Chad - Highway Maintenance Project

uocumcn 01 The World Bank FOR OFFICIAL USE ONLY Report No. 1883 PROJECT PERFORMANCE AUDIT REPORT CHAD HIGHWAY MAINTENANCE PROJECT (CREDIT 125-CD) February 2, 1978 Operations Evaluation Department 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.  PROJECT PERFORMANCE AUDIT REPORT FOR OFFICIAL USE ONLY CHAD HIGHWAY MAINTENANCE PROJECT (CREDIT 125-CD) Table of Contents Page No. PREFACE PROJECT PERFORMANCE AUDIT BASIC DATA SHEET PROJECT PERFORMANCE AUDIT MEMORANDUM (HIGHLIGHTS) ATTACHMENT: PROJECT COMPLETION REPORT I. Introduction A.1 II. Project Preparation and Appraisal A.1 III. Project Implementation and Cost A.6 IV. Economic Re-evaluation A.16 V. The Role of IDA A.21 VI. Conclusions A.21 Tables 1. List of Equipment Provided under the Project 2. Schedule of Actual Project Implementation 3. Actual and Appraisal Estimates of Project Costs 4. Appraisal Estimated and Actual Disbursements 5. Flow of Accumulated Disbursements 6. Actual and Estimated Traffic 7. Comparison of Estimated Vehicle Operating Costs, Net of Taxes 8. Summary of Estimated 1976 Vehicle Operating Costs (voc) in Constant 1970 Prices and Net of Taxes 9. Highway Network, 1970-76 (km) 10. Government Revenues from Road.Users, 1969-75 11. Expenditures on Highways, 1971-76 Annex Details of the Economic Analysis of the Maintenance Program Annex Tables 1. Growth in Vehicle Fleet, 1970-75 2. Indicators of Traffic Growth 1970-75 3. Maintenance Output 4. Recurrent Highway Expenditures 5. Benefit Cost Analysis im This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT CHAD HIGHWAY MAINTENANCE PROJECT (CREDIT 125-CD) Preface This report presents a performance audit of the Chad Highway Maintenance Project for which Credit 125-CD in the amount of US$4.1 million is expected to be fully disbursed in FY78. It consists of a memorandum (Highlights), prepared by the Operations Evaluation Depart- ment (OED), and a Project Completion Report (PCR), prepared by the Bank's Western Africa Regional Office. OED has reviewed the PCR against the Appraisal and President's Reports, and has found that it adequately covers the issues relevant to the implementation of the components as well as to the economic justifi- cation of the project. Comments made by OED on an earlier draft of the PCR are reflected in the present version. On the basis of this limited review process, OED has accepted the analysis and conclusions of the PCR and has summarized its main find- ings in the memorandum (Highlights). Projects staff collected data for the PCR during the final supervision mission of December 1976. OED staff did not, however, visit Chad.  PROJECT PERFORMANCE AUDIT BASIC DATA SHEET CHAD HIGHWAY MAINTENANCE PROJECT (CREDIT 125-CD) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 4.8 5.1 Overrun (%) 6 Credit Amount (US$ million) 4.1 4.1 Disbursed and Outstanding 11/30/77 - 4. Date of Project Completion 12/73 12/73.& Proportion of Expected Maintenance Output Achieved at Completion (%) - 71 Proportion of Time Overrun () - 0 Economic Rate of Return (%) 11 21 Institutional Performance - Better than at appraisal OTHER PROJECT DATA Original Item Plan Revisions Actual First Mention in Files - - 1966 Government's Application - - 2/67 Negotiations 6/68 - 6/19/68 Board Approval 7/68 - 7/16/68 Credit Agreement Date 8/68 - 8/14/68 Effectiveness Date 12/16/68 - 2/11/69 Closing Date 12/31/7 12/31/74 and 12/31/76 NYFDL Borrower Republic of Chad Executing Agency Directorate of Public Works Fiscal Year of Borrower 1/1 - 12/31 Follow-on Project Name Second Highway Project Credit Number 490-CD Amount (US$ million) US$3.5 million Credit Agreement Date 6/28/74 MISSION DATA Date Month/ No. of No. of of Full Item Year Weeks Persons Manweeks Report Identification 1966 4 2 8 1966 Appraisal 2/67 8 2 16 2/68 Supervision I 3/69 2 1 2 4/69 Supervision II 10/69 1 1 1 11/69 Supervision III 6-7/70 2 1 2 7/70 Supervision IV 4/71 2 1 2 5/71 Supervision V 10/71 3 2 6 11/71 Supervision VI 5/72 1 1 1 6/72 Supervision VII 10/72 1 1 1 11/72 Supervision VIII 4/73 2 1 2 5/73 Supervision IX 10-11/73 4 1 4 12/73 Supervision X 11/74 2 1 n.a.L 2/75 Supervision XI 6/75 1 1 n.a./5 7/75 Supervision XII 11/75 2 1 n.a.7 2/76 Supervision XIII 7/76 3 2 n.a.7 11/76 Supervision XIV 12/76 2 3 n.a.7hi 3/77 COUNTRY EXCHANGE RATES Name of Currency CFA franc (CFAF) Year: 1968 Exchange Rate: US$1 = CFAF 247.0 1969 US$1 = CFAF 260.0 1970 US$1 = CFAF 276.4 1971 US$1 = CFAF 275.5 1972 US$1 = CFAF 252.2 1973 US$1 = CFAF 222.7 Average during disbursement period US$1 = CFAF 262.0 /I Includes exchange adjustment of US$400,000. /2 Date when physical components of the project, i.e., procurement and Lonstruction, were completed. See also footnote 4. /3 As shown in Credit Agreement. T4 Not yet fully disbutsed. Awaiting final application for disbursement in the amount of US$16,314.94. Request for 6ubmission of final application has been made. /5 Manweeks not available as supervision of this project was combined with other projects.  PROJECT PERFORMANCE AUDIT MEMORANDUM (HIGHLIGHTS) CHAD HIGHWAY MAINTENANCE PROJECT (CREDIT 125-CD) The Project 1. Credit 125-CD for US$4.1 million was to finance the foreign exchange cost of a highway project, estimated to cost US$5.1 million, through which to help establish a sound maintenance organization. The project consisted of three parts. One part, the most important (82% of the estimated project cost), was a five-year highway maintenance program. The program included: the purchase of equipment, spare parts and materials; the improvement of workshops; and the provision of a training program. The other two parts were the execution of preinvest- ment studies for a main road and lakeside facilities as well as the establishment of a traffic data collection system. 2. The project was revised during implementation by the exten- sion of the length of roads included in the maintenance program as well as by the deletion of detailed engineering of the main road and of the training program. The original maintenance target was to cover 3,700 km of roads by 1971. However, due to delays in the equipment procure- ment program, a new target of 4,300 km by 1974 was set (PCR, para. 3.08). Detailed engineering for the main road was dropped because the feasibility study showed that road improvement would be premature (PCR, paras 3.10 and 4.08-4.11). After consultants determined that the cost of training opera- tors and mechanics would exceed the credit allocation and after the Gov- ernment requested inclusion of a more comprehensive program in a project supported by a subsequent credit (490-CD of June 1974), IDA agreed to the deletion of training under Credit 125-CD (PCR, para. 3.07). Some train- ing of maintenance personnel was carried out during the project period by USAID and by local agents of equipment suppliers. Project Results 3. Implementation. By the project completion date (December 1973), only 71% of the maintenance target (in terms of road length covered) set for 1971 was reached. During implementation, important delays occurred in procurement of equipment and materials, improvement and extension of the workshops, and allocation of additional revenue collected from fuel taxes to highway maintenance (PCR, paras 3.01-3.06, 3.19-3.21, 3.27, 3.29, 3.30, Tables 10 and 11, and Annex, Table 4). The primary causes of the procurement delay were the slow start of tendering, the need for retendering because of devaluation of the French and CFA francs, and the delay in awarding contracts and ordering equipment. Workshop construc- tion was prolonged because the original domestic contractor did not have sufficient experience or financial resources and another domestic contrac- tor had to finish the job, with assistance from the Directorate of Public Works. The Government's unwillingness to allocate additional revenue col- lected from fuel taxes to highway maintenance operations before delivery - 2 - of the project equipment delayed the availability of sufficient funds for the maintenance program. Other delays of shorter duration were associated with procedural arrangements (credit effectiveness and com- munications between IDA and the implementing agency) (PCR, para. 3.24) and renegotiation of the contract for the feasibility study. It appears that the original schedule for the project was somewhat optimistic. This seems to indicate the importance of taking into account administrative constraints as well as the lack of familiarity of the Government and IDA with each other's procedures and regulations in scheduling activities in first projects. 4. Institutional Impact. The project focussed the Government's attention on the importance of highway maintenance and initiated the process of building a sound maintenance organization. Shortages of per- sonnel, local funds, and equipment hampered the Government's ability to observe, fully and continuously, its commitments to IDA to enforce vehicle weights and dimensions and traffic regulations as well as to collect high- way traffic data. This experience suggests the importance of ascertain- ing, at the time of formulation of credit conditions, the extent of avail- ability of resources essential to compliance. 5. Cost. The net increase in the actual total cost of the revised project was 6% over the original estimate at appraisal. The increase in the cost of equipment and spare parts (resulting from procurement delays and price increases) was 19%, but this was partly offset by the savings arising from the deletion of detailed engineering and most of the train- ing program. 6. Economic Rate of Return. Despite the lower than expected main- tenance output and cost overrun, the reestimated rate of return for the project is 21% compared with the appraisal estimate of 11%. This is ex- plained primarily by the substantial rise in vehicle operating cost savings due to the increased price of oil. The economic returq however, is very sensitive to changes in benefits (PCR, paras 4.04-4.05). 7. Conditions Required for Proper Highway Maintenance. The experi- ence of this project also points to the need for provision of increased local funds for maintenance, improvement of equipment utilization, expan- sion of training for maintenance personnel, and development of the Govern- ment's highway planning capability (PCR, paras 6.01-6.08). ATTACHMENT CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 Chad is the largest land-locked country in Africa, roughly 2,000 km from the nearest sea port, and faces formidable obstacles in transporting export commodities (primarily cotton). It is of prime im- portance to the country's development to establish a reliable and inexpensive internal transport network and to secure external links to world markets. A harsh physical environment intensified Chad's difficulties in developing its internal transportation. The commercially active and productive area is flooded during the rainy season, making most of the highway network impassable for more than four months each year. During the dry season the country's two major rivers become unnavigable. Low traffic volumes and high construction costs make major road and water transport investments difficult to justify. Therefore, road maintenance requires priority consideration. The Highway Maintenance Project (Credit 125-CD, August 14, 1968, US$4.1 million) was primarily designed to strengthen the Government's road maintenance operation. A further consideration was to explore the feasibility of a road link between Lake Chad and N'Djamena to assist in transporting fish and other products. II. PROJECT PREPARATION AND APPRAISAL A. Project Formulation 2.01 In May 1966, the Bank's Permanent Mission in West Africa (PMWA) sent a project identification mission to Chad. Based on its findings, the mission recommended a feasibility study of the 82 km Djermaya-Djimtilo road between N'Djamena (Fort Lamy) and Lake Chad, and the provision of a long- term road maintenance program, including the financing of highway maintenance equipment by the Bank Group. 2.02 In February 1967, the Government of Chad submitted a request to IDA for assistance in financing: (i) a five-year program to improve road maintenance, and (ii) a feasibility study of the Djermaya-Djimtilo road including complementary lakeside facilities, to be followed by detailed engineering if the study showed the road to be economically viable. The project was appraised in February 1967. During Credit negotiations, in June 1968, a one-year program for establishing a system of traffic data collection was added to the project. This component was included because the Government had not been successful in obtaining funds for this purpose from FAC. The Credit Agreement was signed August 14, 1968 and became effective February 11, 1969. This project constituted the Bank Group's first lending operation in Chad. - A.2 - B. Project Description 2.03 The project, executed by the Directorate of Public Works (DPW), as initially conceived, consisted of: (i) a five-year maintenance program for primary roads, including provision of equipment, spare parts and materials, extension and improvement of shops, and training of operators and mechanics; (ii) a feasibility study for improving the 82 km Djermaya- Djimtilo road and lakeside facilities in Djimtilo and Bol, provided the construction works were justified, the preparation of detailed engineering and bidding documents; and (iii) a country-wide system to collect traffic data on the main road network. 2.04 The project scope was subsequently reduced because: (i) the feasibility study of the Djermaya-Djimtilo road carried out in 1970, indi- cated that detailed engineering would be premature at that time; and (ii) the cost of the training program for operators and mechanics, as proposed by consultants, far exceeded the allocation (US$200,000)under the project. Subsequently, at the Government's request, this latter program was postponed and included in the Second Highway Project (Credit 490-CD, June 28, 1974, US$3.5 million). A Credit surplus of about US$254,000 resulting from these reductions in the scope of the project, was used to complement the training program provided under the Second Highway Project and to purchase spare parts and service vehicles for use in DPW maintenance operations. Road Maintenance Program 2.06 DPW was responsible for the maintenance of about 1,700 kml/ of roads in 1968. Under the five-year road maintenance program, it was envisaged that by 1971,DPW would extend its coverage of road maintenance to about 3,700 km. At the time of project appraisal, the condition of additional roads to be maintained by DPW was generally poor. Most of the roads were impassable during the rainy season, except some in lateritic soils around Moundou. Maintenance operations were to be improved with the efficient use of new equipment. The objective was to keep the earth roads trafficable during the dry season and in areas where lateritic gravel was available, the roads were to be kept passable during most of the rainy season. The road maintenance program included: (a) renewal and extension of the equipment pool; (b) provision of an initial stock of spare parts and steel culverts; (c) extension and improvement of DPW's existing workshops and warehouses; and (d) training for mechanics and operators. DPW's management and organization were considered adequate to execute this program. 1/ DPW's 1968 annual report concerning the Road Fund shows that 2,000 km were maintained in that year. - A.3 - Preinvestment Studies for the Djermaya-Djimtilo Road 2.07 The small village of Djimtilo near the mouth of the Chari River on Lake Chad is a loading point for boats. The village was connected by an 82 km track branching off from the all-weather N'Djamena (Fort Lamy)- Massaguet road at Djermaya. The feasibility study was to evaluate the upgrading of this track to an all-weather road to provide permanent access from N'Djamena to Lake Chad so that fish and other products from reclaimed zones along the lake could be transported throughout the year. The annual traffic on the completed road in 1975 was expected to be about 40,000 tons/year, increasing rapidly thereafter. The feasibility study was expected to deter- mine the appropriate design standards and cost estimates for construction and to consider the improvement of existing lakeside terminal port and storage facilities at Djimtilo and Bol. Detailed engineering and prepara- tion of bidding documents to construct the road and improve the lakeside facilities were to be carried out only if their economic justification was established. Collection of Traffic Data 2.08 The project provided for the services of a consultant to carry out a country-wide traffic count covering the main road network and to establish suitable facilities for the continuing collection of traffic data. The French consulting firm, BCEOM, was selected in February 1968 to carry out the feasibility study and traffic count program. C. Major Covenants and Supplementary Letters 2.09 Particular covenants required that: (i) the Government employ competent consultants for execution of preinvestment studies on terms and conditions satis- factory to IDA; retention of the consultants was a condition of Credit effectiveness (Sections 4.01 and 6.01 of the Credit Agreement); (ii) DPW ensure the adequate upkeep of highway maintenance equipment and replacement of such equipment when necessary (Section 4.08 (a) of the Credit Agreement); (iii) DPW employ qualified senior technical staff, as needed, for the execution of the maintenance program and make arrangements for the training of operating and maintenance personnel satisfactory to IDA (Section 4.08 (b) of the Credit Agreement); (iv) dimensions and weight limits of vehicles using public roads not exceed their structural capacity (Section 4.08 (c) of the Credit Agreement); - A.4 - (v) traffic regulations be enforced consistently and on a permanent basis (Section 4.08 (d) of the Credit Agreement); (vi) technical, economic and financial information be collected and recorded for proper planning of maintenance, improve- ments and extensicns of the highway system (Section 4.08 (e) of the Credit Agreement). 2.10 In addition, supplementary letters on the following subjects were included: (i) Procurement of Goods: confirming the understanding that, for procurement of spare parts and shop equipment, inter- national competitive bidding would not be required provided the contract value did not exceed US$20,000 equivalent (Letter No. 1, in amplification of Section 3.02); (ii) Maintenance of Roads; Equipment Replacement Account; Local Funds: stating that (a) in order to execute the five-year maintenance program, it was the Government's intention to make available to DPW through the Fonds Routier the necessary budget for proper maintenance operations; (b) as from 1972, it was the Government's intention to make budgetary appro- priations to the Fonds de Renouvellement sufficient to meet the cost of replacement of equipment as needed; and (c) in order to meet the increase in expenditures on highway maintenance, the Government intended to raise motor fuel taxes by CFAF 3 per litre for gasoline on July 1 of each of the years 1969, 1970 and 1971, and by CFAF 2.5 per litre for diesel fuel on July 1, 1970 (Letter No. 2, to amplify Sections 4.01, 4.02 and 4.08); (iii) Management and Personnel Policy: confirming that (a) DPW would continue to recruit qualified and experienced personnel to fill all vacancies in DPW and the transition from expatriate staff to Chadian nationals would be a gradual one, to ensure that the local staff were adequately trained before assuming their responsibilities; and (b) a more rational and less time-consuming method for ordering parts and equipment would be adopted by DPW and that payments to suppliers of procured goods would be made without delay in conformity with the payment conditions stipulated in theircontracts (Letter No. 3 to explain provisions of Sections 4.08 (b) and 4.08 (a), respectively). - A.5 - D. Cost Estimates and Financing 2.11 At the time of appraisal, the total capital cost of the project including taxes, was estimated as follows: US$ Million/ IDA Government Total A. Maintenance Program, 1968-70 1. Equipment and Spare Parts 2.74 0.40 3.14 2. Materials (Steel Culverts) 0.10 0.02 0.12 3. Extension of Shops 0.06 0.01 0.07 4. Operators'and Mechanics' Training 0.20 0.05 0.25 5. Contingencies (Physical and Price) 0.70 0.12 0.82 B. Engineering Studies and Collection of Traffic Data 0.30 0.10 0.40 . Subtotal 4.10 0.70 4.80 C. 1971-72 Equipment Renewal Program - 0.57 0.57 GRAND TOTAL 4.10 1.27 5.37 2.12 The cost of the new equipment and spare parts for the maintenance program was based on the cost of equipment purchases by the Government at the time of appraisal. A price contingency of 10% was added to the basic cost to cover price escalation over the three-year equipment supply period. A further 10% physical contingency was added to cover miscellaneous additional needs of maintenance equipment, shop modernization and operator and mechanic training, which might have become apparent after the first two years of operation. The estimated costs for the feasibility study and detailed engineering of the Djermaya-Djimtilo road, as well as for estab- lishing a country-wide traffic counting system, were based on cost figures of contracts negotiated with the French firm BCEOM, which had been retained as a consultant. 2.13 The project was financed by an IDA Credit of US$4.1 million, which was estimated to cover the foreign exchange component of the capital expenditures of the first three years (1968-70) of the maintenance program, totalling US$4.4 million, as well as the foreign exchange cost of technical studies included in the project. The foreign exchange component of the project, as estimated at appraisal, was 85%. The estimated local expendi- tures of CFAF 165 million (US$700,000 equivalent) for the technical studies and the first phase of the maintenance program, as well as the total cost of equipment renewal in the last two years of the program and all the 1/ US$1.00 = CFAF 247. - A.6 - recurrent costs of the five-year maintenance program, estimated at CFAF 1,114 million (US$4.52 million equivalent), were to be financed by the Government. III. PROJECT IMPLEMENTATION AND COST A. Road Maintenance Program Procurement of Maintenance Equipment 3.01 Suppliers of road maintenance equipment were invited to submit unpriced proposals in September 1968, by announcements in the international press and through diplomatic channels. Based on these proposals, DPW qualified several suppliers. The Government's slow procedures in qualifying suppliers and inviting bids delayed the procurement of maintenance equipment by about four months. IDA approved the bidding documents in April 1969 and the Government received tenders for road maintenance equipment in June 1969. However, before the award of contracts, the French and CFA Francs were devalued, making a comparison of bids unrealistic. Consequently, in November 1969, new bids had to be invited. In January 1970 eight firms participated in the bidding for various groups of equipment followed by IDA approval of the award of contracts in July 1970. It was not until the first half of 1971 that all contract awards, for about US$3.6 million worth of highway maintenance equipment, were completed. 3.02 The equipment was ordered in two lots (Table 1). The major portion of the first batch (60% of equipment provided under the project) was delivered during the secondhalf of 1971, after a delay of about two years compared with appraisal estimates. The delivery of the second batch, ordered in May 1972, was substantially completed by March 1973. The pro- curement of the second batch of equipment was contingent upon an increase in fuel taxes which would increase Road Fund revenues and allow an exten- sion in the road network to be maintained, thus ensuring full utilization of the additional equipment to be procured. Delivery of the second batch of equipment could not be expedited because the Government had failed to augment the Road Fund (para. 3.08). 3.03 As a result of (i) the slow start in inviting bids, (ii) the subsequent need for retendering because of devaluation of the French and CFA Francs in 1969, and (iii) the delay in contract awards and ordering of equipment, the execution of the maintenance program was stalled by about two years. Although some of these delays could not be foreseen, the scheduling assumptions for project implementation made at the time of appraisal appear, in retrospect, somewhat optimistic. 3.04 The initial stock of spare parts,amounting to 10% of the value of equipment,was not procured simultaneously with maintenance equipment since the Government had made arrangements with individual equipment suppliers for parts to be supplied over the project period. This arrange- ment did not work out as the suppliers were unwilling to accept unredeemable Government vouchers for payment for spare parts orders. Furthermore, the - A.7 - Government's actual orders for purchases of spare parts were smaller than the amounts initially contracted to purchase. Lack of adequate supplies of spare parts and poor equipment maintenance contributed significantly to low equipment utilization. Procurement of Culvert Pipes 3.05 The bidding documents for the supply of 1,400 m of corrugated steel culvert pipes were approved by IDA in April 1969. The contract for their supply was awarded to Hamelle Afrique in October 1969, and the delivery of the pipes was completed by July 1970. Installation of the pipes started in February 1970 and was completed by June 1972. Extension of Shops 3.06 In July 1968, the Government invited tenders through local advertisement, under competitive bidding procedures, for the extension of the PWD Mechanical Workshops in N'Djamena. The bids were analyzed in the latter part of 1969. The two lowest bidding firms were not selected because one could not furnish a certification that it had paid all its taxes (a require- ment under the conditions of tender), and the other requested withdrawal of its bid since it had secured another contract. In January 1970, the Government, with IDA's approval, selected Teleboune Mongoye which submitted the then lowest evaluated bid. The contract for the extension of the central workshop, however, was awarded in May 1970 after a four-month delay. By June 1971, only 30% of the contract had been completed because the local contractor had run into financial difficulties. Since the contract was far behind schedule and the contractor was in default, DPW used part of the contractor's security deposit to purchase directly some of the materials that were to be provided under the contract. The extension of workshops was finally completed in August 1972 by another contractor, Abdelkerim- Abdelkades with financial assistance from DPW. This was followed by installation of storage racks for spare parts during the first half of 1973. Construction of the workshop was marred by delays; between the call for bids and the final completion of works, three and one-half years had elapsed. Training of Operators and Mechanics 3.07 Credit funds amounting to US$200,000 were earmarked at appraisal for training operators and mechanics, either by expatriate experts or by sending trainees to the USAID-financed Regional Training Center in Lomg, Togo. In 1969 the Government obtained proposals from four consulting firms for the training program, but the proposals were more expensive, in relation to the services to-be provided, than the amount allocated in the Credit. Meanwhile, at the Government's request, USAID agreed in 1971 to reopen the training center at N'Djamena for five years. This center, run by two American experts, had trained DPW operators and mechanics between 1965-68. From September 1971 the center trained 12 work supervisors, 36 operators, and 31 mechanics under the direction of a USAID expert. In addition, 20 trainees were sent for training to the USAID Regional Training Center at - A.8 - Lom6. As a condition of purchase of maintenance equipment, familiarization training for operators and maintenance personnel was also carried out in N'Djamena by the local agents of equipment suppliers. However, in view of the importance that IDA attached to a full training program, the Government re- quested the consultant ORT Union (Switzerland) to propose a comprehensive training program for DPW's highway maintenance personnel, along the lines of a similar program carried out by ORT in Zaire. The consultant, whose services were financed under the Credit, sent a two-man mission to Chad in May 1972 for about three weeks to assess the training requirements and the estimated costs. Based on their findings, the consultants recommended a program involving about 90 man-months of training specialists and purchase of workshop equipment and tools and other educational aids. Since the cost of this comprehensive training program,estimated at US$400,000, exceeded the amount available in the Credit, the Government requested USAID and the Canadian International Development Agency (CIDA) to finance part of the program but neither agency reacted favorably. Finally, the Government with IDA's concurrence dropped this training program from the project, and reinstated it under the Second Highway Project (Credit 490-CD). The Credit funds thus released were used to purchase tools and workshop equipment and to supplement the comprehensive training program currently being implemented with the assistance of ORT Union, under the Second Highway Project. Output of the Maintenance Program 3.08 The physical execution of the maintenance program was delayed by about two years primarily as a result of the delay in procurement of equip- ment. In addition, the precarious security conditions in the country prevented the mobilization of a full maintenance program, thereby restricting mainte- nance operations to about 75% of the classified road network (see Table 9). At project inception, it was envisaged that in January 1969, fuel taxes would be increased by 55% and the funds used to expand maintenance coverage from 1,700 km maintained before the project (para. 2.06) to 2,800 km. This was supposed to coincide with the provision of the first batch of equipment. A further increase of 45% in fuel taxes was proposed for January 1970, along with an increase in road kilometrage under maintenance from 2,800 km to 3,700 km, the final target of the maintenance program specified in the Credit Agree- ment, as a condition for the provision of the second batch of equipment. Be- cause of the two-year delay in procurement of equipment, new maintenance out- put targets were established in July 1970, with the intention that DPW would expand its maintenance operations to 4,300 km by 1974. The roads to be main- tained included an additional 600 km comprising the Chad section of the Tran- sequatorial Route between N'Djamena and the CAE border. This section was maintained previously by the Agence Transequatoriale des Communications (ATEC), a multinational agency which was dissolved in 1969. In view of the troubled security conditions and the Government's constrained budgetary situation (see para. 3.19), the actual maintenance output between 1971-76 fell considerably short of the stipulated targets. Starting with an annual maintenance output of 1,800 km in 1970, the maintained kilometrage peaked at 2,800 km in 1972 and then gradually declined to the 1970 level by 1976. The proportion of the expected maintenance output achieved at completion of the project was 71%, calculated on the basis of the annual average maintenance output. - A.9 - B. Preinvestment Studies and Traffic Counting Program 3.09 The preparatory work for the preinvestment study of the Djermaya- Djimtilo road started in November 1967, when the Government invited four consulting firms to submit proposals. The Government, with IDA's approval, selected the French consulting firm BCEOM to execute the study. The Government and BCEOM negotiated and signed a contract for the study in January 1969. With this condition satisfied, the Credit was declared effective on February 11, 1969 after two postponements. 3.10 The consultants submitted an interim report in September 1969. IDA evaluated their report and focused on certain limitations in the eco- nomic analysis: e.g., developmental benefits from the road had not been adequately addressed and alternatives, other than construction of a new road, had not been evaluated. The consultants revised the study in the light of these observations and submitted a final report in December 1970. The final report concluded that improvement of the Djermaya-Djimtilo road was not justified and suggested that possibilities for improvement be reviewed after 1975/76. In the light of these recommendations, a detailed engineering study of the road was not carried out. 3.11 The Government and BCEOM also signed a contract for a traffic counting program in January 1969. The program was conducted during the period July 1969-June 1970, and a final report entitled "Actualisation des Comptages Routiers" was issued in August 1971. The report essentially updated the traffic and origin-destination study of 1963. Although the report was a comprehensive traffic and commodity flow study, it did not cover some of the roads included in the maintenance program under the Credit. Contrary to the provisions of the Credit Agreement, the Government did not carry out a continuing traffic counting program after the 1969-70 campaign (para. 3.16). C. Covenants of the Credit Agreement 3.12 The significant covenants and supplementary letters to the Credit Agreement are summarized in para. 2.09. Compliance with the conditions and requirements included in these covenants are discussed below. Employment of Competent Consultants for Preinvestment Studies (Section 6.01) 3.13 This covenant was also a condition of Credit effectiveness. Since the Government took over six months to negotiate a contract with the consul- tants BCEOM, the date of effectiveness was postponed twice, delaying the start of project implementation by three months. Other than the minor delay caused by its enforcement, this condition was fully satisfied by the Government. Employment of Qualified Senior Staff and Training of Operating and Maintenance Personnel (Section 4.08 (b) and Supplementary Letter No. 3) 3.14 At the beginning of the project, DPW was adequately staffed with senior French engineers under a long-term technical assistance agreement with FAC. During project implementation, some management positions were assigned to Chadians with French engineers acting as deputies. - A.10 - Regarding training of operators and mechanics, a limited training program with assistance from USAID was carried out to meet the day-to-day training needs of DPW. The training program envisaged in the project could not be executed as explained in para. 3.07. Enforcement of Traffic Regulations and Weight Limits (Section 4.08 (c) and (d)) 3.15 The permissible axle load limit was 10 tons at the time of project appraisal. At present the legal axle load limit is 13 tons. All vehicles are subject to inspection every six months. The movement of heavy vehicles on unsurfaced roads is forbidden during and for a few hours after heavy rains. These regulations were not strictly enforced as a result of troubled security conditions and manpower constraints. Vehicle inspections, however, are carried out by the Directorate of Mines in the Ministry of Civil Works and Geology. Owing to the absence of detailed records, it is difficult to assess the coverage and regularity of these inspections. Collection of Statistical Information (Section 4.08 (e)) 3.16 Although a traffic counting program (including an origin-destination study for commodity flows) was executed under the project in 1969-70, the Government did not institute a continuing system of data collection. In July 1976, however, a two-year traffic counting program was started to update the information gathered in the 1969/70 campaign. The Government's perfor- mance regarding the collection of technical, financial and economic data can be considered satisfactory, given Chad's limited financial resources and trained manpower. While there is considerable scope for improvement, it may have been overly optimistic to expect a thorough, on-going program in view of the prevailing conditions in Chad. Procurement of Goods (Supplementary Letter No. 1) 3.17 All goods (except spare parts and shop equipment with a contract value not exceeding US$20,000) were procured through international competitive bidding. Local bidding led to a few problems for work related to the exten- sion of the PWD workshops in N'Djamena (see para. 3.06). The experience with domestic contractors in this project highlights the need for substantial improvement in the domestic contracting industry before such contractors can play a wider role in the execution of civil works in Chad. 3.18 At IDA's suggestion, the maintenance equipment was procured in two lots, partly dictated by the precarious security conditions in the country. The first lot comprised equipment that DPW could deploy in areas without security risk. The purchase of the second lot depended on the Government's assurance that adequate funds would be allocated for maintenance. IDA approved the purchase of the second lot of equipment after the Govern- ment gave this assurance and agreed that any shortfalls in revenue receipts - A.11 - from fuel taxes for the Road Fund would be covered by the proceeds of the FAC budget subsidy in 1972. The Government also assured IDA that the planned extension of the maintenance program was feasible and not likely to be adversely affected by the security conditions. Provision of Funds for Maintenance (Supplementary Letter No. 2) 3.19 The financial needs for a full program of highway maintenance, the actual budgetary provisions, and the revenue receipts from fuel taxes for the Road Fund during the period 1970-74 are tabulated below: -------------CFAF Million------------ 1970 1971 1972 1973 1974 DPW perceived road maintenance 1/ 1/ requirements 23a- 310- 443 616 858 Estimated revenue receipts for Road Fund 474 537 410 460 450 Of which allocated to maintenance 176 223 224 225 220 Although funds allocated for maintenance increased from 1970 to 1972, they fell short of fully mobilizing Road Fund revenues for highway maintenance. In fact, they were barely sufficient to meet even half of DPW's maintenance requirements during the project implementation period. The scarcity of funds considerably hampered the scheduled maintenance program. It must be noted, however, that Chad's budgetary constraints were extremely severe during 1972-73, a period marked by an extended drought which caused a steep decline in the already limited production with resulting revenue losses. The Government was then compelled to restrict its budget for recurrent expendi- tures from CFAF 14,245 million in 1972 to CFAF 13,018 million in 1973. This reduction seriously limited the scope of the highway maintenance program. During 1974-75, Chad's impaired fiscal position was dealt a further blow by rampant inflation. 3.20 To meet the increased expenditure for highway maintenance, the Governtaent agreed LQ increase fuel taxes,effective July 1, in each of the years 1969-71. Although fuel taxes were raised in 1969 and 1970, the increases were credited to the general budget rather than the Road Fund. The Government found it difficult to justify increased allocations for highway maintenance since equipment (provided under the project) for exten- sion of operations had not been delivered. The country's troubled security conditions also prevented the extension of maintenance operations as envisaged at appraisal. In July 1970, as a pre-condition for the procurement of the second batch of equipment, the Government agreed to effect fuel tax increases on July 1, 1971, 1972 and 1973, which would have augmented the Road Fund from CFAF 223 million in 1971 to CFAF 550 million in 1974. The latter amount was 1/ Estimated by advancing the 1969 and 1970 requirements at the time of appraisal by a year to account for the delay in equipment delivery. - A.12 - estimated to be sufficient for the maintenance of 4,300 km and normal equipment renewal (using 35% of the Road Fund). The first fuel tax increase, earmarked for the Road Fund, took effect in July 1971, followed by further fuel tax increases in January and July 1972. Although the fuel taxes were to go to the Road Fund, the tax receipts were actually deposited in the Central Treasury rather than earmarked directly to the Road Fund, and eventually were absorbed into the general budget. Therefore, in reality, the provisions of the July 1970 agreement were not consummated. From 1971 onwards, the use of Road Fund revenues for highway maintenance was stabilized at about CFAF 220 million, comprising about 56% of the revenues generated by fuel taxes. An attempt was made to rectify this situation under the Second Highway Project (Credit 490-CD) by a Credit covenant stipulating that proceeds of the Road Fund would be deposited in a separate account in the Central Bank to be used exclusively for highway maintenance and operation of ferryboats. Although this covenant has not been fully satisfied as yet, a separate account for the Road Fund was established within the Treasury in July 1976. As a result, during FY76, CFAF 441 million were actually credited to the Road Fund. 3.21 After 1972, the Government was unable to renew equipment because of serious budgetary constraints. Hence, contrary to the Credit Agreement, budgetary appropriations sufficient to meet the cost of equipment renewal from 1973 to 1976 were not made for the Fonds de Renouvellement. Management Policy (Supplementary Letter No. 3) 3.22 Although the Government agreed to make prompt payments to suppliers, a substantial portion (CFAF 114 million) of its share of the project's local costs, totalling about CFAF 315 million (US$1.2 million equivalent), remained outstanding at project completion. This included the CFAF 112.7 million that the Government owed to maintenance equipment suppliers. After IDA's constant urging, the Government recently issued payment orders to settle these long outstanding arrears. D. Borrower's Performance 3.23 The execution of the project was handled competently by DPW, apart from the severe budgetary limitations and lack of adequate allocations for maintenance. During the course of the project, DPW was organized and staffed as effectively as possible given the Government's financial and human resource constraints. 3.24 Since this was the Bank Group's first project in Chad, procedural difficulties occurred during its execution. Initially, the legal require- ments subsequent to the Credit signing took the Government more time than expected. Furthermore, correspondence between IDA and the Ministry of Public Works was routed via the Planning Ministry, since it had overall responsibility - A.13 - for project execution. Understaffing at the Planning Ministry caused frequent delays, but this situation was later corrected when IDA and DPW handled technical matters directly. These difficulties could have been avoided if the Ministry of Public Works had been designated, in the Credit Agreement, as the executing agency for the project. 3.25 During supervision missions, after the physical completion of the project in December 1973, the Government was requested to prepare a Project Completion Report. Following the guidelines provided during these missions, the Government prepared a concise report covering the salient features of project execution. The report provided a comparison of appraisal expectations with the actual project performance and attempted to explain the shortfalls in expected targets. A major part of the report was devoted to a factual description of the implementation of various project components. The Government's report served to corroborate the information available to IDA. On the whole, the preparation of the report by the Government was a commendable and worthwhile effort. E. Services of Consultants, Suppliers and Contractors 3.26 The services provided by the consultant BCEOM for preinvestment studies were adequate and satisfactory. The traffic-counting program carried out by the consultant was comprehensive and provided a concise picture of traffic and commodity flows on Chad's highway network. 3.27 The experience with domestic contractors clearly indicates the need for substantial improvements in the contracting industry. The experience with the extension of workshops in this project demonstrated that the domes- tic contractor selected to execute the works was neither financially sound nor sufficiently experienced (para. 3.06). 3.28 Concerning equipment suppliers, the Government noted that the after- sales service provided by Richier for the graders, procured in the first equipment batch, was not adequate at that time. Consequently, in the second equipment batch, Richier graders were substituted by other graders. Reimburse- ments iii local counterpart funds to the equipment suppliers were adversely affected by the Government's cumbersome procedures and lack of funds. F. Time Schedule, Costs and Disbursements Project Implementation Period 3.29 At appraisal, project implementation was expected to span a period of five years from 1968-72. Delays in Credit effectiveness prevented the start of project implementation until the first half of 1969. Delays (of about two years) in procurement of maintenance equipment postponed execution of the maintenance program until 1971. Although the project was completed in substance at the end of 1973, the implementation of the - A.14 - maintenance program extended beyond this date. The actual project imple- mentation schedule is presented in Table 2. Summary of Project Delays 3.30 Delays associated with various project activities and their causes are summarized as follows: Project Activity Delay Causes of Delay A. Credit Effectiveness 2-3 months 1. Legal requirements subsequent to Credit signing, e.g. rati- fication of Credit documents by legislative body. 2. signing of contract with consul- tants for engineering studies. B. Procurement of Mainte- 24 months 1. Slow start in inviting bids. nance Equipment and Spare 2. Retendering necessitated by Parts devaluation of French and CFA Francs. 3. Delays in contract awards and ordering equipment. 4. Procurement of second batch of equipment made conditional to increases in fuel taxes, to augment the Road Fund. C. Procurement of Culvert 6 months Slow bid evaluation and Pipes contract awards. D. Extension of Shops 30 months 1. Procedural difficulties in tendering. 2. Financial difficulties of domestic contractor. E. Operators' and Mechanics' Training 36 months Changes in the scope of the training program. F. Engineering Studies 2-3 months Extra time needed for a negotiated contract. G. Increase in Fuel Taxes for the Road Fund 24 months Maintenance equipment provided under the Credit not procured in time to expand maintenance operations. It should be noted that delays encountered in various project activities were concurrent in many cases. - A.15 - Costs 3.31 Actual project costs exceeded appraisal estimates by 6% (Table 3). Procurement costs for maintenance equipment totalled US$4.6 million, 19% more than originally estimated. This cost overrun could be partly attributed to the devaluation in 1972-73 of the US dollar vis-a-vis the Deutsch mark and French franc and partly to delays in project execution with the accompanying price escalation. The costs of procurement of culvert materials and exten- sion of workshops were 13% and 37% less, respectively, than appraisal esti- mates. The cost of the training program for operators and mechanics was only 6% of the original estimates, as the proposed training program was cancelled and subsequently included in the Second Highway Project. Preinvest- ment studies totalled US$283,000, only 74% of appraisal estimates because detailed engineering was not carried out. The foreign exchange component of the project at completion was 76% compared to an appraisal estimate of 86%. Disbursements 3.32 Disbursements lagged far behind schedule (Table 4); only 42% of the Credit funds were disbursed at the end of FY71, as opposed to an expected full disbursement, according to appraisal estimates. The flow of disburse- ments presented in Table 5 shows that, except for engineering studies and procurement of culvert pipes, active execution of the project only started in 1971. The stagnation of disbursements during 1974 reflects the substan- tial completion of the project at the end of 1973, resulting in a surplus of US$254,000 in Credit funds. This undisbursed amount (6% of the Credit) was used to supplement the costs of the training program and to provide equipment and spare parts for road maintenance continued under the Second Highway Project. These funds were used as follows: (i) US$73,000 to supplement the allocation for an expanded training program. (ii) US$36,000 to improve, by force account, buildings required for the training program. (iii) US$43,000 to purchase service vehicles and spare parts for DPW maintenance operations. (iv) US$55,000 to purchase spare parts for the highway maintenance equipment used in the training program. (v) US$46,500 to purchase spare parts for the DPW workshops. As of January 1977, Credit funds were fully disbursed except for US$13,000 committed to the purchase of spare parts. 3.33 In view of the Government's financial difficulties, IDA agreed to disburse against its share of project costs without requiring the payment of - A.16 - counterpart local funds. Although this procedure led to the large backlog of outstanding payments to equipment suppliers, it was necessary to ensure the continued implementation of the project. 3.34 In December 1973, as a result of the modifications in the scope of the project (para. 2.04), the Credit Agreement was amended to reflect these changes in the schedule of disbursements (Table 5). IV. ECONOMIC RE-EVALUATION A. Highway Maintenance Program 4.01 The objective of the five-year highway maintenance program was to preserve the continued serviceability of the highway infrastructure. The strategy designed to attain this objective consisted of strengthening the existing maintenance operations and extending maintenance coverage to a substantial kilometrage of additional roads. Under the program it was envisaged that, by 1971, DPW would be responsible for the maintenance of a road network of about 3,700 km, linking the four major cities of N'Djamena (Fort Lamy), Sarh (Fort Archambault), Moundou and Abech6. At appraisal, the DPW maintenance operations covered about 2,000 km of the road network. As a result of the two-year delay in project implementation, the annual maintenance output of DPW declined from 2,000 km to 1,800 km during the period 1968-70. This situation made the implementation of the maintenance program even more desirable and urgent than envisaged at appraisal. Under the project, the maintenance output peaked in 1972 at 2,800 km and then gradually declined by 1976 to the 1970 level. 4.02 An evaluation of Chad's transport sector during the project period shows that the timing and scope of the highway maintenance program had economic merit. Traffic activity on the road network covered by the maintenance program amounted to about 31 million veh. km in 1970. Despite the prolonged drought and the corresponding decline in economic activity, it is estimated that by 1976, traffic volumes on Chad's highway network had recovered to the 1970 levels (see Table 6) while there is a strong likelihood that traffic may have increased between 1970-76 at an annual rate of 1% (the decline of normal traffic in the drought years being more than compensated by traffic generated by drought relief efforts). In retrospect, a mpre cogent raison d'etre for the maintenance program was the high rate of escalation in vehicle operating costs between the years 1968-76, which was only partly off- set by increases in the costs of equipment and other project inputs. The available voc estimates for 1968 and 1976 show that the cost of operation during this period apparently increased by about 45% for a pick-up truck and nearly 140% for a 15 t truck on a well-maintained laterite road. The corresponding increases on a poorly maintained road were 49% and 240% respec- tively (Table 7)..!/ The sharp increase after 1972 in vehicle operating costs (voc) was triggered mainly by inflationary trends in the prices for gasoline and industrial products. Even assuming that traffic volumes did not register any increase during the project period, the widening differential in vehicle operating costs between adequately and poorly maintained roads results in sufficient justification for the maintenance program. This is particularly relevant in the case of landlocked Chad whose principal economic centers are located at an average of 2,000 km from the nearest ports. 1/ The large differences in voc between 1968 and 1976 as indicated by available voc estimates are only used to demonstrate the significance of the changes in voc during this period. These differences include actual inflation as well as possible errors of estimation. The economic analysis, however, is not based on these large variations in voc (See Annex, page 2). - A.17 - 4.03 A review of the economic evaluation made at the time of project appraisal in 1968 does not permit a rigorous comparison of project per- formance with appraisal expectations. At appraisal, benefits were estimated by considering that savings in vehicle operating costs for the whole network would be about 20% of total operating costs on well-maintained roads. It was further assumed that estimated benefits would materialize fully three years after the start of the maintenance program. Traffic was estimated to increase at an average rate of 5% per annum. The analysis period of nine years was taken to conform to the average economic life of the equipment. Assuming that the equipment under the project would be deployed in the first year of the project (1969), an economic rate of return of 11% was obtained. The delays in project implementation, as well as a redefinition of the "without project" case, make the comparison of ex post economic re-evaluation with the appraisal analysis rather redundant. At appraisal, the "without project" case assumed vehicle operations on roads in a hypothetical "existing" condition, which was considered to remain unchanged during the life of the project. The "without project" case for the economic re-evaluation attempts to model, as realistically as the data permit, the condition of the road network and the associated effect on vehicle operating costs that would have occurred in the absence of the project. 4.04 The details of the ex post economic analysis are presented in the Annex to this report. The actual project period was seven years (1970-1976) compared to a nine-year period used at appraisal. The economic re-evaluatLon, in constant 1970 prices, was based on a traffic growth of 1% annually, an average economic life of equipment of six years, and 1976 estimates of vehicle operating costs (Table 8), which also reflect the change in traffic composition over the project period. The appraisal estimates of vehicle operating costs did not account for the 25 t truck-trailer units put into service after 1970. The 1976 estimates of vehicle operating costs are more realistic than appraisal estimates as they include the effect of relative price changes (e.g. during the project period, the rate of price escalation was more rapid in the transport sector than in the public works sector in Chad). Similarly, a nine-year economic life of maintenance equipment was considered unrealistic in view of the harsh operating conditions in Chad resulting in low equipment utilization rates. The economic benefits of the maintenance project, calculated on road by road basis (Table 6) were consi- dered to result from: (a) avoidance of higher vehicle operating costs (voc/' by continuation of maintenance on the road network (1,800 km) already maintained at the inception of the maintenance program; and (b) reduction of vehicle operating costs (voc) on roads (1,000 km) not maintained at the start of the mainte- nance program in 1970, but maintained under the project. - A.18 - With the foregoing assumptions, the maintenance program was found to yield an economic return of 21%, corresponding to a benefit/cost ratio of 1.07 discounted at lo%Li2. The economic return, however, was found to be ex- tremely sensitive to the incidence of benefits; a 5% decrease in benefits lowered the economic return to 12%, while a 10% decrease in benefits made the maintenance program economically unfavorable. As project benefits have been estimated conservatively and do not account for savings resulting from deferred reconstruction, the possibility that actual benefits were 10% lower than the estimated ones is quite remote. It was not possible to estimate the benefits resulting from deferred construction as data on the serviceability of roads at the time of appraisal were not available. It becomes quite con- jectural to estimate the life of roads without data on initial road conditions and information on road deterioration cycles under different traffic and climatic conditions. Hence, it may be safely concluded that the maintenance program yielded a return of at least 12%, compared to the appraisal estimate of 11%. Despite the adverse conditions that developed during the project implementation period, the rate of return for the economic re-evaluation was higher than the appraisal estimate. This may be explained as a function of (i) the inclusion of a number of relatively more trafficked roads (30-60 vpd) to the maintenance program during project implementation (these roads were either under the jurisdiction of ATEC or under construction at the time of appraisal); (ii) the delay in project implementation and the escalating voc's, which made the incidence of benefits (voc savings) more marked; and (iii) re-definition of the "with project" and the "without project" cases in the economic re-evaluation. 4.05 As reliable data were not available to estimate the rate of traffic growth and economic life of maintenance equipment, a sensitivity analysis was made to evaluate the effect of these variables on the rate of return. The results of the analysis are as follows: (a) rate of traffic growth: 0% 1% 3% ERR: 17 21 29 (b) Economic life of equipment: 6 yrs. 7 yrs. 8 yrs. ERR: 21% 25% 27% This analysis shows that, even if there was no growth in traffic during the project period, the maintenance program was economically justified. Similarly, it becomes clear that equipment life significantly influences the economic return of maintenance projects and points to the need of effecting measures to improve equipment utilization in Chad. Although the training programs initiated under this project and carried out under the Second Highway Project (Credit 490-CD) have catered to the need to provide trained operators and mechanics, proper programming of maintenance operations and adequate maintenance of equipment could prevent premature retirement of highway maintenance equipment. 1/ Estimated opportunity cost of capital in Chad. 2/ The lack of apparent correspondence between a rate of return of 21% and a B/C ratio of 1.07, can be explained by the high sensitivity of the magnitude of benefits in relation to minor changes in costs. - A.19 - 4.06 By all indications, the highway maintenance program initiated in Chad in 1969 was a timely and worthwhile endeavor. Although the program failed to reach the physical targets established at appraisal (an annual maintenance output of 3,700 km), the degradation of the primary network was kept to a minimum. Had the project not been implemented, the network would have required extensive reconstruction. 4.07 Without the maintenance program, the economic burden imposed by high transport costs coupled with the costs of reconstruction might have stretched the fragile economy of landlocked Chad to its limits. Despite its reduced physical performance, the maintenance program contributed significantly to institution building. The training program prepared under this project formed the basis of the comprehensive training program currently being carried out under the Second Highway Project (Credit 490-CD). Similarly, the institutional framework of highway maintenance was strengthened by the extension of workshops and provision of equipment and materials under the project. In fact, inadequacy of funds for recurrent maintenance expen- ditures and the troubled political conditions in the country were more responsible for reduced highway maintenance output than institutional limitations. B. Djermaya-Djimtilo Road 4.08 At appraisal, it was envisaged that the construction of the Djermaya-Djimtilo road, providing a direct link between Lake Chad and N'Djamena (Fort Lamy), would serve to evacuate fish from Lake Chad and agricultural produce and Natron (a form of sodium carbonate), shipped to Djimtilo by water, from the Bol area. Estimates prepared by the Centre Technique Forestier Tropical, agricultural consultants to the Government in 1968, indicated that on the opening of the Djermaya-Djimtilo road, the annual traffic would be about 7-10,000 tons of dried fish, nearly 30,000 tons of multi-crop agricultural produce (primarily grains), and a significant tonnage of Natron from the Bol area. The agricultural traffic from the Bol area was based on production from 7,000 hectares of reclaimed land. It was indicated that the construction of the road and related lakeside facilities would lower transport costs, thereby inducing the production of cash crops and fish by bringing markets economically closer to production areas. On the basis of preliminary estimates of savings in transport costs for normal fish and agricultural output and the generated production resulting from the fall in transport costs, an economic rate of return in excess of 15% was anticipated for this road and related lakeside facilities. 4.09 The 1970 feasibility study of the Djermaya-Djimtilo road, performed by BCEOM, found that the proposed road project was premature at that time. The study estimated goods traffic (consisting of fish and salt from Djimtilo, some agricultural products from Guitte, quarry material from Dandi, and a variety of goods to and from Mani and the Bol area) at about 26,000 tons in 1968, 38,400 tons in 1975 and 89,200-104,200 tons in 1985. This represented an annual growth rate of 7.5%-8.5%. Translated into daily vehicle traffic, including private traffic, the following figures were obtained: - A.20 - Road Segment 1968 1975 1985 Djermaya-Douguia (40.5 km) Trucks 12 18 46 Light Vehicles 18 27 69 Total 30 45 115 Douguia-Mani (20.4 km) Trucks 12 18 46 Light Vehicles 7 11 28 Total 19 29 74 Mani-Djimtilo (15.4 km) Trucks - 2 13 Light Vehicles 2 4 9 Total 2 6 22 4.10 Applying vehicle operating cost savings to the projected traffic growth over 20 years, with due allowance for the maintenance expenses, the study showed that completion of all or part of the project would yield economic rates of return as follows: Economic Rate of Return (ERR) and Approximate Optimum Year for Construction No. Residual 1/3 Residual Value Value ERR Optimum ERR Optimum % Year /_ Year Djermaya-Djimtilo (76 km) 5-6 1984/85 6-7 1984-85 Djermaya-Mani (61 km) 6.5-7.5 1982/84 8 1984 Djermaya-Douguia (40.5 km) NA NA 8 1982 4.11 In the light of this analysis it was concluded that continuation with the project, in whole or in part, was not warranted at that time and a detailed engineering study would be therefore premature. Although projec- tions of increases in agricultural production (30,000 tons at appraisal compared to only 10-12,000 tons at present) and the corresponding generated - A.21 - traffic appear unrealistic in retrospect, these projections were based on the best estimates at appraisal. Considering that only about 3,000 hectares of polders have been actually reclaimed in the study area, compared to 7,000 hectares assumed at appraisal, the decision to terminate the study before detailed engineering was well-founded. It is worthwhile to note that Djermaya-Djimtilo road was economically the most promising of all the priority road projects the Government wanted to consider in 1968. The main reason for carrying out the feasibility study was to assess more ac- curately the economic viability of the project and the optimum time for its execution. V. THE ROLE OF IDA 5.01 In retrospect it appears that many of the scheduling assumptions, especially regarding procurement of equipment, were too optimistic. This is particularly relevant since this project was the Bank Group's first operation in Chad. Many of the delays in project implementation can be attributed to the Government's unfamiliarity with IDA procedures and regulations. 5.02 IDA's role in regularly supervising the project contributed to effective project monitoring during implementation and early detection of problems affecting project execution. During supervision missions, the Government was repeatedly reminded of its obligations to meet the physical and financial targets of the project. Unfortunately, there was little that the Government could do to respond to IDA's requests in view of its fiscal situation arising from the Sahelian drought and run-away inflation. Although IDA's function in requesting the Government's compliance with same credit covenants, such as the enforcement of traffic regulations, may appear lax, the unsettled political situation in the country as well as the Government's fiscal difficulties served as mitigating circumstances. 5.03 In terms of institution-building, IDA played a significant role in highlighting the priority that highway maintenance should receive within the highway sector. By requiring an augmented Road Fund, IDA helped to create a self-sustaining source of funds that would ensure the serviceability of the Government's highway investments. Although a training program for maintenance and operational personnel could not be implemented, the project prepared the framework for a broad-based, comprehensive training program under the Second Highway Project to help satisfy the country's need for skilled manpower. VI. CONCLUSIONS 6.01 Although the full objectives of the project were not achieved, the Government did gain an understanding of the importance of maintaining the exist- ing highway infrastructure. During project implementation a series of important issues bearing on highway maintenance in Chad were brought to light. The resolution of these issues would promote the development of a sound highway maintenance capability in Chad. - A.22 - A. Inadequacy of Maintenance Funds 6.02 Maintenance operations were constrained by lack of sufficient funds for recurrent maintenance expenditures. With this in mind, the IDA Credit (CD-490) for the Second Highway Project covered all net of taxes project costs (foreign as well as local). The financial arrangements for the proposed Third Highway Project%including co-financing by other donors, envisage local cost financing and provision of some recurrent expenditures. B. Use of Labor-Intensive Intermediate Technologies 6.03 The experience in this project clearly showed that the utilization rate of maintenance equipment was low. This raises the fundamental question if completely mechanized maintenance units represent the most appropriate highway technology for use in Chad. In view of the country's conditions (inclement climate, long sections of roads and sparse population), a detailed analysis may reveal that the best alternative might be the use of mechanized units for periodic maintenance in general and routine maintenance in remote areas, and the reintroduction of the "cantonnage" system (a labor intensive method of routine highway maintenance) for routine maintenance in settled areas, i.e. where the required labor may be more readily available. C. Training Needs 6.04 The success of any highway program depends to a large degree on the availability of technicians with the required skills. Although steps have been taken to train maintenance personnel under the Second Highway Project (Credit 490-CD), the scope of future training programs should be broadened to include other skills, as well as the development of management capabilities. 6.05 One possible approach is to design training programs that are sufficiently flexible to be expanded or reduced depending on extraneous circumstances such as the availability of suitable candidates or a reduced demand for a specific category of specialists. Future programs should emphasize on-the-job training as this may require smaller investments in fixed facilities. D. Planning Functions 6.06 The key to the success of any highway maintenance program is forward planning coupled with proper scheduling and programming of the diverse activities comprising a maintenance program. Such a capability is singularly absent in Chad. It is recommended that future highway projects in Chad explore the possibilities of developing these functions within DPW (para. 3.16). - A.23 - E. Domestic Contracting Industry 6.07 The experience with domestic contractors in this project was not encouraging (para. 3.04). Steps are being taken to explore the possibility of UNDP financing of a study of the domestic contracting industry. This study would be expected to determine the scope of technical and financial assistance to domestic construction contractors to improve their efficiency. F. Pre-Investment Studies 6.08 The Djermaya-Djimtilo road study was not useless from a project investment viewpoint, as it will be used as the basis for an African Development Bank (ADB) regional study of the development prospects of the area of influence of Djermaya-Djimtilo road. As such the original study may finally result in project investments.  Table 1 CHAD CREDIT 125-CD-- HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT List of Equipment Provided under the Project Appraisal Bid -----Actual Provision------ Item Estimate Estimate 1st Batch 2nd Batch Total Graders 24 24 13 11 24 60-hp Tractors"- 49 4 3 -- 3 Rubber-tired rollersl/ 44 332] 20 13 33 Water tankers 52 52 32 20 52 Motorpumps 21 21 8 13 21 Trucks (6-8 t) 14 14 3 11 14 Tipping trucks, 8m3 (10-12 t) 27 27 19 9 28 Truck semi-trailers (low-loaders) 5 5 4 1 5 Four-wheel drive vehicles 8 9 6 2 8 Cars 9 8 5 4 9 Truck cranes 4 -- Servicing units (maintenance vehicles) 25 25 18 -- 18 Service vehicles -- 4 3 -- 3 Road tractors (240 hp) -- 5 4 --4 1/ As an alternative to tractor-drawn rollers (49 tractors and 44 rollers), bids were also invited for 4 tractors (60 hp) and 33 self-propelled roller s (20 t). Three 65 hp tractors and 33 self-propelled rollers were procured. 2/ Self-propelled rollers. Source: Project Completion Report, 1976, DPW. CHAD HIGHWAY MAINTENANCE PROJECT - CREDIT 125-CD PROJECT COMPLETION REPORT Schedule of Actual Project Implementation/ Contractor/ Dates of Project Consultant % of Works Completed Component and Contract Beginning Completion of Work by the Expected Nationality Bid Receipt Award of Work According to Contract Completion Date Actual Expected 1. Equipment and SCOA, SAMI, 6/69 5/72 12/69 (1st batch) 0% Spare Parts Renault, Hamelle, and (procurement) NSCKN, Colas 1/70 various various 3/73- 12/70 (2nd batch) 0% 2. Materials (procurement of culvert pipes) Hamelle Afrique 11/68 10/69 2/70 6/72 6/72 100% 3. Extension of Teleboune-Mongeye Shops (local); Abdelkerim Abdelkader (local); DPW various 1/70 5/70 8/72 9/70 30% 4. Operator and Mechanics Training ORT Union (Swiss) various 3/73 5/72 5/73 5/73 N.A.3/ 5. Feasibility Study and Traffic Counting Program BCEOM (French) various 1/69 1/69 12/71 12/71 100% 6. Detailed Engineering BCEOM various 1/69 - - - - 1/ As project implementation schedule was not prepared at the time of appraisal, it is difficult to estimate the expected rate of project implementation 2/ All equipment provided under the Credit was delivered at this time 3/ N.A. = not applicable Source: Project Completion Report, 1976, DPW. CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Actual and Appraisal Estimates of Project Costs Actual Cost Appraisal Estimate of Cos Actual Cost Toc alr Total Local Total3y as of Percentage Project CFAF Foreignp' US$ Equi- CFAF Foreign US$ Equi- Appraisal Estimate Component (000) US$(000) valent(OO) (000) US$(O00) valent(000) of Cost I. Equipment and Spare Parts 298-495 3,530 4669 120,000 3,440 3,926 119% II. Materials 6,109 85 108 6,000 100 124 87;1 IIII Extension of Shops 2,339 36 45 3,000 60 72 63% IVi Operator and Mechanics training - 15 15 11,000 200 244 6% VI Feasibility and Traffic counts Program 7,601 180 209 18,000 210 283 74% VI. Detailed Engineering - - - 7,000 90 118 0% Total 314,544 3 846 5046 165,000 4,100 4,767 106% 1/ Information not available. T/ Actual foreign cost as of June 30, 1975 with a remaining credit amount of US$224,o00reallocated to complement the Second Highway Project (490-CD). 3/ Using an exchbhgt rate of US$1 = 262 CFAF for actual costs and US$1 = 247.0 CFAF for appraisal estimate of costs. Sources: a) Supervision Reports b) Appraisal Report (TO-65K c) Project Complation Repot) DE, 197 Table 4 CHAD CTEDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Appraisal Estimated and Actual Disbursements IBRD ACCUMULATED DISBURSEMENTS CUMULATIVE ACTUAL Fl11,AT D _____ 00 IU i FT S_L__ US '00 EQUIVALENT. DISBURSEMENTS AS YEAR AND AThKIISAL i ACTUAL TOTL PERCENTAGE OF SEMLSTER ESTIMAT DISBURSEMENTS APPIAISAL ESTIMATE 1969 lst I - - I I I B 2nd 2 600 B 60 B 10 I I 1970 B 1 I I 4 III r 1st I B. 120 2nd a 2,400 B 230 10 I I I I 1971 1st 4 230 2nd 3,900 510 13 1972 1st 4,100 1,730 42 2nd 4,100 2,100 B 51 I I 1973 1st 4,100 2,260 55 2nd 4,1002,560 62 B 1974 BB 1st 4,100 2,560 B62 2nd 4,100 11 3,846 94 II BI 1/ The remaining US$254,000 used in FY75 an4 FY76 to partly cover the costs of the training program and provision of spare parts and equipment for road maintenance .continued under the Second Highway Project (Credit 490-CD). Source: Bank staff estimates. CREDIT 125-C -_ HIGHWAY MATNTENANCE PROJFCT Tobl. PROJs,t .kOMPL10 ION REPORT Flow of Accumulated Disbursements (US$-000) Time Period Ending Disbursement Jun 30 Dec 31 Jun 30 Dec 31 Jun 30 Dec 31 Jun 30 Dec 31 Jun 30 Dec 31 June 30 Dec 31 June 3G Dec 31 Jun 30 Jan 28 Category 1 1 1970 1970 1971 1971 1972 1972 1973 1973 1974 1974 1975 1975 19% 1977 1. Equipment & Spare Parts - - - 268.3 1462.1 1980.5 2277.7 2935.6 3529.2 3529.2 3530.3 3530.3 3530.3 3586.3 3629.0 II. Materials - - 80.0 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 85.5 III. Extension of shops - - - 2.1 14.5 19.1 23.5 23.5 23.5 23.5 34.7 34.7 35.6 35.6 67.0 67.5 IV. Operators & Mechanics Training - - - - - - 6.8 6.8 13.0 13, 14.8 14.8 14.8 50.9 121.5 121.5 V. Feasibility Study & Traffic Count Program 60.8 117.5 146.4 146.4 146.4 180.2 180.2 180.2 180.2 180.2 180.2 180.2 180.2 180.2 180.2 180.2 VI. Detailed Engineering - - - - - - - - - - - - - - - - 11 Project completed in substance. 2/ Accumulated disbursements corresponding to expenditure of Credit funds at project completion (Dec. 31, 1973), Credit surplus of US$254,000 used to supplement Credit 490-CD (Second Highway Project). 1' The remaining funds (US$16,314) have been committed for the purchase of spare parts. Schedule of Disbursements (US$'000) Estimated Total Disbursements at Category Appraisal (After Credit Reallocation - 1/30/75) Project Completion I. 2,740.0 3,670.0 3,645.3 II. 100.0 86.0 85.5 III. 60.0 75.0 67.5 IV. 200.0 88.0 121.5 V. 230.0 181.0 180.2 VI. 70.0 - - Unallocated 700.0 - TOTAL 4,100.0 4,100.0 4,100.0 Source: Bank staff estimates. Table 6 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Actual & Estimated Traffic Average Daily Traffic (ADT); veh/day 1970 Traffic Censusi' Road L )ngth(km 196T 1970 1972 %Light Vehicles % Light Trucks %Heavy Trucks (Projected)2/ N'Djamena-Massaguet 83 33.4 48.2 105 60 16 24 Massaguet-Bir Garat 103 17.0 27.2 32 58 17 25 N'Diamena-Massenya 160 - 43.5 26 78 12 10 Massaguet-Ngoura 125 17.0 11.8 32 12 28 60 Ngoura-Bitkine* 244 8.0 - 15 - - - Djermaya-Djimtilo 82 - 19.0** 21 25 25 50 Guelendeng-3ongor 83 22.2 25.2 42 48 19 33 Bongor-Lai 148 22.5 30.3 32 36 28 36 Abeche-Biltine 92 7.2 7.1 15 66 14 20 Abeche-Adre 167 12.1 8.4 26 60 20 20 Abeche-Mangalme-Abou Deia* 387 1.0 1.0 21 - - - Bitkine-Mongo-Magalme 177 5.0 - 21 - - - Abou-Deia-Attaway* 223 1.0 - 15 - - - Attaway-Sarh* 112 4.0 3,0** 15 56 32 12 Sarh-Kyabe 98 9.0 10.0** 21 56 32 12 Guidari-Koumra* 114 8.1 13.6 15 59 28 13 Moundou-KeLg 104 27.1 37.8 42 59 14 27 Relo-Pala 107 25.4 28.5 37 54 12 34 Pala-Lere-Cameroon Border 122 - 6.9 26 12 6 82 Lai-Doba 108 13.9 16.1 32 45 16 39 Doba-Gore 96 18.2 13,7 32 50 15 35 Lai-Guidari* 44 8.1 13.6 21 59 28 13 Doba-Moundou 99 20.6 36.5 37 63 11 26 Moundou-Gore-CAR Border 133 15.3 16.9 32 41 8 51 Moundou-Baibokoum-CAR Border 167 11.7 18.0 26 56 28 16 Lai-Kelo 60 12.0 20.6 15 66 24 10 Pala-Fianga-Cameroon Border* 83 - 3.6 21 0 6 94 Koumra-Mouisala 74 11.4 12.7 15 76 15 9 N'Djamena-Guelendeng3/ 156 44.9 108.2 - 79 7 14 Guelendeng-Sarh2' 406 13.1 16.0 - 45 18 52 Sarh-La Sido3/ 120 20.1 21.0 - 30 17 36 N'Guere-Koumra-Doba 172 12.0 39.5 - 68 11 21 Koutou-Bere 89 17.3 23.0 - 61 24 15 1/ From: (a) BCEOM - Actualisation des comptages routiers - 1971. (b) Appraisal Report - T0645a. 2/ From: Appraisal Report - T0645a, 3/. Maintained by ATEC until 1969. 4/ Under construction at time of appraisal in 1968 * Roads included in the project at appraisal but not maintained duuing project period. ** Approximate estimates. Table 7 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Comparison of Estimated Vehicle Operating Costs. Net cf Taxes (CFAF/kn) Vehicle Type Appraisal Estimates (1968) Recent Estimates (1976) & Cost Items Well Well 2/ 3 ExistLnEkkintaAned2/As)halt3/ xisting- Maintaine Asphalt Pick-up Truck4/1 Fuel 6.34 4.94 3.97 14.58 11.34 8.91 Lubrication 0.68 0.53 0.42 1.19 0.70 0.58 Tires 2.76 2.15 1.72 4.52 2.25 1.50 Maintenance/Repair 10.40 8.10 6.50 15.37 9.84 5.24 Depreciation and interest 11.28 8.79 7.05 22.71 17.82 12.96 Personnel 10.60 8.26 6.63 9.55 9.55 9.55 Insurance 4.06 3.15 2.54 2.39 2.39 2.39 Overhead 5.88 4.58 3.67 7.03 5.39 4.11 Total 52.00 40.50 32.50 77.34 59.28 45.24 Heavy Truck- Fuel 11.63 10.60 8.28 40.15 29.20 21.90 Lubrication 1.70 1.55 1.10 5.14 3.42 2.85 Tires 8,14 6.50 4.30 64.59 27,63 19.36 Maintenance/Repa!ir 10.50 8.40 4.20 6U.iU 34.58 16.28 Depreciation and interest 26.00 17.95 10.41 116.79 70.07 43.79 Personnel (included in overhead) 9.53 8.28 5.18 Insurance 7.00 7.00 7.00 15.94 9.57 5.98 Overhead 47,60 35.70 23.83 99.93 27.42 17,60 Total 112.57 87.70 59.12 382.77 210.22 134.94 1/ Reflects the existinR condition of poorly maintained non-paved roads. 2/ Well-maintained condition is consideredequivalent to that of a good earth road surfaced with laterite 3/ Well-maintainee paved road. 4/ 1.5t capacity. 5/ 15t capacity. Sod rce: 1. Appraisal Report No. TO-645a. 2. BCEOFr"Etodt Pr4liminaire de 1-Entretien des Routes en Terre", January 1977. Table 8 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Summary of Estimated 1976 Vehicle Operating Costs (voc)-/ in Constant 1970 Prices & Net of Taxes (CFAF/km) -------Paved Roads------- ---Non-Paved Roads2/--- Well- Not Well- Not Maintained Maintained!/ Maintained Maintained Light Vehicle4/ 25.0 33.9 32.5 42.4 6 t Truck 48.6 104.6 75.5 130.7 15 t Truck/ 81.2 182.6 127.3 228.3 25 t Truck_/ 111.2 253.6 173.1 317.0 1/ Estimates of voc are based on March 1976 prices, adjusted to constant 1970 prices by using factors derived from Tables 2.3 and 2.4 of "Republic of Chad, Economic Memorandum," December 28, 1976, Report No. 1340-CD. Note: year (factor) - 1970 (1.00); 1975 (0.60); March 1976 (0.59). 2/ Non-paved roads are considered equivalent to an earth road with a laterite surface course. 3/ On an unmaintained asphalt road, voc is taken as 80% of that on an unmain- tained, non-paved road. 4/ As a result of changes in traffic mix over the project period, the voc of a light vehicle is considered equivalent to the average of the voc of a passenger vehicle and a light truck (1.5 t) used at the time of appraisal. 5/ Includes trailer. Source: BCEOM: Consultant Reports, 1976. TABLE 9 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Highway Network, 1970 - 76 (km) 1970 1971 1972 1973 1974 1975 1976 1/ A. Classified Network National Roads Paved 242 242 242 242 242 253 253 Gravel and Earth 1,738 1,838 2,438 4,320 4,320 4,309 4,309 Subtotal 1,980 2,080 2680 4,562 4,562 4,562 4,562 Prefectural Roads Earth 4,150 4,050 3,500 2,630 2,630 2,707 29707 Total 6,130 6,130 6 7,192 7,192 7,269 7,269 B. Unclassified Network- Tracks 24,000 24,000 24,000 24,000 24,000 24,000 24,000 1/ The classified ndtwork represents roads that have been maintained from time to time by DPW ahd prefectural authorities. 2/ The unclassified network represents an estimate of recognized or marked tracks. Source: Directorate of Public Works, 1976 CMAD CREDIT 125-CD - HICHWAY I'1NTENPCE PROJECT PROJECT CONPLETION RPORT Government Revenues from Road Users, 1969 - 75 (CFAF millions) YeaT Yu*1 Taxes Custo Duties -Oth*r Revenues Casoline Diesel C 1 Total Lurtcant- Tiren Tubesa Spare Automobiles Trucke Traller& Special Total Annual LicencinQg/ Vehicle Total Parre Vehicles Registration- Inspection 9564 233.9 116.0 349.9 32.7 43.6 n.a. 40.9 n.&. n.a. n.a. n.a. n.a. n.a. 2.6 n.a. n... 1970 337.5 136.8 474.3 42.4 75.2 n.a. 40.6 r.a. n.&. n.a. n.&. n.a. 51.1 2.8 n.&. n.. 1971 363.n 174.2 537.: 33.6 64.3 7.2 43.3 117.6 170.0 21.2 4.4 461.6 67.2 3.7 n.a. n.. 1972 297.9 113.6 41 5 29.6 42.7 5.4 $6.1 83.7 75.8 11.0 1.0 284.3 66.7 4.3 n.8. n.a. 1973 337.6 209.2-1 544.8 25.0 41.5 8.2 32.1 106.3 125.3 10.2 0.4 349.0 69.0 22.0 2.0 ý3.0 1974 253.6 235.0 488.6 55.2 48.9 10.6 91.5 187.1 188.3 25.C 0.0 606.6 94.0 11.0 8.0 113.0 197 195.1 120.0 315.1 41.7 74.8 7.9 71.3 99.2 190.4 30.7 0.6 516.6 85.011 12. 9.8?- 107.5 :,neLtes - Annual fers oa vchiciet Ycence fees d.rived fco~ grey c.rde i i &re losued when vehice oershie t tranefer edil power pl&n:a. Isludes an exceptionzl tax of CFA} d/sf'r o, ar. cstimated 16.7 illion 11 rs of diese o l Igures for "reel Taxes" Er.d "C:stom 0-lee" are for 9 months (jan. - Sept. 1975) only. :"ures for CY1975. N.t \v.illsble .uy.f.. a) Bureau of Cuato~s b) Directorete of >Ine c r) TABLE 11 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Expenditures on Highways, 1968 - 76 (CFAF millions) Capital Maintenance Year Expenditure DPW Prefactural Administration-L Total Authorities 1968 1,208 167 40 135 1,550 1969 1,388 181 40 135 1,744 1970 1,136 173 40 135 1,484 2/ 1971 1,303 188 40 137 1,668 1972 279 244 40 132 695 1973 358 220 30 140 748 1974 522 220 n.a. 148 890 1975 745 220 n.a. 154 1,109 4/ 1976 738 303 n.a. 144 1,185 I/ Includes approximately CFAF 50 million per year in wages for operational staff. 2/ During the period 1971-76, the capital expenditure on highways represents the total of external assistance for studies, construction, and purchase of equipment. 3/ Maintenance of prefectural roads taken over by DPW in 1974 4/ CFAF 420 million were actually committed for maintenance of roads and ferry boats. Source: Directorate of Public Works. ANNEX Page 1 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT DETAILS OF THE ECONOMIC ANALYSIS OF THE MAINTENANCE PROGRAM A. Traffic 1.01 The traffic counting program carried out in 1969-70 provided estimates of traffic composition and volumes roughly corresponding to the start of the project. As traffic data for specific links were not collected during the project period, traffic trends for the whole network were estimated by analyzing the variation of other proxy indicators of traffic growth during the analysis period. 1.02 Although the vehicle fleet registered a respectable increase during 1970-75 (Table 1), proxy indicators of traffic activity, such as gasoline and diesel consumption, and export and import volumes (Table 2) did not provide any well-defined trends that could be correlated with growth in traffic. Consequently a rate of increase of 1% per annum was used in the analysis. To test the effect of traffic growth on the economic return of the maintenance program, a sensitivity analysis was made, varying the rate of increase from 0-3 percent. B. Costs 1.03 Project costs, net of taxes, were obtained from the project completion report prepared by the Government. The recurrent maintenance expenses were adjusted to account for the "without project" costs. Estimates of maintenance output and the corresponding recurrent expenditure for the "with" and "without" project cases are presented in Tables 3 and 4 respectively. C. Benefits 1.04 Benefits (net of taxes) deriving from the maintenance program were established based on the following assumptions: (a) Benefits generated by avoidance of increased operating costs, as a result of continued maintenance on roads maintained in 1970, were assumed to increase proportionately with time (20% per annum) reaching their maximum in the fifth year of the maintenance program. The gradual increase in benefits is proportional to the assumed rate of deteriora- tion of the road from a well-maintained gravel road to an unmaintained road having the same surface characteristics as an earth road. ANNEX Page 2 (b) Only about one half of the benefits for paved roads were included since routine maintenance, on the average, was performed every second year. (c) Benefits (savings in vehicle operating costs) from roads, that could have been maintained without the project, were not included in project benefits in order to obtain only the net project benefits. (d) The net incremental project benefits were adjusted by the following factors to reflect the inadequacy of funds for recurrent maintenance expenditures: Year (Factor): 1971 (1.0); 1972 (0.79); 1973 (0.62); 1974 (0.50); 1975 (0.45); 1976 (0.40). These factors are the ratio of maintenance funds actually provided to those needed for providing an adequate level of maintenance. D. Adjustment to Constant 1970 Prices 1.05 All benefits and costs were reduced to constant 1970 prices by the use of the following series of factors: Variable 1970 1971 1972 1973 1974 1975 1976 (Est.) Gross Value Added 1.00 0.95 0.91 0.83 0.71 0.60 0.55 (Transport)1/ Gross Value Added 1.00 0.96 0.90 0.84 0.89 0.75 0.70 (Building and Public Works)1/ Consumer Prices2/ 1.00 0.94 0.91 0.87 0.78 0.67 0.62 1/ Is obtained by dividing gross value added in constant 1970 prices by gross value added in current prices. 2/ Reciprocal of consumer price index. Source: 1. Chad - Economic Memorandum, Report No. 1340-CD, December 28, 1976 (Tables 2.3 and 2.4). 2. International Financial Statistics, IMF, 1976. 1.06 Vehicle operating costs were adjusted by the factors for the transport sector while construction and maintenance costs were adjusted by the factors for the building and public works sector. As a check on their validity these factors were compared with those for consumer prices. It is interesting to note that up to 1972, the three series followed a similar trend while from 1973 onwards, the effect of relative price changes becomes more significant. The reciprocals of the above-tabulated factors are deflators for sector gross value added and consumer price index as applicable. ANNEX Page 3 E. Cost-Benefit Analysis 1.06 The cost benefit analysis was based on the following (see Table 5): (a'i Costs: Cost of maintenance equipment, materials, workshop extension and incremental recurrent maintenance expenditure. (b) Benefits: Incremental benefits from (i) the avoidance of increase of operating costs on roads already maintained,and (ii) the reduction of operating costs on roads that were not maintained before the project. (c) Salvage Value: The economic life of maintenance equipmert was taken as 6 years, of culvert materlal 30 years and of workshop buildings 40 ye8rs. Salvage value was computed by assumring i lin- ear life cycle for these cost elements. (d) Traffic: Traffic was assumed to have increased at in ;itaaal rate of 1 percent during the analysis pe.riad. (e) Economic Return: ERR = 21% B/C at 10% = 1.07 B/C at 12% = 1.06 F. Sensitivity Analysis 1.07 Effect of Reduction of Benefits: The economic return of the maintenance program was found to be highly sensitive to the incidence of benefits. The results of sensitivity analysis on this parameter are as follows: ERR B/C at 10% B/C at 12% 1. No change in Benefits 21% 1.07 1.06 2. 5% Reduction in Benefits 12% 1.02 1.00 3. 10% Reduction in Benefits 9% 0.96 0.90 As maintenance program benefits were estimated conservatively, the likelihood of a 10% reduction in benefits is remote. At the very least the maintenance program yielded a return of 12%, although a value closer to 21% is more probable. ANNEX Page 4 1.08 Effect of Economic Life of Equipment: The variation of rate of return with changes in economic life of equipment from 6 to 8 years are tabulated below: 1/ Economic Life of Equipment- ERR B/C at 10% B/C at 12% 6 yr 21 1.07 1.06 7 yr 25 1.11 1.09 8 yr 27 1.14 1.12 1/ Assuming 1% traffic growth per annum. With an increase of one year in the economic life of the equipment, the ERR increased by 19% while a two-year extension in equipment life gave an increase of 24% compared to the economic return obtained with a life of six years. This analysis clearly points to the need of improving the utilization rates of highway maintenance equipment in Chad. 1.09 Effect of Traffic Growth: The effect of traffic growth on the economic return is demonstrated by the following analysis: Rate of Traffic Growthl/per annum ERR B/C at 10% B/C at 12% 0% 17 1.05 1.03 1% 21 1.07 1.06 2% 25 1.09 1.08 3% 29 1.12 1.10 1/ Assuming a six-year equipment life. This analysis shows a 4 percentage point gain in ERR for every 1% increase in the annual growth rate of traffic. It becomes obvious that with the anticipated traffic growth of 3-6% per annum over the next five years in Chad, the need for emphasizing and continuing an adequate highway maintenance program becomes exceedingly desirable from an economic standpoint. ANNEX CHAD Table 1 CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMLETION REPORT Growth in Vehicle Fleet, 1970 - 197 Vehicle Type 1970 1971 1972 1973 1974 1975 Growth RAte Light Vehicles 4023 4765 5250 5770 6225 6627 10.5% per annum (less than 3-5 t) Trucks 5336 5794 5891 6009 6162 6266 3.25% " " Buses 108 126 133 144 147 152 7.0% " " Trailers and 400 448 620 664 834 875 17.0% " " Semi-Trailers. Source : BCEOM, Etude de factibilitg, Route Krim-Krim-Beinamar, Route Gounou- Gaya-Kelo, Pont de Tagal. July 1976 ANNEX CHAD -Table 2 CREDIT 125-CD) - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Indicators of Traffic Growth 1970-1975 Indicator 1970 1971 1972 1973 1974 1975 Gasoline consumption (m ) 17337 18522 16724 15759 1113 14645 Diesel Consumption (m3) 3529 3395 2461 2971 5703 3476 1/ Exports 69 67 75 72 62 66 (thousands of tons) 1/ Imports 171 169 150 183 165 93 (thousands of tons) 1/ Six months only (Jan. - Jun. 1975). Source: Bulletin de Statistique, Republic of Chad. No. 220, 1st quarter 1976. ANNEX Table 3 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Maintenance Output Year Without Maintenance With Maintenance Incremental Project (km) Project (km) Increase with Project (K.) 1968 2000 1969 1950 1970 1800 - 1/ 1971 (1450) 2700 1250 1972 (1100) 2800 1700 1973 ( 700) 2600 1900 1974 ( 200) 2200 2000 1975 (0) 2000 2/ 2000 1976 (0) 1800 2/ 1800 14 Figures in parenthesis are estimates of highway network that could have been maintained without the project using the equipment available in 1970. 2/ Approximate estimates of kilometerage maintained Source-: Estimates prepared by Bank Staff. ANNEX Table 4 CHAD CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT Recurrent Highway Expenditures (in millions of CFAF) Year With Maintenance Without Maintenance Incremental Project Project Expenditure (In current prices) (In current prices) (Current (Constant Prices) 1970 prices) 1968 167 - 1969 181 1970 - 172 - - 1971 188 (102).1/ 86 83 1972 244 (96) 14C 133 1973 220 (61) 159 13' 1974 220 (23) 197 175 1975 220 (0) 220 165 1976 220 (0) 220 154 1' Figures in parenthesis are estimated recurrent highway expenditures without the project. Source : a) "Rapport d'Ex&cution concernant le Fonds Routier" from 1968 to 1974 b) Estimates prepared by Bank Staff. ANNEX CHAD Table 5 CREDIT 125-CD - HIGHWAY MAINTENANCE PROJECT PROJECT COMPLETION REPORT 1/ Benefit Cost Anali- Year Capital Incremental Incremental Investment Recurrent Maintenance Benefits (million FAF) Costs (million CFAF) (Million CFAF ) 2/ 3/ CB C2 B1 B2 Total 1 (1970) 26.9 - - - - 2 533.0 83.0 35.0 341.0 376.0 3 339.0 133.0 84.0 323.0 407.0 4 1.7 134.0 176.0 207.0 383.0 5 - 175.0 180.0 83.0 263.0 6 - 165.0 188.0 75.0 263.0 4/ 7 - 46.2 154.0 196.0 67.0 263.0 ERR 21% B/C at 10% 1.07 B/C at 12% 1.06 1/ The analysis is based on the following assumptions a) Equipment life = 6 yr b) Traffic Growth = 1% per annum c) All Costs and Benefits are in constant 1970 prices. 2/ Benefits realized by avoidanc- of increased VOC on the road network maintained in 1970. 3/ Benefits realizeu by extending m-ntenance to additional roads. 4/ Salvage value of maintenance equipment, materials and workshop. Source: Bank staff estimates. CHAD HIGHWAY MAINTENANGE AND ENGINEERING PROJECT EXISTING ROADS HIGH WAY SYSTEM .0AO TRAFFIC 19c3 All weather (SCHEMATIC LAYOUT) o U.d-ý .. -.1l- 5 - I veh,cIej p*, d,¥ memmeSeasonal a*O*diy,I, HIGHWAY MAINTENANCE Road ..mainaid by ATEC I. , Roads (MI96) maintained by the DPR Roads (1971) aantained by the DPW Di em'ya-li-tailo Far t 'dy ~akeside facalities enine,i a ng r..GDr. URII' AI 150 M HA Í\ \ Polaala B!aabiioOa. 9 B ~ 30 R50 SEPTEMBER 967 aBRD-30i3Rl