were completed under the project with substantive impact in the road network system: Tarma-La Merced, La Merced-Satipo, Huanuco-Tingo Maria, Rioja-Rio Nieva and Rio Nieva-Corral Quemado. Preparation of the road rehabilitation component was unsatisfactory: at project effectiveness designs were not ready and their quality was inadequate. This resulted in initial procurement delays of approximately 15 months and cost over-runs for civil works of approximately 83% due to underestimation of construction cost during road design. Nonetheless, the project completed 81% of its physical targets, about 589 km of road rehabilitation and paving works. Achieving these road works was possible,in part because the funds originally budgeted to the Tarapoto-Rioja road, the Road Maintenance Program subcomponent and the Runway Rehabilitation at Lima Airport component were reduced and reallocated to the road rehabilitation subcomponent and in part because the Government local counterpart contribution increased from US$18.1 million to US$60.82 million. However, it is worth noting that the physical targets proposed at project appraisal were based on cost estimates produced after a long period of inactivity in road construction. With the revival of the industry and the economy, these estimated costs - 3 -  were no longer valid as confirmed by cost overruns in other projects under implementation financed by other Multilateral Banks during the same period. The project also supported the rehabilitation of 44 bridges, the recovery of 500 linear meters (I.m.) of Bailey bridges and acquisition of 500 I.m. of Bailey bridge stocks. The project objective was achieved marginally satisfactorily through the installation of 15 Mabe Johnson bridges, the replacement of 37 derelict old bridges and the recovery of 540 l.m. of Bailey bridges stocked to support emergency intervention. The obtained stocks were timely and useful especially during the "El Nifo" Phenomenon, which destroyed a large amount of bridges in 1998. However, the derelict bridge works contracts could not be completed fully before the closing date of the project, including the six months extension due to procurement delays and two bidding processes. Thus, the project financed about 82% percent of the bridge physical works. The rehabilitation of the derelict bridges was delayed mainly due to an assumed collusion between bidders. The cancellation of the original bidding process and the subsequent rebidding took a considerable amount of time, which delayed the initial rehabilitation works for about fourteen additional months of the appraisal-estimated schedule. Rebidding took place based on postqualification instead of prequalification used in the first bidding to avoid collusion, and this yielded prices that were almost half of those in the first set of bids. The Bank agreed to complete the financing of the two bridge replacement contracts with funding from the El Nino Emergency Loan. As per October 31, 2000, there was an implementation progress of 91.40% (Maranon-Utcubamba) and 86.48% (Huallaga) of the physical works. However, because of scarce availability of counterpart funds completion of all bridge works before the closing date of the "El Nino" loan is still uncertain. Remaining works mainly consist of access ramps pavement which will be financed with Government funds if not completed before December 31, 2000. A software Bridge Management System was also developed and staff was trained in applying the system. In the SAR, the objective of implementing a Road Maintenance Program was addressed through a pilot road maintenance component of 620 km, which should lay the foundation for a decentralized road maintenance strategy and strengthening of local institutions. The planning study for the pilot maintenance program was completed as planned. In February 1996, the study results showed that 340.5 km needed routine maintenance works while the remaining 294 km required major rehabilitation and reconstruction with a preliminary cost of US$1.6 million and US$23.7 million respectively. Thus, the physical component of 620 km of road maintenance could not be achieved because of the prohibitive cost of full implementation of the program. In addition, the inadequate design quality for the roads to be rehabilitated caused a high cost overrun in this component, which required the reallocation of the US$10.5 million originally assigned to the Road Maintenance Program component in the SAR. As a consequence of canceling the pilot maintenance works, no results became available regarding (i) costs of contracting out maintenance, (ii) the capacity of local micro-enterprises, (iii) durability of different pavement types under alternative maintenance strategies, and (iv) training needs. Without these inputs, the formulation of a decentralized road maintenance strategy and strengthening of local institutions came to a halt. The Traffic Safety Subcomponent was implemented satisfactorily through the completion of the traffic safety strategic study and the implementation of key road safety activities. This study allowed for and recommended to the Government and MTC to create the National Road Safety Council (NRSC) and its executive secretariat. During the implementation of the project, the Council was established and a traffic safety unit, supported with project funds, was created. The unit has implemented priority road safety pilot activities (e.g. accident registration and accident data collection, a National Traffic Sign Manual, Manuals for Road Safety Education for primary and secondary schools including audiovisuals, technical feasibility studies for black spot improvements) and has identified, through consultant studies, priority road safety investrnents to be financed under the proposed Second Transport Rehabilitation Loan. Furthermore, the creation of the NRSC has brought about the following benefits: (i) enhancing Government officials' - 4 -  awareness of the road safety problems, (ii) increasing the cooperation between various road safety stakeholders (police, health and education sector, SINMAC, bus owner association, etc), (iii) producing an inventory of road safety furniture of main national roads and (iv) identifying priority road segments to improve road safety conditions. In order to enhance quality control of road infrastructure feasibility studies, the project supported the acquisition of technical equipment for the MTC's transport laboratory of soils and mechanics. This technical equipment has permitted the MTC transport laboratory to perform the role of quality control office providing services to MTC directorates, SINMAC, PERT and DGC in reviewing technical and final design feasibility studies since 1998. In the airport sub-sector, the Runway Rehabilitation Component achieved its intended physical targets satisfactorily. The component, which included rehabilitation works on the runway and taxiway, was redesigned when the detailed engineering and the actual performance of the runway showed that major rehabilitation works were not needed and that with pavement repairs, the runway could provide adequate service for a lifespan of at least 7 years instead of the 20 years initially planned for, reducing component cost from US$30.19 million to US$11.65 million. ICAO's pavement expert performed this analysis and recommended that with superficial repairs (resurfacing and crack sealing) the runway lifespan could be extended until a second runway is ready for operation. The main runway rehabilitation works was completed successfully within the planned time frame by the fourth quarter of 1998, without reducing the operation of the Airport. The component was financed through the OPEC fund (US$5.4 million), Government counterpart fund (US$5.18 million) and with Bank funds (US$1.07 million). The loan proceeds were reallocated to defray the additional costs experienced under the road component. With fewer resources, the Runway Rehabilitation Component achieved its intended physical targets of rehabilitating the runway and taxiway. Also, CORPAC has installed, with its own resources and MTC's funds, new ASR 12 primary radar, secondary radar, and a control center, which will provide good navigational aids and form the basis of the national aeronautical communications network. An upgraded lighting and an instrument landing system, planned under the project, were installed and financed by CORPAC. The project also financed the development of a Master Plan for Civil Aviation, which was intended to provide the basis for strategic planning in the aviation sub-sector. Based on the Master Plan, CORPAC has prepared individual master plans for the regional airports. In the railway sub-sector, the railway component achieved its intended objective satisfactory by transferring a restructured and functioning railway company to a private concessionaire. The decentralization of ENAFER management into three cost centers or entities and the staff reduction plan for the three entities were implemented as planned in the Privatization Strategic Plan proposed in the SAR. With respect to the physical targets of the component, these were partially achieved mainly due to delays in the procurement of the sleepers and required spare-parts for locomotives and wagons. As a result, only 383 km out of the 600 km of track rehabilitation, repair of 26 out of 36 locomotive and repair of 370 out of 391 wagons were installed and completed. These assets together with the remaining sleepers and spare parts not installed were included as part of the concession package. It should be mentioned that although the project supporte7a Privatization Action Strategy together with complementary investments, ENAFER's financial position continued to be acutely questionable during project implementation. Operating revenues in 1998 were about US$34.1 million, but operating and administrative costs amounted US$43 million, and financial and other costs added US$40.7 million to this figure. During the past ten years operating losses have been financed by accumulating liabilities - either by not servicing the railway's debt or by deferring payments for personnel-related contributions to social security, pension and health plans. ENAFER did not receive - 5 -  any direct subsidy from the Government and, according to 1998-balance sheet, the accumulated losses amounted US$191 million. These, together with the stagnant rail transport in the country, made the prospects for ENAFER's privatization challenging and Government had to absorb the accumulated losses. Nonetheless, the Government has successfully achieved the project aim through the concession of ENAFER, and from all accounts, with an attractive final bid. Assist Government in Implementing Institutional Reforms. The original objectives of the project institutional reforms were to help the Government - especially MTC and MEF - in identifying and selecting the best alternatives for (a) an organizational structure to manage and administer the national road system effectively, and (b) a funding mechanism for adequately maintaining and improving the road system. These institutional reforms were achieved marginally satisfactory despite its implementation delays, not under the control of PERT or of MTC, but caused by slow progress in the underlying Reform of the State, as explained under 5.2 hereafter. Nonetheless, MTC has made significant progress in increasing its efficiency towards: (i) designing a road concession program to mobilize private sector participation in financing and managing roads, (ii) developing new service performance-based maintenance contracts to be used in the road maintenance component of the Second Transport Rehabilitation project, (iii) the reduction of road accidents, injuries and fatalities through the creation of the National Road Safety Council, (iv) rehabilitating and maintaining 8,500 km of rural roads financed through Bank and IDB loans during 1995-2000, (v) addressing urban transport problems in Lima-Callao through the creation of the Urban Transport Council for Metropolitan Lima, (vi) strengthening its road network planning and environmental departments, and the transport laboratory performing quality control at MTC, and (vii) developing a Bridge Management System for the General Directorate of Bridges of MTC and SINMAC. While the preparation of a decentralized road maintenance strategy and strengthening of locainstitutions was not achieved, MTCC made good progress in establishing a regular road maintenance funding arrangement for SINMAC through the creation of a 'Fondo Vial' with road toll revenues. Furthermore, under the loan covenants, there was a clause that stipulated that the Borrower would provide a budget of not less than US$50 million per year for road maintenance. Since 1995, this budget allocation to MTC has been provided adequately, reaching US$55.6 million in 1999. As a result, the condition of the road network has improved, and 4,855 km of the 7,719 km total paved road network, equivalent to 63%, have been maintained in good condition. Lay the Groundwork for Future Projects in Three Areas. Strengthened Road Management. Strengthening of road management is linked to the above-mentioned institutional reforms. The project achieved its intended objective satisfactorily by improving capacity for long-term planning. With component funds for designing packages of future investment projects, PERT had completed the final engineering designs for three road subprojects: Tingo Maria-Pucallpa, Chanchamayo-Villa Rica, and Rioja-Tarapoto roads. The first two subprojects, worth about US$250 million, will be ready for financing under a possible operation with the IDB while Rioja-Tarapoto road is already under construction financed by CAF funds. Furthermore, PERT completed the economic and final design feasibilities studies, including the environmental impact of the following roads: Tarapoto-Rioja, Tarapoto-Juanjui, Tarapoto-Yurimaguas, Juanju-Tingo Maria, Ingenio-Chachapoyas, and Chamaya-Jaen-San Ignacio-Rio Canchis. Of these roads, San Ignacio- La Balsa, Puente Ingenio-Chachapoyas, Tarapoto-Juanjui, and Naranjitos-Corontochaca, which will be considered for financing under a follow-on operation. Also, the project supported the preparation of the feasibility studies for the Rural Rehabilitation Project, financed and approved by the Bank in 1995, and for the proposed Lima Urban Transport Project. - 6 -  Increased Private Sector Participation. The project objective achieved its intended objective highly satisfactorily. Railroads. Except for some regional concentration, rail transport represents only a minor part of Peru's transport system, both in terms of freight (less than 2%) and passenger services (less than 3%). While the sector is likely to remain relatively small, rail transport still has to play an important economic role in Peru due to its strategic role in transporting key exports products, such as minerals, petroleum derivatives, and other bulk commodities. Railroad privatization was formally included in the Peru's privatization program in 1993. The privatization committee focused on the most urgent measures to keep ENAFER in operation with the support of the project. Since the Government wanted to maintain the ownership of ENAFER's track, rolling stock and facilities, the committee opted for a long-term 30-year asset management contract of ENAFER's infrastructure facilities with obligations for open access and leaseback of rolling stock to maintain open entry for other private providers. The concession process for the railroads was undertaken in July 1999 and the winning consortium - Consorcio de Ferrocarriles de Peru--offered the Govermnent a canon of approximately 33% of its revenues as well as investments of US$30 million. Airports. On November 16, 2000, the Government awarded the airport concession to Frankfurt- Bechtel-Cosapi Consortium. The concessionaire will pay to the Government a canon of 46.51% of total operating revenues and provide investments of US$1.5 billion over the 30-year concession period. The investment program includes the construction of a new terminal and a second runway. The concessionaire will maintain the runway rehabilitated under the project. Roads. In 1999, the Government committed itself to expand private sector participation in the financing, construction and management of roads through a series of laws and decrees with IDB technical assistance. MTC, through a special committee for roads, identified 11 potential packages of roads consisting of 6,700 km of national roads as potential candidates for toll roads with private sector participation. Of these, the first road package is scheduled for concession in the first quarter of 2001. Improved Mobility of the Poor. This objective aimed at promoting the use of bicycles by low-income residents and preparing the ground for expanding the use of an environmentally friendly and affordable transport mode in Lima. The project included the provision of bicycle infrastructure connecting the Lima-Callao industrial area with low-income residential areas, representing 20% of the metropolitan area population, with lower than average family (US$355 vs. US$598 average per month) and per capita (US$83 vs. US$157 average per month) incomes. In addition, the project established a revolving fund at a non-profit bank to provide access to credits for the purchase of bicycles to low-income workers, and a promotion campaign to promote the program. The Project objective was satisfactory by constructing 48 km of dedicated bicycle ways of the original planned 51 km at appraisal, and making available 4,632 bicycles to low-income workers out of the 6,000 targeted through the revolving fund. Funds for the construction of an additional 35 km of bike paths on service roads were reallocated during the execution phase to achieve the original objectives through modifications that created a basic bikepath network, ensured the cleaning and maintenance of the paths in this pilot phase, and strengthened the promotion campaign, which after a slow start, because of limited resources, has been successful during 1999, resulting in a rapid increase in credit applications. Annual savings in transport cost by bicycle users averaged 532 soles or $150. 4.2 Outputs by components: The project achieved its principal components in physical terms and value, and the overall assessment of project outcome is rated satisfactory. The principal achievement of the project is that there are now 589 km of roads rehabilitated, 52 bridges replaced and improved, a runway and taxiway repaired and operational at the Lima airport, and the Railway Company concessioned successfully. These components represent 86% of the total original cost of the project (84% of the total final cost). The project also achieved its institutional development objective. Important contributions to the firther -7 -  development of the transport sector include the development of a bridge maintenance system and a Civil Aviation Master Plan, the strengthening of the Roads Laboratory, the establishment of a National Road Safety Council, and assistance in the development of a new Transport Law. Although important sector policy areas such as road user charges and financing of infrastructure investments under public/private ownership were discussed intensively, the political sensitivity of these issues lead to mixed results. While packages have been prepared for private sector participation through road concessions, the issue of decentralization of road maintenance and rehabilitation has not been resolved yet. By keeping ENAFER operational while the concession process was underway, the project made a substantial contribution to its successful concessioning. Over the last years ENAFER had net operating losses of approximately US$10 million per year and accumulated losses of over US$191 million. 4.3 Aet Present Value/Economic rate of return: Upon completion, the Borrower, using the same methodology and parameters employed in the SAR, undertook ex-post evaluation analyses. The economic returns were re-evaluated on a set of investments, especially for road rehabilitation, bridge rehabilitation, railway and runway rehabilitation. (See Statistical Tables Annex 3 Economic Cost-Benefit Analysis). Road Rehabilitation. An economic evaluation using HDM III for the five road rehabilitated was completed. The internal economic rate of return (IERR) for the road rehabilitation (66 % of the total project cost) was calculated and found to be high and consistent with the SAR estimations, about 38. 1% confirming that the road rehabilitation subcomponent achieved an acceptable level of net benefits, ranging between 21.10% for Rioja-Corral Quemado and 50.10% for Tarma-La Merced. The main quantified benefits are (i) the time saving for passengers, (ii) the vehicle operating costs saving due to road rehabilitation and (iii) saving in routing maintenance. The five road sections showed rates of return greater than 20 percent. The 589 km are now maintained by SINMAC. However, for the long-term, SINMAC should move toward the use of performance-based maintenance contracts with the private sector and enhance the road user charges to improve funding of the Road Maintenance Fund (Fondo Vial). Bridge Rehabilitation. Cost-benefit analyses were carried out for all bridges with an investment cost higher than US$0.5 million (seven bridges), based on a condition of the loan agreement and as part of the preparation of the proposed second Transport Rehabilitation Project. T he benefits considered in the analysis are a reduction in vehicle operating costs, mainly for trucks, bv avoiding alternative routes which would need to be taken if the bridges were as severely restricted as they were. These alternative routes are usually much longer and sometimes in worse conditions. There are also some benefits from diverted traffic. Bridge project costs include both the initial investment in bridge construction and the recurrent bridge maintenance cost. The estimated IERRs are extremely positive, ranging between 16% for Cocahuayco Bridge of the Utcubamba valley and 257.5% for Filatobon Bridge of the Huallaga valley. - 8 -  Railway Rehabilitation Although the ENAFER three cost centers did not improve their operation and efficiency, the net operating losses showed a tendency to decline during project implementation period, reaching on average per year an amount of US$10 million for 1995-98. In the SAR, the estimated overall financial rate of return for the railway rehabilitation works was 15 percent projecting improvements in the net cash flow with the proposed investment package. The SAR analysis was made using two scenarios: a non-investment scenario that would generate a rapid increase in net operational losses and an investment scenario that would mitigate the net operational losses while awaiting privatization of ENAFER. The financial rate of return cannot be calculated because of the concession of the company. However, an IERR has been calculated for the project investments from the point of view of the Government. The successful concession of ENAFER has brought to the Government the following benefits: (i) the concessionaire will pay to the Government 33% canon of the gross revenues; (ii) through a credit granted against the canon payment, the Government has provided an incentive scheme to the concessionaire to make infrastructure investmnents during the first ten years of the concession. The estimated investment obligations, during the first five years, are 100% deducted for each dollar invested and, from the years 6 to 10, only 50% is discounted from payments due to Govermnent; and (iii) as the railroads were making net operating losses of US$10 million, the Government saves recurrent expense of around US$10 million per annum through this concession. Based on these benefits, a Net Asset Value of US$23.04 million was calculated, obtaining an internal economic rate of return over the 30 year concession period of 17.33%. This analysis is not considering the accumulated liabilities of ENAFER, which have been absorbed by the Government, an assumption also made in the SAR analysis. Runway Rehabilitation. The Borrower has carried out an economic analysis ex-post for the rehabilitation of the Lima International Airport runway based on a useful life estimate of 10 years instead of the 20 years originally planned for in the SAR. Although the original lifespan estimate for the redesigned runway was 7 years (see page 5), based on the actual good condition of the runway CORPAC has upgraded this estimate to at least 10 years. The methodology for the economic analysis was based on a total cost for rehabilitation equivalent to US$ 10million. Benefits were calculated as the savings gained in maintenance with and without the project, an increase in passenger airport taxes for use of the improved airport infrastructure and a 30% increase in the number of passengers, and an increase in landing fees since the rehabilitation of the runway. The resulting IERR of the rehabilitated runway was 20%. The concessionaire of the airport will provide the civil works routine and periodic maintenance of the runway, while the electrical works remain CORPAC's responsibility. Bicycle component. The Borrower carried out an economic analysis ex-post based on a useful life of the bikepaths of 20 years, a discount rate of 15%, and including operational costs for cleaning and maintenance of the bikepaths. Benefits are primarily based on transport costs savings, assuming an annual increase in bicycle use of 1% starting in 2001. Based on these assumptions, a Net Present Value of US$270,000 was calculated, obtaining an internal economic rate of return of 16.9%. 4.4 Financial rate of return: The Financial Rate of Return was not calculated at appraisal and is considered not applicable. 4.5 Institutional development impact: The project provided significant contributions for the development of the transport sector in Peru. In particular, the project assisted in the development of a new Transport Law preparing the way for future reforms, supported the creation of National Traffic Safety Council and its traffic safety unit, improved budgetary resources for maintenance of the road network during the project implementation, promoted -9-  private sector participation in the railway sub-sector, developed a Bridge Maintenance System, developed a Master Plan for Civil Aviation, and supported strengthening institutional capacity. In regard to the latter, the technical assistance component of the project assisted MTC and PERT in strengthening its road network planning capabilities and road environmental and safety analysis. As a result, MTC is carrying out road investment analysis and incorporating detailed economic analysis and environmental and road safety evaluations to define optimum rehabilitation standards, their associated economic worthiness, environmental conditions and safety standards for sustainable management of roads. Overall, the MTC improved its capacity in contracting out feasibility studies, final design and supervision of works to the private sector companies using Bank procurement methods. The difficult economic and political situation has caused uncertainty regarding a follow-up project, which will affect negatively the developed institutional capacity within PERT. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Project implementation took place in a generally stable social environment. Under the bridge rehabilitation component, there was an assumed collusion of prequalified bidders resulting in rebidding, which took a considerable amount of time. Furthermore, there was the "El Nino" phenomenon, and while this affected the works on some of the project roads, most of the impact was foreseeable and the Bank's El Nino Emergency Loan included a component to mitigate the negative impacts of this phenomenon. 5.2 Factors generally subject to government control: The slow progress in the Reform of the State has been the principal reason for the implementation delays in MTC's institutional reforms. Early in 1995, MTC made progress in designing a major reform that would basically assign the responsibility of policy making, long-term planning and overseeing transport sector performance to MTC, and transfer the responsibility for managing the road network to an autonomous agency. These institutional reforms were proposed by an ad-hoc committee within MTC, assisted by international consultants and several transport seminars. Support for the restructuring plan was weakened after the Government Executive Branch did not pass framework legislation for the modernization of the State before the end of 1996 (the deadline for extraordinary powers entrusted to the President). The Government Plan for "Reform of the State" was never undertaken and furthermore, an IDB loan to support this plan was canceled, reducing the possibilities of carrying out the institutional transport reforns needed. However, in 1998, the president of a Congress transport infrastructure committee requested the assistance of MTC and the Bank to prepare a Transport Law. With technical assistance and the support of international consultants, Congress approved the new Transport Law in October 1999, which in principle had been envisaged since 1995. The Government still has to complete work on the By-laws that will define the concrete reforms measures. 5.3 Factors generally subject to implementing agency control: There was a six-month extension of the closing date of the project requested by the Government to allow the completion of the rehabilitation of the Maranon- Utcumbamba and Huallaga bridge packages. However, as of today the civil works have not been finished and despite the financial support from El Nino loan, works will not be completed by December 31, 2000 due to lack of local counterpart funds. The resources from the technical assistance component were insufficiently used during the first year of project implementation to strengthen the technical capacity of PERT to prepare terms of reference, review and approve feasibility and design studies, and prepare adequate civil works and supervision contracts. These factors affected the implementation of the road component. - 10-  The complexity of the project required a large diversity in professional skills, (airport, railway, road safety, bridges, etc.). However, this diversity was not reflected in PERT staffing which had primarily road engineering skills. This resulted in the lack of ownership for components that were not directly related to road engineering. Although quarterly project reports were prepared, these reports did not include an analysis based on performance indicators that would have allowed PERT to have a management tool and assessment of potential problems and risks. Although not mandatorily required in bank projects at the time of writing, the SAR included key monitoring indicators and targets that covered achievements through the Mid-Term Project Review scheduled for 1996. It was expected that during this Review new indicators through 1999 would be developed, but this was not done. 5.4 Costs andfinancing: On June 30, 2000, the closing date, the total project cost was about US$299.85 million, 123.9% of the SAR estimate made in March 1994. The most significant source of incremental cost was the high cost of road rehabilitation works. On average, the actual cost of road rehabilitation was about US$335,611 per km, compared to an original estimate of US$149,393 per km. The project, at appraisal, was to be financed 62% by the Bank, 20% by the Government and 18% by co-financiers; the final figures are 50%, 33% and 17% respectively. The project was restructured in March 1996 and loan amounts were reallocated. The loan amount budgeted to the road component was increased from the appraisal estimate of US$88.5 million to US$111.98 million, while the runway rehabilitation loan amount was reduced to US$1.07 million from the planned US$21.6 million. The Govermment Counterpart funds increased from US$47.90 million to US$98.06 million to mainly finance road construction costs overrun. 6. Sustainability 6.1 Rationale for sustainability rating: The sustainability of the project is rated likely because: (i) the Government has promulgated a new Transport Law in 1999, which lays the groundwork for institutional reforms, to be concretized through the development of the regulations, (ii) the Loan Covenant on road maintenance created a positive road maintenance culture by clearly demonstrating to project executing agencies the viability of maintaining the physical infrastructure rehabilitated under the project, (iii) the viability of road safety activities has been demonstrated and will be supported further with IDB support and own resources, and (iv) the private sector is participating in the railway and airport sub-sectors assuming the operation and maintenance of the assets involved. On the other hand, the project implementation unit within MTCC was financed through the project and without this support the professional capacity assembled in this unit may be lost. 6.2 Transition arrangement to regular operations: Upon completion, the 589 km of rehabilitated roads were transferred to SINMAC for maintenance. SINMAC generates resources for financing road maintenance through road tolls. However, these resources are insufficient to maintain the overall national roads network, and without an enforceable mechanism to ensure sufficient maintenance funds, maintenance of project road depends on government priorities. Once completed, the repaired and constructed derelict bridges will be transferred to the Directorate of Bridges of MTC. The O&M of Road Laboratory equipment will be fully recovered through fees charged to private firms and budgetary transfers from MTC and Government funds. The Municipality of Lima will clean and maintain the 48 km of dedicated bicycle paths constructed under the project with its own resources and will continue operating the bicycle revolving fund established through Caja Municipal and related promotion - 11 -  activities. The Lima airport concessionaire will be in charge of the maintenance and operation of the runway rehabilitated while the Consorcio de Ferrocarriles del Peru will maintain and operate the equipment and rail-infrastructure acquired under the project. 7. Bank and Borrower Performance Bank 7.1 Lending: The Bank's performance during project preparation is rated satisfactory. Eleven missions visited Lima during the preparation, appraisal and negotiation phases, complemented by a mission of the borrower to Washington D.C. Appraisal was conducted by a highly qualify multi-disciplinary team consisting of a transport engineer, a transport economist, a procurement specialist, a non-motorized transport specialist and an environmental specialist. The timeliness of the project was not optimal: designs for the road rehabilitation component were not ready before project effectiveness resulting in procurement delays for civil works. 7.2 Supervision: Bank Supervision is rated satisfactory. On average, the Bank conducted two full supervision missions per year. Sufficient resources were allocated toward project supervision, which allowed for the constant monitoring of the project, including a budget of eight staff weeks a year of a project officer at the Resident Mission in Lima. Supervision compromised of 222 staff weeks. Although there was a task manager turnover, the project never encountered significant delays in obtaining "no objections" from the Bank team because the Resident Mission acted as a backup to the Task Managers while staff was away on missions and gave continuity to project implementation. During Supervision, the Bank staff tended to combine supervision with other transport missions in the Country, which proved to be very cost-effective. 7.3 Overall Bank performance: Overall, Bank performance was satisfactory in terms of responsiveness to borrower needs. The operation was prepared in line with the timing of regular investment projects, and, from 1995 on, the Bank was prompt in responding to Borrower requests for " no-objections" from Washington by providing day-to-day assistance in procurement and-institutional and policy issues from the Resident Mission of Lima. The local project officer maintained a constructive working relationship with the Borrower, following up on tasks and action plans agreed during supervision missions and overseeing resulting work. The Bank reacted rapidly and favorably to the Borrower's request to restructure project components and to reallocate project funds when needed. Supervision reports carefully highlighted key project implementation issues and corrective measures agreed upon. Bank staff participated in several institutional reform seminars and other project related activities. Borrower 7.4 Preparation: Borrower performance during preparation is rated satisfactory, although. the quality of designs for road rehabilitation works was insufficient, resulting in substantial cost overruns. However, the Borrower, through -project technical team, was committed to preparing the project. The Borrower's staff spent a significant amount of time with the Bank's team in Lima to complete the analysis and discuss project scope, objectives, components and implementation arrangements, demonstrating a sense of ownership. 7.5 Government implementation performance: The government implementation perfornance was mixed. In terms of sector and institutional reforms, the - 12 -  Government response showed lack of commitment in implementing the institutional reforms required to (i) reorganize and strengthen the Ministry of Transport and (ii) improve the organization and management of the road network. The Transport Law was approved practically at the end of project execution and the MTCC still has to prepare the regulations required by this Law. With the political situation and economic restrictions, it is projected that the implementation of the regulations will take longer than expected. In terms of counterpart funding including road component cost overruns, bridge rehabilitation, traffic safety, runway rehabilitation and project management, the government performed satisfactorily, increasing its local counterpart share from US$47.9 million to US$98.06 during project implementation. Furthermore, the Government showed its strong commitment to private sector participation in the concession of ENAFER as had been agreed at appraisal. 7.6 Implementing Agency: The performance of the implementing agencies is rated satisfactory. The project-executing unit (PERT) provided smooth administration of the resources to the other project participants such as the Municipality of Lima and ENAFER. PERT played a critical role in facilitating coordination among the different implementing agencies and departments of MTC and public institutions. Although there was a high turnover of the project coordinator position, project management went smoothly and provided technical assistance to the other agencies, which lacked experience, throughout the project implementation period. 7.7 Overall Borrower performance: Overall Borrower performance is satisfactory. Throughout the implementation period, the Borrower maintained a strong commitment to attaining the project objectives due to good project management and strong commitment by the implementing agencies and other participants to achieve the project targets. 8. Lessons Learned Key lessons learned from Peru Transport Rehabilitation Project are: Project Design and Policy implications: (a) Calibrate project complexity with existing institutional and professional capacity. The scope of the project was correctly identified and appraised but it was overly ambitious, addressing various modes with components ranging from railways and airports sub-sectors to a transport sub-sector, and involving several executing agencies with initial lack of experience in managing this type of project. The lack of adequate professional capacity resulted in a slow implementation start of the project. (b) Carry out the feasibility and engineering studies before project approval to ensure readiness for implementation where feasible. The underestimation of construction costs during road design, and the resulting cost over-run during construction, to the extent possible, could have been avoided if detailed technical designs had been completed well in advance of construction. Experience has shown that unless detailed and updated road design studies are available before bids are requested, the financial bids received from contractors are often much higher than the previously estimated construction costs. Also, in those cases where construction bids were based on uncompleted or outdated design studies, technical specifications needed to be modified during construction, which then resulted in higher-than estimated construction costs. (c) Ensure quality of designs by reviewing their consideration of terrain and climatical conditions. The extreme difficult terrain and climatical conditions in the Andean Mountains result in the occurance of multiple 'zonas criticas' which were not adequately addressed because of design/budget deficiencies and a - 13 -  'tramo' rehabilitation approach. Future projects must opt for an approach that focuses on full rehabilitation of 'normal' sections and 'reduced' rehabilitation in zonas criticas, only assuring transitability of such zones. (d) Include enforceable sustainability mechanisms in the project design. The Loan Agreement (Article 4.04) required an annual budget allocation of US$50 million for the purpose of financing the maintenance of national roads, other than the roads to be rehabilitated under the project. Over the life of the project, the Borrower has complied with this (enforceable) requirement, which contributed significantly to the preservation of the national road network. However, taking into account (i) the actual economic crisis, (ii) the insufficiency of financial resources for road maintenance generated through road tolls, (iii) the absence in the new Transport Law of a sustainable road maintenance financing mechanism, and (iv) the postponenment of the Second Transport Rehabilitation Project which again included an (improved) road maintenance requirement, there is a high risk of deferring periodic road maintenance resulting in a rapid deterioration of the national road network. Project Implementation (e) Follow through with the use ofproject monitoring indicators and select key measurable institutional indicators, and assign a monitoring and evaluation responsibility to the project-executing unit. Although the project included a set of monitoring indicators and targets, the implementation unit (PERT) did not use them for project management or as a monitoring tool as an "early warning device", thus hindering effective implementation of project staff monitoring, and progress in fulfilling the development objectives or the performance of the other project executing agencies, such as ENAFER, CORPAC, NRSC, and the Municipality of Lima. In addition, the project did not include appropriate indicators for the institutional reforms. The monitoring and evaluation of effectiveness of the institutional reforms could have been improved with the inclusion of clearly defined and measurable indicators. Without these indicators, it is difficult for Bank supervision teams to identify delays and issues early enough to propose timely remedial measures. Clear responsibility for planning and monitoring project performance and targets must be included in the project-executing unit. GO Develop andfollow through with a specific technical training program for local staff during the first year ofproject implementation for sectors with a long period of inactivity. Staff of project executing agencies must be qualified and trained to prepare terms of reference and to review and analyze technical feasibility studies prepared by extemal consulting firms during the first year of operation or, alternatively, to hire experienced international consultants to assist in the approval of the technical studies. Also, executing agencies must incorporate quality control mechanisms to ensure proper evaluation of technical reports or feasibilities studies. (g) Promote the use of a procurement method ofpost-qualification of bids instead of pre-qualification where there are a limited number of local contractors. It was observed during the execution of the bridge component that where there were a limited number of contractors, which had been prequalified for a well-defined scope of work, and all participants' competitors knew the list of prequalified companies, the financial bids received were significantly higher than expected. Project management suspected exchange of information between pre-qualified contractors and decided for a subsequent relaunching of bids introducing the method of post-qualification of bidders. This yielded prices that were almost half of those quoted in the first set of bids. The appearance of new bidders, unknown to the long-established local bidders, was certainly the main factor that brought about the lower bids. (h) The existence of bikepaths is a necessary but not sufficient condition for the use of bicycles in a city such as Lima-Callao. Bikepaths protect bicyclists from traffic, but they do not provide security - 14 -  against theft or -in the case of women- sexual harassment. Whenever the use of bikepaths needs to be combined with cycling along other main avenues where bikepaths are not present, and bikers share road space with motorized traffic, this represents a serious deterrent of bicycle usage for both men and women. The impact of bikepath construction on neighbors and residents needs to be taken into consideration in their design. Furthermore, a participatory approach is necessary to this intervention, in order to generate goodwill toward the project and contribute to the creation -or strengthening- of a bicycle culture. Finally, the promotional and educational efforts are a critical component for the success of a non-motorized transport project. The communications campaigns needs to address the specific issues that concern men and women with respect to bicycle riding and handling, and to the use of bicycles and bikepaths. 9. Partner Comments (a) Borrower/implementing agency: The Final Evaluation report prepared by the Borrower is included as Annex 8. Hereafter follows an informal summary of the Borrower's report, prepared by the TTL. Evaluation of objectives and goals of the Project In the evaluation of the Project, it is very important to stress the high degree of complexity involved while acting simultaneously adjusting to the Standards set by the World Bank and the reduced time frames urgently demanded by the country for its recovery, considering additionally that the Project had been drafted with a multi-modal conception, which included in addition to the highways and bridges projects, the studies and works of non-motorized, railways, civil aeronautics, urban metropolitan transportation and road safety. Some external demands had to be overcome by the Project with the purpose of achieving the proposed objectives and goals, among which we could mention as the more relevant ones, those derived from the ampleness and particular characteristics of the regions where the works where done, as well as the different climatic phenomena according to the season, the different types of geology and existing geographic accidents, as well as the variety of hydrology of the Peruvian territory. However, in spite of the inconveniences faced, the adequate management of those responsible for the administrative and operational aspects of the executing organisms allowed to reach satisfactorily the goals established in the Project, which are shown in the Appendix and which are contributing substantially to the development of the country, turning the PRT-1 into a facilitator and integrator of development with alternate modes and ways which are more secure and faster, fostering growth of the different socioeconomic activities of each region, promoting the generation of work, the access to health and education services and helping in the reduction of the transportation costs which will drive commercial and tourism exchange. Evaluation of results PRT-1 contributed in a decisive way to the reactivation of the transportation and construction sectors, making4 possible the utilization of the machinery and personnel of the national engineering, providing direct work to approximately 66,000 men/month, which equals a total of more than 5,500 man/year, an amount that is distributed in approximately 380 professionals, 620 technicians and 4564 assistants and workers each year. The benefits of the Project were highly profitable, initially with the dynamization of the economic activity - 15 -  in the areas of influence through the generation of employment and globally through the direct benefits in the operational costs of the vehicles with a significant profitability, especially in the roads that have been improved at the asphalt carpet level; and in respect to the indirect benefits (well being of population, improvement of competitiveness of the Peruvian export products and more economic stability within the country), which although are difficult to quantify, a substantial growth that has benefited the population as a whole has been observed. Performance of the Borrower Performance by the Borrower (Government, MTC, MEF, Executive Organisms) was rated satisfactory, reaching by the end of the Project the objectives and goals and execute almost in its entirety the available funds. The interest and responsibility showed in the technical and administrative aspects, and the permanent coordination with the Bank, allowed to identify and solve timely the problems that in several instances demanded adjustment or modification of the goals in order to ensure the success of the Project. Regarding the execution stage, compliance with the programs of activities developed for each component, as well as the follow-up of the key indicators of implementation and the operational indicators of performance, expedited the achievement of virtually all goals established or adjusted. During this stage, the goals of the components and the assigned amounts were reviewed, and in accordance with the World Bank some goals were adjusted and others were moved to a next project, basically due to larger investment costs than those initially considered, as a result of the Definitive Studies, Contests and Bidding performed. The work teams conformed by the Executive Organisms to carry on the technical and administrative functions had a satisfactory performance, improving the quality of the results as the Project advanced. It should be stressed that at the beginning of the PRT-1, as a result of an omission by previous governments of development of transportation infrastructure, there was an evident lack of qualified human resources with experience to satisfy the integral requirements for the adequate direction and execution of the different studies, supervision and works that had to be performed. This first Loan Agreement between the World Bank and the Government - Sector MTC (PERT-PRT), meant the implementation and mandatory compliance of the procedures established in the Bank Standards, which in those moments were not known nor applied in the systems of the transportation sectors, because of which the Executive Organisms had to adapt, innovate and apply in all the activities and technical-administrative processes, the above mentioned standards in order to fully achieve the goals and objectives established. Performance by the Bank The ongoing participation of the Bank during the preparation, evaluation and supervision stages was very important for the achievement of the objectives and goals, providing continuous administrative and operational advice at all levels, which helped to overcome setbacks and difficulties that rose throughout the development of the Project. In the same way, through the visits of the missions and communications from Washin on, the officers of the Bank showed interest, experience and knowledge, coordinating and establishing dialogue with the different Government Organisms and in specific cases taking part in work meetings with the consultants, proposing actions and/or alternatives with the purpose of solving existing problems. From the preparation works, the Bank showed a wide identification with the objectives of the Project, which helped with the Integral Strategy of the Government to reactivate the transportation sector, which in - 16 -  those moments was going through a collapse situation due to the lack of road infrastructure en good condition and at the same time setting up solid foundations for promoting the development of the country. During the evaluation stage, through a multidisciplinary professional team, the Bank undertook a task of analysis and revision of the work perforned during the first stage, identifying the possible risks that would involve the execution of PRT- I and providing concrete solutions, obtaining as a final product the Evaluation Report No. 12309-PE from February 17 1994, in which the transportation sector and the economic situation of the country, the objectives and characteristics of the Project, the agreements reached and recommendations for the optimum execution of the same are analyzed in depth. During the supervision stage, the Bank assisted the Borrower through visits to the country by the missions, work teams and communications from Washington, evaluating the performance of the advances and progress, cooperating to troubleshoot and solve problems, formulating recommendations and approving requirements, demonstrating promptness and flexibility towards proposals presented by the Executive Organisms in the best interest of overcoming difficulties and optimize execution of the Project. In specific cases, they promptly approved the partial or total modification of goals and the consequent restructuring of costs of the Project. Furthermore, the responses from the Bank to the requests for No Objection in terms of time, mainly for issues regarding approval of additional budget for works and supervision, allowed the normal development of the works. Key lessons learned for future projects In the formulation of the Feasibility Studies, Basic Engineering Studies and Definitive Studies, a good quality control is critical giving special attention to the topographic, geologic, hydrologic, climatic and environmental studies, with emphasis in the field investigation phase, soil and subsoil testing (with backside excavations of 2 m depth as a minimum, in distances of no more than 200 meters); also, the solution of critical points should be considered, the stabilization of banks (upper and lower), appropriate emergency lanes, the design of efficient drainage, the mitigation of negative environmental impact and the optimization of the road safety. The approval of the Definitive Studies must be very demanding, as that is a way of ensuring the successful completion of the works; if not done so, during the execution there could be defects, deficiencies or omissions, which could give rise to additional delays and budgets with very high percentages in relation to the budget established in the contract, putting the objectives of the Project in risk. The Definitive Studies in the case of highways, require additionally a specialized review in the aspects of road safety, with the purpose of decreasing the problems related to the designs, which will help to minimize significantly the possible future expenses for modifications or corrections after construction. It is important to consider in the terms of reference for the Studies, the basic concepts of road safety and during the construction phase the application of audits. For future contests or bidding processes, with the purpose of optimizing results and avoid jeopardizing the completion of the studies or works during the selection, we should: a. Implement considerations that will impede awarding the contract to Bidders (Consultants or Contractors) with a limited contracting economic capacity; requiring during the selection stage the sufficient liquidity that will ensure progress without depending entirely from contractual payments. b. Disqualify bidders who present offers below a reasonable margin with regard to the referential budget (offers below 90%). c. In the event that intemational companies bid, the mandatory direct participation should be required, through the assignment and permanent residence of its specialized technical staff (foreign) until the project - 17 -  has been concluded. d. Program in the future the contests and bidding processes through the post-qualification modality, as the more flexibility of the submittal stage allows for a greater number of bidders, reducing thus the possibilities of arrangements in prices. e. Distinguish in the terms of reference for the projects of highways the concepts and scope of the Basic Engineering Studies and the Engineering Projects, being convenient to separate them during the execution and presentation phases. This first experience has made possible the identification of procedures for future projects and the establishment of the need to implement and operational handbook that will standardize the different processes that are required during the execution of a project type PRT- l, defining the steps and time frames that must be met for each of the activities, which should be adjusted to the real needs and future requirements. It is critical to promote and sustain the maintenance plans of the recently rehabilitated highways that will ensure continuity of the ways and avoid its progressive deterioration, for which it is necessary to have and strengthen: i) assigmnent of the necessary funds through toll collection (auto-sustainable) and the obligatory nature of the fiscal contribution in case it is necessary to cover differences; ii) the implementation of weighting controls of heavy vehicles that could endanger the conservation of highways; iii) establish a monitoring plan with the purpose of supervising the state of conservation of the rehabilitated highways and the routine and periodic maintenance programs. In the same way, it is necessary to foster creation of local companies that perform the minor maintenance tasks of highways and bridges in the remote zones, where the presence of work equipment from MTC will be too limited, difficult or cost ineffective. (b) Cofinanciers: The draft ICR report has been sent to the Cofinanciers, but no comments were received. (c) Other partners (:NGOs/private sector): Not applicable. 10. Additional Information Not applicable. - 18 -  Annex 1. Key Performance Indicators/Log Frame Matrix 1. ROAD COMPONENT > Road Rehabilitation 725 Km 589,40 Km Tarma - La Merced 72 Km 71,60 Km d- Pte. Yanango La Merced - Satipo 122 Km 122,60 Km Huanuco - Tingo Maria 120 Km 120,60 Kmn Tarapoto - Rioja 135 Km Canceled Rioja - Rio Nieva 100 Km 100,00 Km Rio Nieva - Corral Quemado 176 Km 174,60 Km A. Bridge Rehabilitation 44 bridges +repairs 52 Bridges + 540 i.m. B. recovered Acquisition of Stock Stock acquired for 500 I.m. 540 i.m. bridges recovered Recovery of Bailey 500 Il. 15 new Mabe Johnson Replacement of Derelict 44 bridges 37 bridges permanent Bridge Management Study 1 Study Management system acquired . Road Maintenance Design of Pilot Program 1 Study 1 Stuidy Works & Supervision 620 Km Canceled . Equipment for Road Laboratory Laboratory improvements Quality Control Office (Laboratory) improved = Traffic Safety Program Traffic Safety Study Traffic Safety Road Study Study implemented Equipment and Works Safety Improvements Pilot Project Implemented & feasibility studies for future investments . Design of Future Road Rehabilitation Schemes Tingo Maria - Pucallpa 255 Km 255 Km Pte.Chanchamayo - Villa Rica 44 Km 44 Km Others Roads 175 Km Tarapoto - Rioja Olmos - Corral Quemado & others. Road & Traffic Surveys Studies Studies completed & preparation of 2