Liberia - Fourth Highway Project

Do0ment of The World Bank FOR OMCIAL USE ONLY Report No. PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH HIGHWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) March 14, 1986 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. THE WORLD BAN FOR OFFICIAL USE ONLY Washngon. DC 20433 us A. March 14, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Liberia Fourth Highway Project (Loan 1573/Credit 1311-LBR) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Liberia Fourth Highway Project (Loan 1573/Credit 1311-LBR)" prepared by the Operations Evaluation Department. Attachment This documnt has a skstricted distribution and may be wed by ecipints only in the perfonmance of their olcial duties. ts contens may not otherwise be disclosed without World Bank autherlatiod . FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH HIGHWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) TABLE OF CONTENTS Page No. Bre8Ce.********* ************e************* ****0 BaslC Data Sheet*o.................................................. i1 Evaluation Summary.....*..................*.. IV PROJECT PERFORMANCE AUDIT MEMORANDUM I. INTRODUCTION ............................................. 1 II. THE FOURTH HIGHWAY PROJECT ............................... 2 (a) Identification and Preparation ....................... 2 (b) Objectives ........................................... 3 (c) Implementation of Project Components ......... ..... 3 (d) Implementation Schedule .............................. 10 (e) Costs and Financing .................................. 10 (f) Economic Reevaluation ................................ 11 III. CONCLUSIONS AND RECOMMENDATIONS .......................... 11 (a) Conclusions .......................................... 11 (b) Recommendations ...... ......................... 13 Table 1 Liberia Fourth Highway Project, Estimated and Actual Costs. 15 ANNECES 1. Liberia: Recent Developments ........................ 17 2. Fourth Highway Project: From Inception to Board Approval ...............................*** 23 3. Fourth Highway Project: Project Implementation ...... 29 PROJECT COMPLETION REPORT I. Itouto..,...........1....... 39 II. Project Identification, Preparation and Appraisal....... 39 III. Project Implementation.*.............................. 41 IV. Economic Reevaluation ................................. 46 V. Institutional Performance .............................. 47 VI. Bank Performance.......*........................... 48 VII. Consultants Performance ............................... 49 VIII. Cocuin....................... 50 This document has a restricted distribution and may be used by recipients only in the performance of thir ofAdal duties. Its contents may not otherwise be disclosed without World Bank authoriation. -2- Table of Contents (cont.'d) Page No. Tables 1. Actual and Forecast Estimates of Project Costs ......... 53 2. Economic Reevaluation of Paynesville-Kakata Road ....... 54 3. Economic Reevaluation of Kakata-Totota Road ............ 55 4. Economic Reevaluation of Pavneaville-Robertsfield Road.. 56 Fourth Highway Project IBRD-13313 (PCR) PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH HIGHWAY PROJECT (Loan 1573/Credit 1311-LBR) PREFACE This is the performance audit report on the Fourth Highway Project for which Loat 1573 and Credit 1313 in the amounts cf US$13.8 million and SDR 1.7 million %ere respectively approved on May 18, 1978 and December 14, 1982. The Credit was granted to cover financing shortfalls resulting from cost overruns which exceeded the amounts available under the Loan. loan 1573 has been fully disbursed and SDR 0.228 million of the Credit has been can- celled. Co-financing was provided by the Knwait Fund for Arab Economic Development in the amount of US$7.4 million. This document consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED), and of a Project Completion Report (PCR) prepared by the Western Africa Regional Office. OED studied the documentation preserved in the Records Center and reviewed the project against the Staff Appraisal (SAR) and the President's Report (PR), as well as against the legal documents and the transcripts of the Executive Directors' meetings which considered the project. Discussions on project formulation, implementation and follow-up were held with Bank staff and consultants. An OED mission visited Liberia in July 1985 to secure Government views on the project and the assistance extended to the mission is gratefully acknowledged. Drafts of this report have been sent to the Govern- ment and to the Kuwait Fund for their comments; however, none were received. The PCR provides an adequate summary of the project expet ience. The PPAM is focussed on the broader impact of Bank assistance, extended through this and previous projects, to the Liberian highway sector. PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH RIGHiWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) BASIC DATA SHERT KEY PR-OJECT DATA Appraisal Actual/ Estimate Reestimate La. 1573 Or. 1311 in. 1573 Cr. 1311 Item (US$ R) (SDR M) (US$ M) (Su M) Total Project Cost 28.8/a - 47.9/b loan Amount 13.8 - 13.8 Qredit Amount - 1.8/C - 1.8 Loan/Oredit Status at 12/31/84 Disbursed 13.8 1.8 13.8 1.6 Cancelled - - - 0.2 R&naid-- -- Outstanding - - - 1.6 Project Completion Date 06/82 11/83 01/86/d 01/84 Percent of Project Completed at Original Completion Dte - - 50 lime Overrun (mos.) - - 43 2 E:onomic Rate of Return (%) Payneaville-Robertsfield 22 - 16/e . Paynesville-Totota 20 - 14/W CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS* FY80 FY81 FY82 FY83 FY84 FY85 In. or. n. Cr. n. c. in. V n.O r. C. n. O. $M SDR M $M SD M $M SDR M $M SDR M SM SDR M SM SDR M Estimated 7.7 - 11.8 - 13.8 - 3 - - - - - Actual 4.5 - 11.3 - 13.5 - 13.8 0.6 - 1.5 - 1.6 Actual/Est. (%) 59 - 96 - 99 - 100 - - - - - OTHER PROJECT DATA Original Plan Actual or Est. Actual Item La. 1573 Cr. 1311 Ln. 1573 Cr. 1311 First Mention in Files 1974/f 04/82 Appraisal 06/22-07/67/77 Negotiations 04/19-24/78 Board Approval 05/18/78 12/12/82 Loan/Credit Agreement Date 06/02/78 01/03/83 Effectiveness Date 09/11/78 01/31/83 Closing Date 12/31/82 12/31/83 12/31/82 12/31/83 Borrower Republic of Liberia Executing Agency Ministry of Public Works Fiscal Year of Borrower July 1 - June 30 Follow-on Project Name Fifth Righway Project QCedit Number Oredit 1 -9-LBR of March 20, 1984 Credit Amount (US$ million) 11.4 NOTES: /a Including the Paynesville-Robertsfield Road financed by the Kuwait Fund for Arab Economic Development. /b Estimated total cost as of July 1985 (see PPAM. Table 1). /c Supplemental financing for reconstruction of Nyaforla Bridge, updating of engineering and contract documents for thn Kakata-Totota road section and bid evaluation for the road work. /d Estimated completion date for the Kakata-Totota reconstruction under AfDB financing. /s Assuming that, starting in 1985, traffic will increase by 52 per annum, an optimistic assumption given the current state of the economy. /f Project components were developed within context of 2nd& 3rd Highway Projects. MISSION DATA No. Month/ No. of No. of of man- Date of -Item Sent by Year weeks Persons weeks Report Preparation WAPHW 02/22/77 1.0 1 1.0 03/04/77(NB) Appraisal WAPHW 06/22-07/07/77 3.0 2 6.0 05/04/78 Supervision I WAPHW 12/78 1.5 3 4.5 01/29/79 Supervision II WAPHW 03/79 2.0 2 4.0 05/07/79 Supervision III WAPHW 11/79 2.5 2 5.0 12/19/79 Supervision IV WAPRW 03/80 3.0 1 3.0 05/23/80 Supervision V WAPRW 12/80 3.0 1 3.0 12/31/70 Supervision VI WAPRW/RMWA 03/81 1.0 2 2.0 03/10/81 Supervision VII WAPTI/RMWA 11/81 2.0 3 6.0 12/21/81 Supervision VIII WAPTI/RMWA 03/82 3.0 3 9.0 04/26/82 Supervision IX WAPTI/RMWA 07/82 1.0 2 2.0 08/17/82 Supervision X WAPTI/RMWA 09/82 3.0 2 6.0 11/01/82 Supervision XI WAPT1/RMWA 12/82 1.0 2 2.0 12/20/82 Supervision XI* WAPTI 12/82 1.0 2 2.0 03/23/83 Supervisi.u XIII* WAPTI 04/83 1.0 2 2.0 04/28/83 Supervisin XIV* WAPT1 11/83 1.0 2 2.0 02/02/84 NB - Missions VII through IX also concerned with preparation of Fifth Highway Project. * Supervision of CR 1311. - iv - PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH HIGHWAY PROJECT (Loan 1573/Credit 1311-tBR) EVALUATION SUMMARY Introduction For twenty years, startirg with the First Project of 1964, World Bank assistance to the Liberian highway sector was aimed at strengthening the country's capacity to plan, construct and maintain its transport infrastruc- ture (PPAM, paras. 1-3). Results have been mediocre enough to raise the question whether the Bank should persevere with institution building efforts in a particularly difficult socio-political environment (PPAM, paras. 23- 26). Auditing the Fourth Project (which flowed out of the Second and Third, and was approved in December 1978) offered the opportunity to consider the highway sector within the context of recent problems '(PPAM, Annex 1) and to see whether any useful changes might be made it the Bank's assistance strat- egy (PPAM, paras. 29-32). Project Objectives (PCR, para. 2.06) (a) continue to develop the main highway system; (b) continue to develop local capacity to plan and execute highway maintenance; and (c) improve the Government's capacity for highway planning. Neither the President's Report, nor the Staff Appraisal Report suggest any quantitative milestones on the basis of which attainment of objectives could be evaluated (PPAM, para. 5). Implementation Experience The original project composition envisaged eight project components but short.3e of funds dictated that two of them be switched to the Feeder Roads Project (Loan 1664-LBR). All eight items were supervised by the same Bank staff (PPAM, para. 6). Items Financed under the Fourth Highway Project: (a) Improvement of the Paynesville-Totota Road (71 miles) (PPAM, paras. 7-8; PCR, paras. 3.05-3.08). 40 miles completed. Remainder financed by the Afzican Development Bank. Work underway and expected to be completed in early 1986. (b) Improvement of the Paynesville-Robertsfield Road (28 miles) (PPAM,para. 9; PCR, paras 3.01-3.04). Financed by the Kuwait Fund. Substantial completion achieved by August 1980. -v - (c) Detailet. engineering of two roads (totalling 90 miles) (PPAM, para. 10; PCR, para. 3.18). Satisfactorily completed. (d) Feasibility study of a 152-mile road (PPAM, para. 11; PCR, para. 3.19). Study was to be carried out with bilateral aid financing. Funds reallocated to a feasthility study of a different road but the study was not done because of cost overruns in other project components. (e) Consulting services to improve road maintenance (PPAM, paras. 12- 14; PCR, paras. 3.20-3.23). Main focus of institution-building efforts. Disappointing results. Limited effect of technical assistance, few qualified staff available for the counterpart posi- tions, maintenance funding reduced after 198C. Maintenance opera- tions at a virtual standstill since 1982. (f) Technical assistance to the Planning and Programming Bureau (PPB) in the Ministry of Public Works (MPW) (PPAM, para 16; PCR, paras. 3.24-3.25). Satisfactory perforwan,e of techncal assistance staff. Mixed results of overseas training element. Items Financed under the Feeder Roads Project (a) Technical assistance for the domestic construction industry [PPAM para. 17(i)). The first attempt at implementing this component was a failure. Further attempts are underway. (b) Reorganization of transport planning and coordination [PPAM, para. 17(ii)]. After lengthy delays, technical assistance staff was assigned to the Ministry of Planning and Economic Affairs where they prepare feasibility studies but prospects are not encouraging. Results Overall, project execution registered a time overrun of over 80%. This was due to the Paynesville-Totota road which had been scheduled for com- pletion in 1981 but will not be fininshed before early 1986 (PPAM, para. 18; PCR, paras. 3.26-3.27). At appraisal, total estimated project cost was US$30.7 million. The most recent estimates (PPAM, Table 1) show that the total actual cost is likely to be US$48 million, or 56% more than the estimates. Once again, the overrun is largely due to the Paynesville-Totota Road whose construction and supervision are likely to cost respectively about 110% and 185% more than anticipated (PPAM, para. 20; PCR, paras. 3.09-3.15). At appraisal, economic justification was based on benefits expected from the improvement of the Paynesville-Totota and of the Paynesville- Robertsfield Roads (estimated rates of return, 20% and 22% respectively). The rates recalculated in the PCR (14% and 16% respectively) reflect in- creased construction costs and substantially lower traffic. The PCR assumes - vi - a 5% annual rate of traffic growth increase starting in 1985. This seems optimistic but cannot be challenged since the July 1980 OED mission could not mission could not secure recent traffic data for an independent check (PCR, paras. 4.01-4.05; PPAM, paras. 21-22). Conclusions (a) The Bank thesis that maintenance ought to be given preference over new construction was sound and the proposed assistance to MPW for improved maintenance operations was justified. MPW agreed with both the diagnosis and the presciption (PPAM, paras. 23-24). (b) Institution building results were unsatisfactory because the poli- tical leadership never believed that maintenance should be given priority over new products (PPAM, para. 24). (c) Cumersome and often questionable Government procedures have dis- couraged a number of donors but the Bank (whose presence was Vastrumental in the survival of KPW during a difficult period (PPAM, para. 30) ought to con- tinue assisting the highway sector, although under a modified operational strategy (PPAM, paras. 26-27). (d) Important adjustments have already been made in the Bank's stance: the Fil' Project is better supervised than the Fourth; past emphasis on cen- tralizeu planning and coordination has been reduced; attempts to strengthen the domestic construction industry continue in a more rational manner (PPAM, para. 28). Findings and Lessons (a) The Bank may reconsider the force account formula it has been advo- cating for strengthening maintenance operations since Government commitment continues to be lacking. Instead, the MPW and the Bank may consider adopting the de facto rolling plan of rehabilitation or strengthening of principal roads with a view to provide them with a surface lasting between seven to ten years. At the end of the pavement's life, a new pavement could be applied, together with any improvement works justified by increased traffic (PPAM, para. 29). (b) The Bank ought to assist MPW with the latter's three main problems: financial accountability: improvement of middle management staff; and a re- ward system for superior performance (PPAM, para. 31). (c) Assistance to MPW ought to be extended in tranches, under specific conditions, and tied to a detailed list of milestones which, once accomplish- ed, would release further aid (PPAM, para. 32). (d) Formal aid coordination with other donor agencies ought to be re- activated (in the form of a five-year indicative plan of assistance), both to prevent uneconomic investments and to actively direct foreign assistance so that it achieves an appropriate balance between new investments and preserva- tion of existing assets (PPAM, para. 32). -1I PROJECT PERFORMANCE AUDIT MEMORANDUM LIBERIA FOURTH HIGHWAY PROJECT (Loau 1573/Credit 1311-LBR) 1. INTRODUCTION 1. World Bank assistance to the Liberian transport sector was initial- ly extended through the First Highway Project of 19641/ and continued through the Monrovia Port Project of 1969.1/ 2. In October 1972, the Government convened a meeting to coordinate aid to the highway sector. Potential donors were briefed on a five-year highway development and maintenance program and financial assistance was solicited for different components. The Second Highway Project of 19733/ was an outcome of that meeting. Its emphasis was on highway maintenance and on upgrading selected roads. / The Third Highway Project of 19755/ was to continue assisting the Government in the implementation of its 1972 tive-Year 1/ Loan 368-LBR for US$4.25 million. It involved construction of 62 miles of new roads, and procurement of road maintenance equipment, spare parts and workshop facilities. The Project was completed in June 1969. 2/ Loan 917-LBR for US$3.6 million. It involved dredging of the port of Monrovia and management assistance to the port administration and to the National Port Authority. The project was completed in 1973. 3/ Loan 907/Credit 395-LBR for US$5.6 million. It consisted of reorganization and improvement of road maintenance operations over four years; upgrading of the Monrovia by-pass; and pre-investment studies and a study of the contracting industry. 4/ OED has issued a Project Performance Audit Report (No. 2557 of June 22, 1979) which can be summarized as follows: (a) it was too optimistic to expect that maintenance operations could be effectively reorganized within four years; (b) the project registered a 16-month time overrun and a 33% cost overrun; (c) the Ministry of Public Works (MW) performed well as executing agency but needs assistance to maintain bituminous roads; (d) Government increased considerably its appropriations for road maintenance; (e) the concultants who prepared the feasibility and engineering . studies for the Paynesville-Robertsfield and the Paynesville-Totota Roads did not do satisfactory work. Even so, Government proposed that the same consultants undertake supervision of the rehabilitation works. 5/ Loan 1156-LBR for US$27.5 million consisted of four major components: (a) civil works by contract; (b) feeder roads by force account; (c) technical assistance and fellowships; and (d) consultants' services for construction supervision, feasibility and engineering studies. -2- Road Maintenance and Development Program.6/ The Fourth Hiohway Project flowed out of the Second and Third, was approved in December 1978, and is the subject of this audit. 3. From the outset, Bank assistance to the road subsector was extended with a view to strengthening Liberia's ability to plan, construct and main- tain its transport infrastructure. After twenty years, various road sections have been improved but Govarnment is not better equipped to plan, construct and maintain the network. The MPW is not a mpre efficient department and local contractors have not matured to the point where they can undertake an expanding volume of work. The reasons for these discouraging results must go deeper than any conceivable shortcomings of any particular sector, government department or professional class. Auditing the Fourth Highway Project of- fered the opportunity for a review of broader problems and PPAM Annex 1 (Liberia: Recent Developments), which summarizes this review, shows how Liberia arrived at its present situation, and highlights the difficulties which plaqued not only the Fourth Highway and other projects in the past, but continue to plaque development efforts today. II. THE FOURTH HIGHWAY PROJECT 7/ (a) Identification and Preparation 4. The project was implemented during a period (1976-1984) of politi- cal violence and a declining economy. Early in the project identification phase it was evident that the transport sector in general, and the highway subsector in particular, were confronted by three problems: absence of even rudimentary planning; almost total neglect of road maintenance and imperfect arrangemencsfrorProject financing. Planning -an maintenance were hampered 6/ OED issued a Project Performance Audit Report on the Third Highway Project (No. 4903, dated January 23, 1984) which can be summarized as follows: (a) the project suffered a 2.5 year delay, primarily because the three-year contract for the Totota-Canta Road took five and a half years to complete; (b) delays were caused by poor site organization of the contractor; late payment of the local share of invoices; and disruptions following the coup d'etat of April 1980; (c) Government could not meet in a timely fashion its financial courmcaents under this and other civil works contracts and issued promiseory notes instead. In view of what were regarded to be exceptional circumstances, the Bank raised no objections but urged the Government to eliminate the payment arrears by postponing new highway investments; (d) the most successful element in the project was staff training overseas; (e) institutional development was impaired after 1980 when many senior MPW staff resigned. 7/ The Project Completion Report (PCR) prepared by the Western Africa Regional Office is a comprehensive document. This section of the Project Performance Audit Memorandum (PPAM) summarizes points discussed in greater detail in the PCR, findings of the July 1985 OED mission to Liberia, and historical material contained in the project file. -3- by lack of Government commitment and by a shortage of qualified staff. Proj- ect financing was erratic because, although Government depended almost entirely on external assistance, its procedures for resource allocation were always cumbersome and often arbitrary. These were economy wide problems re- quiring economy wide solutions. The Government and the Bank proceeded with the preparation of the Fourth Project on the assumption that problems could be successfully managed on a sectoral basis.8/ This was not possible and, upon completion of the project, the road secto is facing the same difficul- ties as before. (b) Objectives 5. The President's Report (PR) states (par&. 31) that the Fourth Project had three objectives: to continue to develop the main highway sys- tem; to ccontinue to develop local capacity to plan and execute highway main- tenance with increasing emphasis on management; and to improve the Government's capacity for highway planning. These are broad formulations of intent rather than specific objectives that could be pursued during the limited duration of a Bank-assisted project. Non-achievement of the similar- ly broad intentions behind the Second and Third Projects ought to have cautioned against generalizsAions or, at least, to have added to the general- izations some specific results expected to be achieved by the end of the project. In fact. neither the PR nor the Staff Appraisal Report (SAR) offer any quantitative milestones on the basis of which attainment of targets could be evaluated. (c) Implementation of Project Components 9/ 6. The SAR states (par*. 3.02) that the project would consist of six components: 10/ (a) improvement of thd Paynesville-Totota Road (71 miles); (b) improvement of the Payneaville-Robertefield Road (28 miles); 8/ PPM( Annex 2 ("Fourth Highway Project: From Inception to Board Approval") is a summary of key documents from the various stages of project preparation. 9/ PPAM Annex 3 ("Fourth Highway Project: Implementation") is a summary of supervision reports and other documents in the file. It shows that implementation problems encountered during the Second and Third projects had not been resolved and, on the contrary, had become aggravated. 10/ Two more components were originally included in the project but lack of funds dictated that they be switched to the Feeder Roads Project (Loan 1664-LBR). These were (i) Technical assistance for the domestic construction industry, and (ii) Reorganization of transport planning and coordination. Bank staff supervising the Fourth Project also supervised these components which are discussed in para. 17 below. -4- (c) detailed engineering of the Ganta-Sanniquellie road (25 miles) and of the Ganta-Tapita road (65 miles); (d) feasibility study for the Gbarnga-Voinjama-Kolaha road (152 miles); (e) consulting services for the organization and execution road maintenance (continued from the Second Highway Project with extend- ed objectives); and (f) technical assistance to the Planning and Programming Bureau (PPB) in the Ministry of Public Works (MPW). Implementation results are summarized below. 7. The Payneaville-Totota Road is the first link of the road that links Monrovia with the northeastern part of the country. It was originally constructed in the early 1960s and long before the preparation of the Fourth Project started, the road began to show signs of failure. A consultant was retained under the Second Highway Project and produced a study which called for complete repaving over the entire length, together with relocations to improve alignment, and strengthening of bridges. The consultant worked under terms of reference approved 'by the Bank and Bank supervision missions were kept informed of his conclusions. 8. There was little continuity in the assignment of Bank staff working on Liberia. In the Fourth Project, eight engineers and five economists participated at various stages. Different individuals have different percep- tions and a Bank engineer did not agree that the Paynesville-Totota Road should be repaved from end to end. Instead, he suggested that a deflection survey be carried out to determine which sections needed a complete recon- struction and to plan a strengthening program for the remainder. The survey was done between December 1977 and February 1978.(PR, para. 33) and subse- quent developments were as follows: (a) The consultants had prepared documents for full reconstruction of the entire road. (b) The deflection survey indicated that 25% of the road length be reconstructed and that the remaining 75% be improved with selective patching and overlay. (c) The revised bidding documents were approved in December 1978. Ten contractors prequalified and bids were received in February 1979. - 5 - (d) The low bid was found to be US$935,000 over the appraisal estimate of US$13.05 million.11/ (e) A negotiated contract, priced at US$13.6 million, was signed iV. July 1979.12/ (f) The contractor mobilized in October, and began work officially on November 1, 1979. This was almost two years after the deflection survey had been completed. (g) Project design based on the results of the original deflection sur- vey was no longer valid after two rainy seasons whose effect neces- sitated extra work to cater for the increased deterioration. In addition, the first construction season revealed that the bill of quantities on which the contract price was based did not include major contract quantities for asphalt, shoulder widening and side drains.13/ Furthermore, during the first year of construction there v;e major price increases for fuel, bitumen and labor, all of them subject to price variation under the contract. Finally, the May 1980 coup disrupted completely the operations of the con- tractor who had to close down and send part of his staff home. (h) In December 1980, a Bank mission estimated that the final contract cost would be over US$18 million or US$5 million more than the 11/ Cost estimates increased dramatically and the difference between the negotiated contract price and final estimated cost is enormous: Original estimate (full reconstruction) US$7.9 million Cost estimate (after deflection survey) US$10.7 million Appraisal estimate US$13.1 million Lowest bid US$14.5 million Negotiated contract US$13.6 million Estimated final cost US$28.6 million 12/ An October 18, 1985 internal Bank note (Liberia: Country Procurement Assessment Report) notes (p. vii) that "the public procurement practices in Liberia often have little or no relationship to the written guidelines and regulations described in this report. The stated controls appear to be ineffective at most stages of the procurement process." 13/ The contract drawings and instructions to bidders prepared by the consultant for the original, full reconstruction scope, did provide for these quantities but in adjusting the bill of quantities from that required for full reconstruction to the one for selective rehabilitation, these items were overlooked. Responsibility rests with the consultant who made the mistake, with the MPW who did not notice it, and with the Bank who did not notice it either. appraisal estimate.14/ A February 1981 Bank mission noted that unless additional fEds could be made available, works should be quickly terminated to avoid contractor standby charges for which there were no funds either in the loan or in the Government's cof- fers.15/ (i) At the time of termination, there were outstanding payments for claims settlement and for the retention money. Since the Government had not cash, the contractor agreed to accept promissory notes.16/ (j) The conntruction contract was terminated in June 1982. Including claims, the total contract cost was US$16.5 million but out of the 14/ In fact, the final cost appears to be: Cost of the First Section (financed by the Bank): $16.5 million Cost of Nyaflorla Bridge (financed by the Bank): $1.2 million Cost of the Second Section (financed by AfDB): $10.9 million Total $28.6 million As against the appraisal estimate of $13.05 million. 15/ The Government was already faced with a funding gap of $10-15 million on other MPW projects (MPW Report dated August 21, 1981). 16/ Four notes (each for $375,550) were issued for the claims and four (each for $288,315) for the retention money. The due dates ran from August 15, 1983 through May 1984. As of August 1984, the Government had not honored the last three notes and about $1.1 million was still owed to the contractor. The July 1984 OED mission attempted to secure from the Ministry of Finance updated information on this and other items but no officials were available for discussions. -7- 71 miles only about 40 had been improved. This left 31 miles and the Nyaforla bridge. 17/ 9. The Paynesville-Robertafield Road, originally financed under the First Highway Project, connects Monrovia with the country's international airport. Work was completed in 1969 but, according to the PR (para. 29), pavement failures, "attributable to weakening of the road base by the entry of surface water, rapidly became evident". The Bank arranged for this com- ponent to be financed by the Kuwait Fund and, at Government's request, priority was given to the first half of the road so that this section would be ready in time for the GAU Conference in July 1979. Work proceeded without delay, and substantial completion was achieved by August 1980. After modifi- cations in the work program and settlement of claims, the total cost amounted to US$10.9 million, as against the original contract amount of OS$8.4 million. 10. The project provided for detailed engineering studies of the Ganta-Sanniquellie Road (25 miles) and of the Ganta-Tappita Road (65 miles). Consultants began work in November 1979 and completed their task satisfacto- rily in October 1981. Construction of the two roads had been envisaged to take place under the Fifth Highway Project but funding constraints precluded this. 11. The project provided for a feasibility stud for the improvement of the Gbarnga-Voinjama-Kolahun Road (152 miles) which connects Lofa Country with the main road from Sanniquellie to Monrovia. Subsequently, the Government arranged that the Japanese International Cooperation Agency would carry out the study and project funds were reallocated to a feasibility study of the Tappita-Zwedru Road. However, this study was dropped because of cost overruns in other project components. 17/ The Nyaforla Bridge is on the Paynesville-Totota road and a new structure was required. The contractor began demolishing the old bridge in October 1980. Delays ensued as the contractor proposed alternative construction methods and sitings and these were reviewed by the consultant and the MPW. By the time MPW approved the final construction plans, there were no funds left in the original loan. After lengthy discussions, IDA agreed in May 1982 to provide additional funds for the reconstruction of the bridge and for updating of the engineering study for the rest of the road. There were further delays while Government prepared formal documentation in support of its request for supplementary financing and, eventually, Credit 1311 became effective in January1984. The reconstruction began in February 1983 on a lump sum contract with the original contractor, and was substantially completed in At--ust 1983 within the original contract price of $1.2 million. The updating of the engineering study was completed in Januar- 1984 and work is underway, with AfDB financing, for the completion of the remaining 31 miles. Completion of the work is estimated to take place early in 1986. -8- 12. Improved road maintenance had been urged by the Bank since the First Highway Project of 1964 and various forms of assistance had been ex- tended through every highway project thereafter. The principal institution- building element of the Fourth Highway Project was also focussed on main- tenance and technical assistance was provided to assist the MPW. The Second Project had already financed four years of conrulting services to assist in planning and executing road maintenance. Althiwuh good progress was made in training staff in the physical aspects of maintaining earth and gravel roads, results were less satisfying in building up expertise within MPW on planning and organization at the district level and on financial controls. The Fourth Project provided for a three-year extension of the consultant's services for (i) civil engineering assistance (to cover the preparation and implementation of the road maintenance program), and (ii) mechanical meineering assistance (to build and operate the central and field workshops, to operate the road maintenance machinery, and to train operators and mechanics). In addition, an administrative expert would be attached to the Bureau of Operations in MPN to implement work programming and control, budgeting and cost accounting, and a warehousing expert would be provided to implement an effective scheme for the procurement and issue of spare parts and equipment in central and field warehouses.18/ MPW undertook to provide qualified counterpart staff (SAR, para. 3.10)7 13. Results are disappointing. Only marginal improvements followed the departure of the technical assistance and MPW now alleges that the wrong talent was recruited for the training activities: field staff training should have been done by former contractors and not by former supervisory engineers because consultants do not build roads and do not maintain equip- ment. It is also alleged that, at MPW headquarters, consultants acted only as advisors which made it easy not to listen to them.19/ 14. MPW staff are quick to point out that even if the right talent had been recruited and even if consultants had been given executive authority, results would still be mediocre. Despite the commitment it made during proj- ect negotiations, MPW could not assign qualified counterparts to work with the technical assistance team. Furthermore, after 1980, maintenance funding was reduced and the current system for financial allocations precludes the operation of a road maintenance mechanism such as that envisaged when the 18/ In December 1980, the consultant's terms of reference were modified to include preparation of a follow-up 5-year maintenance program to be funded through the Fifth Highway Project. 19/ This lesson has borne fruit. Consultants employed under the Fifth Highway Project have executing duties as well. -9- Fourth Project was being prepared. Maintenance operations a. e, consequently, at a virtual standstill.20! 15. The consultants did prepare, as required by their December 1980 modified terms of reference, a Five-Year Maintenance Program which the PCR (para. 3.23) characterizes as "somewhat unrealibtic in magnitude". MPW staff claim that they knew the program was overambitious, that they pointed this out to the Bank missions preparing the Fifth Highway Project, that they were urged by Bank staff to put together an "optimum maintenance program", and that they were assured that financing would not be a problem. IDA staff reasonably maintain they never indicated that IDA could offer a blank check and that by "optimum maintenance program" they always understood one that could be carried out within the financial and institutional constraints of MPW. 16. Assistance in Highway Planning was focussed on the Planning and Programming Bureau of the MPW and was initially extended under the Third Project which financed the services of a traffic engineer and the cost of postgraduate education in transportation of three Liberian students. The Fourth Project continued this assistance by financing the cost of two ex- perts: one transport economist and one traffic engineer, each for two years. In addition, the project provided financing for training abroad of four Liberian students. Technical assistance staff carried out their tasks satisfactorily until the end of their contracts in December 1982. The over- seas training component had mixed results. One of the students is now the Chief Engineer of the MPW. Another returned to the Ministry without complet- ing his studies. The remaining two have not gone back to Liberia, reportedly because their connections with the Tolbert regime were too close. 17. Two additional components, intended originally for financing under the Fourth Project, were switched to the Feeder Roads Project. They were supervised by the same Bank staff who supervised the Fourth Project and re- sults are as follows: (a) Technical Assistance for the Development of the Domestic Construction Industry. A specialist was recruited at the end of 1979, remained in Liberia until the middle of 1980, left the country for allegedly medical reasons and did not come back. The component was a failure. However a fresh start was made in 1984 with a new consultant. Implementation of a comprehensive training program for domestic contractors has now started with the strong support of MPW management and substantial complementary financial and technical assistance inputs from USAID. 20/ The OED mission visited a number of field workshops in July 1985 and noted the absence of activity. Lack of fuel and spare parts were the standard reasons given but there were also indications of disorganiza- tion and apathy. This was particularly true in the Camp Mechlin Training Center which has been closed since late 1984 and whose facili- ties are falling apart. - 10 - (b) Technical Assistance for the Reorganization of Transeport Planning and Coordination. .This reflected the conviction of some Bank staff that Liberia needed, and could be persuaded to want, centralization of transport planning and coordination functions in the Ministry of Commerce, Industry and Transport (MCIT). The record shows2l/ that the Government did not want these functions to be centralized and, after many delays, implementation of this component was shifted, in December 1983, from MCIT to the Ministry of Planning and Economic Affairs. Although the technical assistance staff are occasionally called upon by the Minister of Planning to assist in the prepara- tion of feasibility studies, their main activities concentrate onr the strengthening of the transport planning and monitoring unit of the Ministry of Planning through the establishment with counterpart staff of a consistent transport data base, planning methodology, medium term investment program and transport policy reform program. D. Implementation Schedule 18. With one exception, all project components were completed on time (PCR, paras. 3.26-3.27). The exception was the Paynesville-Totota Road which at appraisal had been scheduled for completion by mid-1981. The contract was terminated in 1982 after about 40 miles (out of the total 71) had been im- proved. The remaining 31 are expected to be completed, with AfDB financing, in early 1986. E. Costs and Financing 19. While the Fourth Project was being prepared, it was known that Government was experiencing financial difficulties with the Third. The March 1977 Project Brief specifically noted that project financing was a key issue (PPAM, Annex 2, para. A.3). This was not fully taken into account during the calculation of financing requirements which assumed that Government could absorb any cost overruns (PCR, para. 3.06). 20. Table 1 of the PCR (Actual and Forecast Estimates of Project Costs) shows that all components were expected to be completed by December 1982 and that their combined cost would amount to US$30.7 million. PPAM Table 1 (Fourth Highway Project: Estimated and Actual Costs) shows that the combined cost of all components is likely to be US$48 million (i.e., more than 562 more than the estimates) and that completion will probably take place early in 1986 (i.e., more than four years later than expected). The largest por- tion of both the cost and the time overrun is due to the Paynesville-Totota Road whose construction and supervision are likely to cost respectively about 110% and 185% more than anticipated. Although most of the cost overruns have been covered by Credit 1311-LBR and by the AfDB loan of 1984, this does not diminish the weakness of the original estimates. This case demonstrates that the significance of misestimates in small countries with limited financial resources is enormous and that misestimates lead to major financial distor- tions, administrative complications and operational crises. In large countries with large road programs overruns can be more readily absorbed 21/ See PPAM Annex 3, paras. A.15(b), A.16(c), A.23(b), A.24(b). *- 11 - through adjustments in the general budget or the overall roads program. Con- sequently, In small countries, it is highly desirable to exercise the great- est care in establishing cost estimates, to design projects so that they can more readily absorb overruns and to implement them so as to minimize the occurrence of such problems. F. Bconomic Reevaluation 21, The SAR states (para. 4.02) that economic justification of the project was based on the benefits from the improvement of the Payneaville- Totota and the Paynesville-Robertsfield Roads. The Payneaville-Totota Road would yield 20% (SAR, para. 4.11) and the Paynesville-Robertsfield 22% (SAR, para. 4.18). For both roads, the average growth of traffic over the first 10 years was assumed to be 6.5% per annum. 22. The PCR states (paras. 4.01-4.05) that the recalculated rate of return for the Payneaville-Kakata section (where traffic declined by about 7.7% per annum between 1977 and 1981, instead of increasing by 6.52), would be 15%. The corresponding rate for the Paynesville-Robertafield Road (where traffic declined by 9% per annum between 1977 and 1981, instead of increasing by 6.5%) would be 162. In both instances, the PCR assumes traffic to remain constant between 1981 and 1985 and to show an annual growth of 5% there- after. The July 1985 OED mission did not succeed in securing recent traffic count data to verify the reasonableness of the 5% growth rate assumption and therefore cannot challenge the PCR conclusions, even though recent economic performance raises doubts fs to whether a 5% rate of traffic growth can be achieved any time soon. III. CONCLUSIONS AND RECOMMENDATIONS A. Conclusions 23. When the First Highway project was approved in 1964, Liberia had a total of 1,750 miles of public roads and when the Fourth Project became ef- fective in 1978, the total had reached about 3,400 miles.22/ The limited network reflected the low demand for road transport and the Fact that Liberia was not rich. From the outset, the Bank had argued that maintenance ought to be given preference over new construction and, since MYW lacked both quali- fied staff and sufficient maintenance equipment, the Bank proposed to help correct these weaknesses. Such was the sound rationale behind the first four highway projects but the mechanism for translating rationale into action had one defect: it assumed that what had been agreed would be implemented. 24. Highway project preparation was carried out by Bank missions who discussed their findings and proposed recommendations with the technical ser- vices of MW. The latter agreed with the Bank that better maintenance proce- dures were needed and also agreed on the specific measures to be taken. The 22/ In addition, Liberia had a network of private roads, forming part of enclave operations (iron ore, timber, rubber). Total lengths for 1964 and 1977 were 530 and 1,444 miles respectively. - 12 - agreed approach was recorded in aide memoires submitted to, and rbutinely approved by the political leadership. However, the political leadership never believed that maintenance should be given preference over new projects and, since it controlled financial and human resources, it often proceeded to allocate them in ways different from those that had been formally agreed. This created serious difficulties for Bank assisted operations and although the Bank protested in unusually strong terms,23/ nothing substantial resulted since, even when financial crises were at their most acute, construction of new buildings for the police and purchase of executive jets went on. 25. Perhaps the Bank also contributed to some of the difficulties. In a period when the economy stagnated and shrunk and the lack of government funds became extremely critical (PPAM, Annex 1 - Liberia: Recent Developments), the Bank acquiesced to the Government's wish to include in the project a road which Bank staff had previously set aside as lower priority (PPAM, Annex 2, para. A.6). When the Bank's own lending program could not accommodate the extra cost, the Bank arranged for cofinancing and incorrectly described this road as useful for agricultural development (PPAM, Annex 2, paras. A.8 and A.10). During such a time, the Bank advocated a maintenance program which the Government itself perceived as "overambitious" (para. 15 above). Also, the Bank sought to help develop a capacity for transport planning despite resistance by the Government (PPAM, Annex 3, paras. A.14(c), A.15(b), A.16(c)) which demonstrated its proclivity to disregard investment priorities even when these were quite apparent without detailed analyses. Furthermore, the Bank endeavored, in a small country with fewer than two million inhabitants and with a very limited GNP outside the enclave enterprises, to develop an independent construction industry. This was done in a period of stagnation or worse and without, it would seem, any attempt to take advantage of the technical capacities available within the enclave ent,rprises themselves.24/ Finally, the Bank did not insist that a consultant about whom serlous reservations were expressed (para. 2, footnote 4, above) and who turned out to be "not satisfactory" (PPAM, Annex 3, paras. A.13(a), A.14(a), A.17) be refused supervisory responsibility for major road works under the project. Thus, during a period of crisis, the Bank continued to emphasize long range issues and complex objectives rather than concentrate on a few fundamentals. As a result an administrative pattern was pursued which suffered from conflicting advice and from a tendency to acquiesce in activities the Bank staff did not really support. 23/ See, in this connection, the excerpts from a 1982 letter from the Bank to the Minister of Public Works in PPAM Annex 3, para. A.20(e). 24/ The July 1985 OED audit mission saw a number of roads constructed and maintained by enclave enterprises and was struck by the fine quality of the work and the excellent state of maintenance. The question therefore arises: since the enclaves have a locally established capacity for road construction and maintenance, should they not have been asked to under- take road maintenance operations on behalf of the MPH, at least in the areas surrounding their holdings? - 13 - 26. Unpredictable, and frequently questionable Liberian behavior with respect to resource allocations, together with long delays, or even outright failure to fulfill agreed commitments, led a number of aid agencies to scale down, or eliminate completely, their programs of development assistance at the very time when the country needed assistance as never before.25/ Between October 1984 and October 1985, the Bank was forced to suspend dE- bursements on two separate occasions, the second lasting for more than seven months. Recent (June 1985) supervision reports on the Fifth Highway Project do not indicate that administrative practices have been visibly improved and the question cannot be evaded: should the Bank continue its assistance to the highway sector and if so, are there any changes that could usefully be incorporated into its assistance strategy? 27. The answer to the first part of the question is yes. The 1978 President's Report on the Fourth Highway Project says that a principal objec- tive of Bank Group operations is to help Liberians play a larger role in developing their own resources for the benefit of their own people. This statement, made seven years ago, applies with even greater force today when the country is in a much more difficult situation. Different country condi- tions require different Bank responses and it is encouraging to note that flexibility has prevailed so far. 28. A number of important adjustments have already been made. Largely because of too frequent changes in Bank staff, the Fourth Project was not well supervised. This is no longer the case: the Fifth Project has shown remarkable staff continuity. Attempts to strengthen the domestic construc- tion industry ate laudable in themselves and indispensable for national development. However, experience has shown that Bank efforts in this direc- tion were ineptly conceived and imperfectly implemented. At present, efforts continue in the same direction but with a new consultant, at a lower key and with somewhat better prospects for success. Nevertheless, the fundamental problem remains: the existing road network has to be maintained and is not. (B) Recommendations 29. After four projects and twenty years of effort to establish a force account operation, the assertion is permissible that the chances of success are microscopic as long as the political leadership remains unconvinced that money spent on maintenance is money well spent. The Bank might therefore reconsider the formula it has been advocating and might explore alternative ways of assisting the MPW to keep vital roads open. It might be worthwhile 25/ Germany withdrew its support and this led to the closure of the Camp Mechlin Training Center. Kuwaiti disappointment over the non-repayment of funds due led to the cancellation of proposed financing for the Ganta-Tapita Road. Japanese dissatisfaction with the lack of results concerning the promised construction of workshops facilities in Camp Mechlin is reducing the chances of any major flows of assistance from that country. Such setbacks cannot be offset by the gift of the massive athletic complex provided by the Chinese Government, or by the highly specialized technical assistance provided by Israel. - 14 - for the Bank and MPW to formulate a rolling plan of periodic reconstruction encompassing the country's main roads with a view to provide them with a sur- face lasting between seven and ten years. The possibility that little main- tenance would be done ought to be faced and the plan could envisage that at the end of the pavement's life a new pavement would be applied, together with any betterment or improvement works justified by increased traffic. 30. According to customary standards of efficiency and effectiveness, the Fourth Highway Project was not a success. This should not conceal the fact that the Fourth Project, together with the Feeder Roads Project, did accomplish something more significant than the usual savings in vehicle operating costs. The two projects were implemented during a traumatic period for the MPW which went through a phase of utter disorganization and lost many of its experienced personnel. Bank assistance extended through these two projects provided the MPW with a minimum of resources which made possible the continuation of its operations, the preservation of some sort of structure and the development of new cadres. In late 1985, the MNW had a more expe- rienced staff and a clearer sense of direction than it did five years ago and, by itself, this contribution made by the Bank went a long way towards helping some Liberians help themselves. 31. This is not to say that MPW has no problems. Its three most impor- tant weaknesses are that it lacks a regular flow of adequate financing (which makes it virtually impossible to plan ahead); a more competent middle manage- ment (which makes it hard to institute sounder administrative practices); and a system that will offer rewards for superior performance (which, unless cor- rected, will contribute to further discouragement of those officers who work above the call of duty). These are the three areas in which the MPW deserves assistance. 32. In view of the country's financial situation, any assistance to the MPW will have to come from concessionary aid. As noted above, many donors have become discouraged but the following approach, which might be adopted with advantage in future projects supported by the Bank, might also help to entice them back. It is a matter of extreme urgency that reactivation takes place at once of formal aid-coordination among all donor agencies. This could preferably take the form of a five-year indicative plan of assistance which might be instrumental both in preventing uneconomic investments and in directing foreign assistance so that it achieves an appropriate balance be- tween new investments and preservation of existing assets. Arrangements ought to be made so that external assistance be extended under specific con- ditions and tied to a detailed list of milestones which would release further resources as targets are being met. For this to be possible, the Government would have to overhaul some of its burdensome practices and although this will not be easy, there does not seem to be any other alternative. _ 15 - Table 1 PROJECT PERFORMANCE AUDIT MEMORANDUM LIBERIA FOURTH HIGHWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) Estimated and Actual Costs (US$*000) Source of External Estimated Actual Financing CIVIL WORKS CONSTRUCTION Paynesville-Totota 13,050 In. 1573-LBER Paynesville-Kakata 16,550 Ln. 1573-LBR Kakata-Totota 10,900(a) AfDB yaforla Bridge 1,265 1,181 Cr. 1311-LBR Paynesville-Robertsfield 9,570 10,937 Kuwait Fund CIVIL WORKS STUDIES , Update engineering study 370 271 Cr. 1311-LBR CIVIL WORKS SUPERVISION Payneaville-Totota 830 LU. 1573-LBR Payneaville-Kakate 1,203 In. 1573-LBR Kakata-Totota 1,166(b) AfDB Nyaforla bridge 265 202 Cr. 1311-LBR Paynesville-Robertsfield 610 833 Kuwait Fund TECHNICAL ASSISTANCE Road Maintenance 3,280 3,790 In. 1573-LBR PPB 310 235 Ln. 1573-Lbr CONSULTANT SERVICES Detailed Engineering 530 651 La. 1573-LBR Feasibility Study 610 - (c) Ln. 1573-LBR TOTAL 30,690 47,919 Source: PCR, Table I and OED Mission estimates Notes: (Ta3 MPW estimate, July 1985 (b) Suervision cost to AfDB estimated as the same percentage of supervision cost/construction cost for the Bank-financed Payneaville- Kakata segment. (c) The feasibility study was not done. ーゾど一 ノぢバノぞ汐p多洛．c／才 17 ANNEX I Page I PROJECT PERFORMANCE AUDIT MEMORANDUM LIBERIA FOURTH HIGHWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) RECENT DEVELOPMENTS 26/ Liberia, a small West African country with an area of 114 thousand square km and a 1980 estimated population of 1.9 million, has a unique polit- Ical history and a checkered socio-econamic record. In the 1950S and 19608, it experienced an unprecedented rate of economic expansion. Annual rates of national product Increase were close to 72 and stand In sharp contrast to the complete stagnation of the previous eighty years. However, the expansion was led by investments of foreign enclaves and, as a whole, Liberia remained far behind its neighbors both In physical capital and In trained manpower. In the mid-19709, the economy depended on three elements, all of them run by foreign-ovned enclave concessions. First, iron ore; it accounted for 30% of the GDP and 3/4 of the total exports. SiZio-ndrubber; but its outlook was bleak and no more than 3% annual growth of exports could be reasonably foreseen. Third, forestry; it had experienced a phenomenal growth which led to fears of total depletion. Other sectors did no t promise any signif icant potential. The choice f aced by the Government 'was .'either to continue collecting tribute from the enclaves while resources were being depleted, or to diversify the economy and make it strong enou&- to survive when the' exploitative phase would end, The latter required a basic reorientation of the country's productive mechanism and, participation of more Liberians in the "modern", as distinct from the "traditional" economy and the political implications did not pass unnoticed. 26/ The audit has studied the four major reports on Liberia prepared by the Bank between 1975 and 1982: Liberia: Growth with Devel2pment, A Basic Economic Report (In seven volumes), leport No. '426a BR, March 1-777S.- Current Economic Position and Promets of Liberia: Review of Major Sectors, leport No. 1642a-LBR, February 28, 1979. Liberia: Current Economic Situation and Prospects* Report No. 2662-LBR, Beceinber 28, 1979. Liberia: Recent Economic Developments and Medium-Term Prospects, Report No* 4178-LBR, December 30, 1982. The main findings and conclusions of these documents are summarized in the following pages. - 18 - ANNEX I Page r Since mid-1971, the country had a new Government.27/ After the 28-year Tubman regime, the Tolbert administration proposed to introduce re- forms and there were many problems requiring attention and action: Four iron ore concessions were in operation. One would close at the end of 1975 but the shortfall could be made up by the others and the volume of exports maintained around 23 million tons a year up to 1978. Prospects beyond 1978 were uncertain. The rubber industry consisted of seven concessions and 5,300 Liberian-owned farms. Tax concessions needed to be renegotiated and Liberian farmers had to get better prices for their produce, Forestry was a growing sector. Its contribution to GDP was expect- ed to increase from 2.2% in 1972 to 8% in 1978 but the Government needed to enforce its own regulations with regard to cutting of trees, replanting, etc. The country lacked capital even for simple sawing operations. Capacity of the public service was limited. The fiscal system was undeveloped, passive, highly sensitive to external fluctuations and ill-equipped for development purposes. Maximization of revenues and minimization of expenditure was used by the Ministry of Finance to demonstrate sound fiscal management. The surplus so generated was used to reduce debt burden and to accumulate bank balaaces. The funding and planning systems were not geared to development re- quirements. Current and development expenditures, especially for agriculture, were inadequate relative to the economic and social needs of Liberia. Greater participation of the rural people was needed in the econo- my. Traditionally, Government devoted little attention to the traditional sector which fed the 70% of the population whose per capita annual earnings did not exceed $100. The reorientation of agricultural policy had to look into marketing and pricing. Both discriminated against the small farmer. More competition was needed in marketing of farm products. Measures had to be taken to extend credit and banking services to rural areas, and to modify existing controls so as to encourage small entrepre- neurs to improve the land tenure system. Extension services, research, and infrastructure (feeder roads, storage facilities) were urgently needed. In the financial sector problems were related to the lack of a national banking system and the lack of a national currency. 27/ The following paragraphs summarize the major conclusions of the March 1975 Bank report, Liberia: Growth with Development, A Basic Economic Report. - 19 - ANNEX 1 Page 3 En the social sectors (health, housing and education) the infra- structure was small and almost entirely directed towards Monrovia and the concessions. Education was in desperate straits. There were not enough teachers and the curricula were unsuitable. The statistical stem was inadequate. Economic planning was poor- ly organised and there was no capacity for project preparation. This was a serious bottleneck in the implementation ability of the Government.28/ The Tolbert administration did not even begin to confront these problems and was violently overthrown. The Military Government which assumed power in April 1980 took over an economy in which annual GDP growth had averaged less than 1% between 1974 and 1979.29/ Explanations for the poor performance include the following: The iron and rubber sectors were largely responsible for the rapid rates of economic growth in the 1960s (6% p.s.) and early 1970s (4% p.s.). Fuel price increases and the subsequent recession brought growth rates down to 12 in the late 1970s. Weak external demand persisted and the economy started deteriorating rapidly: real GDP declined by 4.7% in 1980 and by 5% in 1981. The economy suffered from a heavy commercial debt contracted to finance the OAU Conference in 1979. The coup dietat of April 1980 led to a devastating light of capital. A large import bill for oil and rice, plus a doubling of public sector minimum wages, produced a fiscal crisis. Domestic savings fell from 27% in 1979 to 17% in 1981. The investment ratio fell from 30% in 1979 to 18% in 1981. Public sector investment, financed largely by borrowing, partially offset the decline in private investment since the mid-1970s. But, as the Government's capital budget was squeezed since 1980, and private capital flight persisted, disinvestment became a prominent feature of the Liberian economy. Investment performance in the 28/ In view of the disquieting implications of the problems listed above, it is surprising to read in the March 1975 Report (Volume 1, page iii, para. 9) the following forecast: "The worst probable path is for a drop from the recent 5% growth rate per annum to about 3.5% and then a gradual rise, reaching 5% by the end of the 1970s, peaking in the mid-1980s at over 7% and then falling back to 5% to the end of the century. Neither the balance of payments nor public sector finances are likely to encounter serious problems and external debt servicing burdens are likely to fall quite sharply, to below 6% of exports and below 15% of public revenues." 29/ The following is a summary of the principal conclusions in the December 1982 Bank report, Liberia: Recent Economic Developments and Medium-Term rospects. - 20 - ANNEX I Page 4 early 1980s reflected a worsening resource mobilization effort in the public sector, the spending limits imposed under the IMF Stand- by Arrangements (in effect since mid-1980), a persistence of the confidence crisis, and the poor price prospects for Liberia's prin- cipal exports. Tn somewhat greater detail: Fiscal imbalance reached critical proportions. Current expenditure exploded since 1980 with the doubling of public sector minimum wages and high interest payments. In spite of excessive personal income taxation, there was a persistent shortage of public sector resources for investment. Measures taken by the Government in December 1982 to contain the size of the wage bill have somewhat contributed to a curbing of the growth of recurrent expenditure but much more needs to be done, especially in connection with better collection of customs duties, corporation and partnership taxes, and forestry fees. The Government meets the performance criteria imposed by the 1980 IMF Standby Arrangement sometimes by adopting extraordinary measures, such as withholding up to two months pay for civil servants. The external debt position reached crisis levels since 1981 when total disbursed and outstanding debt reached US$592.3 million, or 82.8% of monetary GDP. The,a icultural sector stagnated in 1980 and declined in 1981 by 7.8% (non-subsistence agriculture declined by 22%), due to the con- tinuing poor performance in rubber and the 46.5% decline in log output. Iron ore dominates the mining sector, where production has been declining since 1974 due to weak demand and low prices. Performance in mining, forestry and plantation rubber depend on concession sector activities. These are in a difficult situation because excessive wage grants by the Government in 1980 led to pressures on the concessions to increase wage payments to their own workers. The result is that concession wages have grown beyond productivity changes and trends in competing countries. The open unemployment rate in 1979 was 13.8% and although no reli- able figures are available for subsequent years, it is evident from the rapid decline of the economy that the employment base has been deteriorating too. Performance of the small (less than 9.0% of GDP in 1982) manufac- turing sector has been declining. Performance of the transport sector was poor. The public enterprise sector grew too ast in the 1970s and has been a heavy drain on Government resources since 1980. Education and training are uncoordinated, with low enroll- ment ratios, with serious regional disparities, inefficient institutions and suffer from an acute shortage of financial re- - 21 - ANNEX 1 Page 5 sources. The health status for the majority of the population remains poor: life expectancy at birth is only 54 years, and morbidity and mortality are high. Malnutrition is rampant but, at the same time, the population growth rate is high (3.4% p.a.) and creating major and social and economic problems. The December 1982 Bank report concluded (page 42, para. 93) that economic recovery in Liberia would not be easy. ` � � � �� '1i� г t1 t ( . `�;,� \�` .� L� � 23 ANNEX 2 Page I' PROJECT PERFORMCE AUDIT MEMORANDUM LIBERIA: FOURTH HIGHWAY PROJECi: (LOAN 1573/CREDIT 1311-LBR) FOURTH HIGHWAY PROJECT: FROM INCEPTION TO BOARD APPROVAL Project Inception Aol. The first document in the file (dated April 12, 1976) records that Government suggested the following project composition: (a) read construction (Mt. Coffee Dam road, Ganta-Tapita and Saniquille road, and Paynesville- Totota road) and (b) road maintenance and rehabilitation. In December 1976, a Bank mission visiteZ Uberia and summarized its findrn-gs in a letter to the Government, (dated January 11, 1977) which contains a much broader set of tentative project components ranked In order of priority,30/ Project Brief and Preappraisal A*2* The Pr2lect Brief (dated March 4, 1977) states that total invest- ments in transport during the 1976-1980 Development Plan were estimated at about US$153 million and that foreign sources were expected to contribute about US$110 million. The Project Brief notes that the Plan appeared to be ambitious. 30/ As follows: (a) Construction Paynesville tots Road 71 m (Pr.1) Paynesville-Robertefield Road 28 m (Pr.2) Mt. Coffee Dam Road 15 m (Pr.3) (b) Detailed !nsineerina Ganta-Sanniquellie Road 25 m (Pr,l) Ganta-Tapita Road 65 m (Pr.1) (c) Feasibilitz Studies Manga-Kolahum Road 155 m (Pr. 1) Zwedru-Crenville Road 110 m (Pr,3) (d) Road Maintenance Prp am (Pri 1) To consider further proposals in the light of the Cionsultant's mid-project report (Highways 11) (e) Domestic Construction Industry (Pr.1) To consider further proposals in the light of the report of the consultants. -24 ANNEX 2 Pag=e A.3. In addition to comments on project focus, composition and cost31/, the Project Brief discusses the three key issues: road maintenance; transiport planning; and project financing. A.4. The Pre-appraisal Mission Report (dated March 18, 1977) expressed reservations as to whether Government would have enough resources to sustain the effort for improved road maintenance operations. Doubts were also ex- pressed on Liberian ability to continue on its own with a school for mechanics put together with German assistance at Camp Mechlin. Issues Paper and Decision Memorandum A.5. The Issues Paper (dated July 29, 1977) notes that: (a) Appraisal was hampered because MPW had not been ready to discuss pro- posals. (b) Detailed engineering completed in June 1977 for the two roads proposed for inclusion in the project showed cost increases in the foreign com- 31/ These can be summarized as follows: Focus of Bank operations for next five years: (a) Upgrade primary system; (b) Improve feeder road network; (c) Improve road maintenance; (d) Expand and improve ports; (e) Improve overall transport planning and coordination; (f) Improve domestic construction industry. Highways IV flows out of Highways II and III with three trends emphasized: (a) Expand the main network to penetrate into rural areas; (b) Support Government institutions to become self-sufficient in high- way planning and management; (c) Improve highway maintenance operations. Project composition: (a) Civil works; (b) Detailed engineering; (c) Feasibility studies; (d) Highway maintenance; (e) Development of domestic contractors; (f) Technical assistance to the Planning and Programming Bureau (PPB) of the MPW. Cost Estimates (Net of taxes, early 1977 prices): Foreign: US$M 15.50; Local: US$M 9.70; Total: US$M 25.20. - 25 - ANNEX 2 Page 3 ponent of over 40%. The foreign component previously estimated at US$15.5 million (Project Brief, March 1977) was now increased to US$23.95 million. Total estimated cost became $33.05 million. With Bank financing limited at $10 million, the first issue was the financing gap. (c) The second issue was that Government had not been able to produce staff to be trained for planning and management of highway maintenance. Hence, MPW would continue to rely on consultants. (d) The Study of the thmestic Construction Industry, prepared by consul- tants, was not found to be very penetrating. Although the Government declared interest in building up the domestic construction industry, the Mission felt that the consequences had not been fully appreciated. (e) The Mission emphasized the importance of the Reorganization of Transport Sector Planning and Management (Issues Paper, Annex II, para 3.01). A.6. The Decision Memorandum records the following: (a) Rehabilitation of the Payneaville-Robertefield Road would be excluded. Despite its estimated 20% ERR, the road was not a high-priority invest- ment and, besides, it had been built under the First Project. (b) The project would include the Paynesville-Totota Road which, despite its estimated 15% ERR displayed more developmental potential. (c) Project cost and financing would be as follows: Total: US$12.7 million; Foreign: US$13 million; Local: US$2.7 million; Bank: US$10 million; Government: US$2.7 million. (d) Domestic construction industry would be assisted through the provision of technical assistance. (e) Technical assistance for maintenance would be continued. The focus of the consultancy services would be shifted from engineering to Improving MPW capacity for planning and organizing highway maintenance. Also, MPW would undertake a training program to provide more staff. (f) Technical assistance would be extended to the Ministry of Commerce, Industry and Transportation to strengthen its transport planning capac- ity. A 2/3 month organizational study would be carried out by a UNDP- financed consultant and Government would be urged to take appropriate steps. Post-appraisal Project Processing A.7. The substance of the Decision Memorandum was communicated to Government in a letter from the Bank, (August 29, 1977). The letter was accompanied by a note on the need for a deflec on survey which would help determine the 26 - ANNEX 2 Page T4 extent of selective reconstruction needed and by a table showing the latest project scope and tentative costs. This table was quickly superseded by events because, according to an internal Bank note of October 6, 1977, the project scope was drastically changed and the Paynesville-Robertfield road was reinstated, thereby necessitating cofinancing, since the Bank credit would not be increased.32 A.8. A Post-appraisal Mission Report (dated October 25, 1977), records chat the two roads had been reinstated; that cofinancing would .be sought for the Paynesville-Robertsfield Road; and that the following components would be shifted to the Feeder Roads Project: (a) detailed engineering for the Ganta-Sanniquellie and the Ganta-Tapita roads; (b) feasibility study for the Gbargna-Voinjama road; (c) consultancy services for the domestic contracluing industry; and, (d) technical assistance to the Bureau of Transportation of the Ministry of Commerce, Industry and Trade (MCIT). By January 1978, arrangements were underway between the Bank and the Kuwait Fund which undertook to finance the reconstruction of the Paynesville- Robertsfield Road. A.9. A second Post-appraisal Mission Report (dated March 8, 1978) notes that deflection surveys had been completed but although cost estimates were not yet ready, they were expected to be substantially less on both roads than those originally estimated by the consultants who had worked under the assumption of complete reconstruction. On March 24, 1978 project documents were forwarded to the Bank's Loan Committee. 32/ During the Bank-Fund Annual Meeting, the Liberian Minister of Finance asked that the Paynesville-Robertsfield Road be reinstated, that re- alignment of the Paynesville-Totota Road be also included in the proj- ect, and that the Bank increase its contribution from about $10 to about $16 million. The Ban" reviewed the request and decided that, contrary to the conclusions recorded in the Decision Memorandum (para A.6, above), it would be difficult to exclude either the Paynesville- Robertsfield road or the possibility for at least some realignemnt work on the Paynesville-Totota Road. However, the Bank's lending program had no slack. The note concluded that Government should be told that, following the review, the Bank no longer insisted on the exclusions (which had just been communicated to the Minister of Works in the letter of August 29, 1977) but since there were no spare funds available, two solutions presented themselves. First, to shift some of the technical assistance and project preparation components from the Fourth Project to the proposed Feeder Roads Project. Second, to offer the Bank's good services in finding co-financing-for the Paynesville-Robertsfield Road. - 27 - ANNEX 2 Page 5 Negotiations and Project Approval A.10. Project negotiations took place in April 1978 and resulted in the following modifications: (a) Add to the project a feasibility study of the Gbaraga to Kolahun Road; (b) Delete from the project technical assistance for transport plan- ning; (c) The consultant's final estimate for reconstruction works, based on the deflection survey, showed a substantial increase in the civil works cost33/. The cost of the Paynesville-Totota Road increased from $7.9 ;illion (with $5.7 million in foreigh exchange costs) to $10.7 million (with $7.7 foreign exchange costs). Government asked, and Bank management approved, that the Bank loan be in- creased to make up the difference. The project was approved by the Bank's Executive Directors in May 1978. The subsequent news release (dated May 22, 1978) asserts that "most of the roads are for opening up areas of rich agricultural potential".34/ 33/ This contradicts the statement made one month earlier in the Post- appraisal Mission Report that costs would be substantially less than those originally estimated. 34/ The assertion is questionable because the primary function of the Payneaville-Robertsfield Road was to connect Monrovia to the airport, and because its reconstruction was urgently desired by the Government which was preparing to host the 1979 OAU Conference. 1 - 29 - ANNEX 3 Page 1 PROJECT PERFORMANCE AUDIT MEMORANDUM LIBERIA: FOURTH HIGHWAY PROJECT (LOAN 1573/CREDIT 1311-LBR) FOURTH HIGHWAY PROJECT: IMPLEMENTATION A.11. This annex contains an abstract of key documents in the project file and shows that the project started slowly and was fraught with problems from the outset. A.12. The first supervision report (dated January 29, 1979) notes that project implementation was slower than anticipated and that no disbursements had so far been made. - The mission report states: "The draft paper on the reorganization of transport planning is expected to be finalized by March 1979, after the receipt of comments from the Government, UNDP and the Bank." A.13. Another Bank mission visited Liberia from March 10-16, 1979, to supervise the Third and Fourth Projects and, at the same time, to identify the Fifth. Below are the main points of the mission report (dated May 7, 1979): (a) Highways IV - Implementation not satisfactory. - Increase in road construction costs. A $1.7 m. overrun foreseen (6% of total project costs). - Technical assistance for road maintenance not achieving the expect- ed results for more efficient operations. Annex 5 (para. 6) states that consultant personnel had not been deployed in the district offices. Consultants complained of arrears in local cost payments (over $300,000). - Disbursement estimates slipping again. - Consultant charged with road supervision not performing well. (b) Feeder Roads Project - Government is taking steps to recruit two experts to assist the development of the domestic construction industry. - UNDP-financed study for reorganization of transport planning has been completed. - 30 - ANNEX 3 Page 2 A.14. A Bank mission visited Liberia from October 22-November 3, 1979 to- supervise the Third and Fourth Projects. Below are the main points of the supervision report (dated December 21, 1979): (a) Highways IV - Implementation of all components has started. - The contractor for Paynesville-Totota started to mobilize in mid- October. - The supervision contract was awarded to the consultants whose performance had been judged unsatisfactory during the preparation phase. - Project costs have increased by about $1.1 million (about 42 of total cost). - Government continuing to have difficulties with the technical assistance for road maintenance. Expected results in terms of improved field operations are not forthcoming. - Local cost payments for consultants are still in arrears for sev- eral months. - Revised schedule of disbursements shows further slippage. (b) Feeder Roads Project - Government has recruited a technical specialist to assist the domestic construction industry. Recruitment of the financial adviser has been postponed. - The UNDP-financed study on the reorganization of transport planning and coordination has been completed. Arrangements for recruitment of technical assistance will be made after the Government formally approves the reorganization plans. (c) Supervision Report: Annex "There were some indications that the Government may not wish to proceed with the proposed reorganization because an expanded Bureau of T1ansport would require an additional outlay of funds that the Government can ill afford under its present financial difficulties. The Mission however suggested that the L--tk could consider additional financial and technical assistance for MCIT including incremental costs (other than local salaries) as part of the proposed Fifth Highways Project." A.15. A further Bank mission visited Libe-ia from February 24-March 23, 1980 to supervise the Third and Fourth Projects and to continue preparing the Fifth. Below are the main points of the mission report (dated May 23, 1980): - 31l - ANNEX 3 Page 3 (a) Ri;hways IV - A cost overrun of about $3.8 million (13% of total project cost) which is expected to increase further. - Annex 5 (para. 8): "There ts a cost overrun on virtually every component of the project." - Significant improvements in road maintenance operations since November 1979. - Local cost payments still in arrears. - Invoicing procedures slow. (b) Feeder Roads Project - Government reluctant to implement recommendations of the UNDP- financed study on the reorganization of transport planning. The stratagem of creating an ad-hoc committee is no more than a delay- ing tactic. - Construction Industry expert had not been paid and had to resort to selling his personal assets for subsistence. Questionable as to whether he will stay in the course. A.16. The next Bank mission visited Liberia from December 2-18, 1980 to supervise the three ongoing projects and to cbntinue preparing the Fifth. Below are the main points of the mission report (dated January 6, 1981): (a) Righways IV - Except for the feasibility study of the Tapita-Zwedru road, all components are being implemented. - Reconstruction of the Payneeville road (Kuwait) completed within the appraisal cost estimates. - Project cost overrun estimated at $6.8 million (about 18% of total project cost) - Mission requested MPW to prepare proposals for reducing the scope of works on the Paynesville-Totota road. A mission ought to visit Liberia in March 1981 to discuss a reduced project scope and the possibility of supplementary cost financing to complete the proj- ect. -32- ANNEX 3 Page 4 (b) Supervision Report - The Paynesville-Robertsfield road substantially completed within appraisal estimates but the contractor submitted claims for about $2 million and a time extension of five months. The consultants maintain that the claims have no merit. - The Paynesville-Totota road is underway but plagued with technical and financial problems. Staggering cost overrun. Therefore a re- appraisal of the project is warranted for supplementary financing. - The coup disrupted the improvement of maintenance efforts. MPW awash with plant and vehicles but has no money to operte them. MPW has asked the consultants to cut out four staff. - MIW asked Germany to withdraw its support of the Camp Mechlin Training Center. 3/ - MPW proposes to reorganize the PPB and add coordination and train- ing functions to its planning and programming responsibilities. (c) Feeder Roads Project - The Construction Industry expert left the country and did not come back. The coup did not help matters when soldiers commandeered his official car. - MPW renewing efforts to recruit both the financial and the techni- cal advisers. - Government taking no action to implement the UNDP-financed study on the reorganization of transport planning and coordination. A.17. A Bank mission visited Liberia from February 11-17, 1981 for a limited supervision of the Third and Fourth Projects. Below are the. main points of the mission report (dated February 23, 1981): - "The current deteriorated state of Liberia's economy is adversely affecting all government and private operations, including the on- going Bank projects, and little improvement can be hoped for prior to the beginning of the next fiscal year in July." - "The mission will recommend the efficient curtailment of works on the Paynesville-Totota Road so as to leave a usable highway that hopefully will last until the availability of additional funds can allow completion of the project as designed." 35/ MPW made allegations of irregularities on the part of the German techni- cal assistance staff. The German authorities denied the allegations and withdrew all support to the Camp Mechlin Training Center. - 33 - ANNEX 3 Page 5 - "The mission querried the 'chattel mortage' advance made to the contractor under the Third and Fourth Highway projects. In effect this is a duplication of payment." "However, leaving principles aside, this was the only way to proceed." - "Performance of thetconsultant has not been all that is normally expected from supervising consultants". It would be hard "to ree- ommend the consultant for similar work." - "All suppliers in Liberia are reported to be on a 'cash In advance' position." - "Overall, the position with respect to feeder road development is almost completely unsatisfactory but probably as good as can be expected given a rather demoralized MPW team and almost a total lack of local funds. Whether the situation will improve with the new fiscal year is problematical. We can only continue to be sup- portive and give any reasonable proposal sympathetic consideration" A.18. A Bank mission visited Liberia from November 2-13, 1981 to super- vise the Third and Fourth Projects. Below are the main points of the mission report (dated December 18, 1981): (a) Highways IV - Loan funds are practically exhausted while the main component (Paynesville-Totota) is only about 60% complete. - The revised total cost of US$23 million compares to the $13.1 million appraisal estimate. - The Mission recommends the termination of the contract of the con- sultants who have been supervising the road component because they have been less than satisfactory. A.19. A Bank mission visited Liberia from 18-22 January 1982 to supervise the three ongoing projects and to review progress made on the preparation of the Fifth. Below are the main points of the mission report (dated February 18, 1982): - Some activity by Government on all project items. - Promissiry notes have been or will be issued to cover contractor claims in the Third Highway Project and for payment of outstanding contractor invoices for work of H&ghways IV as well as to provide funds for completing the project. - Continued friction between Ministry of Planning and Ministry of Public Works. Planning considers that MPW has been less than dedi- cated in maintaining proper financial control over its projects. -34 - ANNEX 3 Page 6 A.20. A Bank mission visited Liberia from March 15-April 2, 1982 to supervise the three ongoing projects and to preappraise the Fifth. Below are the main points of the mission report (dated April 26, 1982) which includes a copy of a letter sent by the Bank to the Minister of Public Works: (a) Highways V: - A letter being prepared to terminate the contact for the Paynesville-Totota road. - The supervising consultants have been asked to prepare a termina- tion report. - Contractor claims not yet referred to the consultant's review and recommendations. - The Loan will be fully disbursed shortly, ahead of the expected completion date. - Despite the November 1981 supervision mission's recommendation to take immediate steps to terminate or suspend the present contract for the Payneaville-Totota Road to avoid further accumulation of contractor claims for standby time, the Government failed to do so. Instead, the Government attempted, without success, to arrange commercial financing to complete outstanding works on the Kakata- Totota section under the existing contract. It is only now, after all efforts to mobilize additional funding in the short term have failed, that the Government is preparing a contract termination letter. - A Kuwait Fund mission was scheduled to arrive at the end of March 1982 for the appraisal of the Ganta-Tapita road but was cancelled at the last minute, reportadly because the Government had failed to meet its debt service obligations. - Two of the four scholarship students have returned. The other two completed their studies in January 1982 but have failed to report back. (c) Feeder Roads Project: - Despite a long-standing agreement between the Government and the Bank on the need to encourage and promote the development of the domestic construction industry, MPW has consistently failed to pur- sue the preparation of the Grand Bassa County road sections agreed to be the subject of bidding by local contractors. - "Under normal circumstances the mission would not hesitate to re- commend that the Loan be cancelled in view of the lack of support from MPR and the Government." -35- ANNEX 3 Page 7 (d) Supervision Report (paras. 9 ff) - The mission was informed that the Head of State had signed a letter transferring all feeder road activity to the MRD. MPW officials acknowledged that such a letter had been issued but said they had requested the Head of State to reconsider. - "Nevertheless, it seems obvious that unless MPW can show positive progress in the very near future on the existing Feeder Roads Project, the various agricultural development projects will seek other means of accomplishing their feeder road components. This would have serious implications for Liberia in the proliferation of small equipment units, support facilities, spare parts supply, and the efficient utilization of scarce operator and equipment main- tenance personnel. Furthermore, although the various agencies involved may be able to construct the roads with relative efficien- cy the problem of future maintenance must still be addressed." (e) Excerpts from a letter to the Minister of Public Wroks Para 3(f) "The diversion of scarce financial, material and managerial resources to non-programmed, mostly politically oriented projects seriously dis- rupts the efficient implementation of donor-assisted priority projects. This dramatically reduces the anticipated economic returns upon which the justification of these development projects was based". Para 4: "The need for a well-planned and executed maintenance program isevident but until corrective action can be taken....any new project would only add to the already large problems resulting from delayed exe- cution and cost overruns on existing projects." Para 12: "MPW's current indebtedness for payments due primarily to con- tractors and consultants is reported to be about $26 million equiva- lent. This amount is obviously beyond MPW's capacity to deal with and Government should initiate a concerted effort to bring this high- interest bearing debt under control." Para 13: "MPW should not be required under any circumstances to divert manpower, equipment or funds to projects for which no funds have been made available to MPW through the usual budget channels. Furthermore, the diversion of resources from development projects should be stopped immediately and any diverted resources returned to the appropriate proj- ect. The government as a whole should realize that such diversions are contrary to the p6blic interest as well as violations of the conditions under which aid money has been obtained." Paras 28-29: "The mission was quite troubled on learning of a number of new capital investment projects under active consideration by the Government. The Bank has worked closely with the Government in the pre- paration of the medium-term investment plan. During this collaborative -36- ANNEX 3 Page 8 effort it was agreed by both parties that, given the extremely limited resources available for development purposes, these would be used for on-going projects and that only the highest priority projects would be considered. In the roads sector, these priority projects were under- stood to be the currently stagnant feeder roads program in support of agricultural development and the proposed maintenance project with, latterly, the addition of funding for completion of the Kakata-Totota road section. Thus, the discovery of new projects either under active consideration or already agreed was of serious concern." A.21. On May 21, 1982, the Programs Department of the Western Africa Regional Office submitted to the Bank's Senior Vice President a note entitled Highways IV, Supplemental Financing requesting Board approval for an extra US$2 million to cover 95% of the costs of completing the engineering and con- structing the Nyaforla Bridge, with the understanding that the African Development Bank would undertake the financing of the remainder of the Paynesfield-Totota Road. A.22. A Bank mission visited Liberia from July 26-30, 1982 to supervise Highways IV and the Feeder Roads Project and to prepare the Nyaforla bridge for supplementary financing and Highways V for appraisal. Below are the main points of the mission report (dated August 17, 1982): - Mission cleared well in advance with the MPW which gave assurances that documentation previously promised in connection with each of the above elements would be availabe on arrival of the mission. - None of the items were ready on arrival and substantial parts are still under preparation. - "MPEA and Finance have to establish reasonable prospects for fund- ing MPW activities over the next 3-5 years. Planning basis at present is obviously not in keeping with the parlous state of the counrty's finances but without firm guidance on financial pros- pects, little choice is left to the planners but to play with inflated figures." (a) Highways IV (Summary): - Letters terminating the civil works and supervision contracts for the Paynesville road works have been signed by the Minister of PW, the contractors and the consultant. However, final authentica- tion by the Ministry of Finance is still pending. (b) Feeder Roads Project (Summary): - The Government feeder roads program is very much in a state of dis- array. Except for the MPW feeder road work under the Feeder Roads Project, all other feeder road activities have recently been assigned to the Ministry of Rural Development. - 37 - ANNEX 3 Page 9 A.23. A Bank mission visited Liberia from September 20-October 7, 1982 to appraise Highways V and in the course of its work noted the following (in its report dated November 1, 1982) with respect to Highways IV and the Feeder Roads Project. (a) Highways IV - The primary condition for Board presentation of the Supplemental financing was submission to the Bank of satisfactory evidence that agreement has been reached on the settlement of the claim on the Paynesville road, and on the schedule of related payments. The Government has agreed with the contractor on the amount of the claim and the settlement schedule is now under review by the Ministry of Finance. - Under the Third and Fourth Highway Projects, the Bank provided assistance in setting up a Planning and Programming Bureau in MPW to foster a local road transport planning capability. However, due to budgetary constraints, the imminent departure of the expatriate consultant, and the departure of two senior staff members of the Bureau for extended studies abroad, the Bureau's activities are about to be seriously curtailed. (b) Feeder Roads Projects - Under the Feeder Roads Project, funds were provided for technical assistance to the MCIT to begin implementation of recommendations for transport coordination made in a UNDP-financed study. Despite a number of discussions with MCIT, this mission and previous ones have been unable to reach any agreement on how the technical assistance funds should be applied. The matter was discussed with the Minister of Planning and Economic Affairs who expressed considerable interest in having his Ministry made responsible for the assignment. The decision on whether responsibility for the work should be left with MCIT or transferred to MPEA would have to be resolved w4thin the Government before any final action can be taken. A.24. A Bank mission visited Liberia from December 6-.*, 1982 to supervise Highways IV and V and the Feeder Road Project. Below are the main points of the mission report (dated December 20, 1982): (a) Highways IV - The Bank was advised earlier that the contractor's claims with respect to the Paynesville-Totota road construction contract had been agreed as to amount and also that a payment schedule had been agreed. The mission learned that although the amount of the claim has been agreed, the settlement schedule is still under discussion. -38- ANNEX 3 Pag e 10 (b) Feeder Roads Project - No progress regarding transfer of responsibility from MCIT to MPEA for strengthening transport planning. A.25. Beginning in November 1983, the Kuwait Fund and the Bank repeatedly requested that Government makes loan repayments on time. Tn April 1984, the Kuwait Fund requested the Bank's assistance in persuading the Government to settle its overdue payments. A.26. The last item in the Project File (dated October 11, 1984) is a notification from the Bank to the Government on suspension of disbursements. - 39 - REPUBLIC OF LIBERIA FOURTH HIGHWAY PROJECT (La. 1573-LBR/Cr.1311-LBR) PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 The Bank's initial involvement in Liberia's highway sub- sector, the First Highway Project (Ln 368-LBR), provided financing for the reconstruction of two roads and equipment for road maintenance. The Second and Third Highway Projects (Ln 907/Cr 395-LBR and Ln 1156-LBR, respectively) while continuing to provide financial assistance. for road construction, gave increasing emphasis to the need for improved maintenance. Beginning with the Second Highway Project, substantial funding was provided for technical assistwce to MPW for the reorganization and improvement of MPW's maintenance capability. This technical assistance was continued through the Third and Fourth Highway Projects and the recently approved Fifth Highway Project concentrates almost exclusively on maintenance. 1.02 Although delays in execution were experienced in the first three highway projects assisted by the Bank group and the quality of paving on the Paynesville-Robertefield road in the First Highway Project was not fully up to specifications, all three projects were judged reasonably successful. The capacity of the Ministry of Public Works to plan and manage highway construction and maintenance was enhanced through technical assistance and fellowships provided for key ministry personnel. This was the background to the Fourth Highway Project. 1.03 This report is based on information contained in the appraisal and President's reports for the Third and Fourth Highway Projects, supervision reports, a review of Bank files, draft PCR prepared by Government, discussions with Bank and Government staff concerned with the project, and a field review in May 1984. II. PROJECT IDENTIFICATION. PREPARATION AND APPRAISAL 2.01 Components of the project were identified and developed during the course of the Second and Third Highway Projects within the context of the Government's First Five-Year Road Maintenance and Development Program. Feasibility studies and*detailed engineering for the Paynesville-Totota and Paynesville-Robertsfield roads were carried out in the Second Highway Project. Pre-investment studies for the Ganta- Tappita and Ganta-Saniquelle roads were done under the Third Highway Project. Technical assistance for highway maintenance, financed for a four-year period under the Second Highway Project, received additional financing under the Fourth Highway Project. The Fifth Highway Project - 40 - (Cr 1449-LBR, US$11.4 million, March 1984) is based in part on the technical assistance consultant's recommendations. 2.02 Appraisal of the Fourth Highway Project took place in June/July 1977. At the time it was estimated that implementation would begin in July 1978 and continue through June 1982. However, the Issues Memorandum noted that estimated foreign costs of the project had increased from US$15.5 million in the March 1977 Project Brief to US$23.95 million. The increase stemmed primarily from increased costs identified during preparation of detailed engineering (based on complete reconstruction of two roads) of the road reconstruction component. 2.03 During preparation, the Bank had suggested to Government that total reconstruction of the Paynesville-Robertsfield and Payneaville-Totota roads might not be necessary, but that the decision should be based on detailed pavement evaluation studies. Faced with major cost increases, the MPW agreed to consider a program of partial reconstruction, patching and overlay. Accordingly, MPW commissioned the original design consultant,to carry out a deflection survey. Administrative delays kept the consultant from initiating the work before October 1977 and the final results were not received in the Bank until April 1978. A post-appraisal mission in March 1978 reviewed the preliminary findings of the consultant. With the submission of the final construction cost estimates for the two roads, negotiations were held in April 1978. On the basis of the pavement evaluation studies, it was decided to fully reconstruct the Paynesville-Robertsfield road but carry out only selective rehabilitation of the Paynesville-Totota road. 2.04 Although the modified reconstruction program reduced the estimated project costs, there was still a substantial gap in financing requirements. The Bank assisted the Government in obtaining co-financing from the Kuwait Fund amounting to US$7.4 million and the Bank was able to adjust its lending program to provide for a loan of US$13.8 million (US$3.8 over the initial proposal). The total, US$21.2 million, was considered sufficient to cover the estimated off-shore cost requirements, including contingencies. 2.05 Loan 1573-LBR was approved on May 18, 1978, in the amount of US$13.8 million. It was signed on June 2, 1978, and became effective on September 11, 1978. Project Objectives and Description 2.06 The three principal objectives of the Fourth Highway Project were: a) to continue the development of Liberia's main highway system; b) to continue the development of local capacity to plan and manage highway maintenance; and c) to improve the Government's capacity for highway planning. 2.07 As appraised the Project provided for: a) reconstruction and improvement of two sections of major highways (99 mi); b) detailed engineering of two road sections (90 mi); c) feasibility study of a - 41 - further road section (152 mi); d) consultancy services for planning *d execution of road maintenance; and e) technical assistance to the Ministry of Public Works in highway planning and overseas fellowships in the same field. III. PROJECT IMPLEMENTATION Civil Works 3.01 Paynesville-1Robertsfield road (28 mi). This road was first reconstructed under the First Highway Project with work being completed in mid-1969. Poor soil conditions and lack of experience at the time in asphalt road construction in Liberia contributed to early pavement failures. 3.02 Under the Fourth Highway Project the Kuwait Fund provided co-financing for the reconstruction of the road. After reviewing the findings of the pavement evaluation the Fund agreed with MPW to proceed with full construction of the total length. The possibility of selective reconstruction was raised again during the construction period but on the consultant's recommendation, MPW authorized the continuance of the full reconstruction program. 3.03 The consultant had contract documents based on full reconstruction already prepared and it was possible to let the contract for this work in November 1978. The Government asked that priority be given to the first half of the road so that it would be in service in time for the OAU conference being hosted by Liberia in July 1979. Work proceeded without undue delay and a substantial completion certificate was issued on August 29, 1980. Although the certificate accepted the work as satisfactory with only minor corrective action required, Bank supervision missions noted that some of the earlier (pre-OAU) work had developed signs of pavement distress which was attributed at least in part to inadequate quality control during construction. 3.04 The original contract price for the work was US$8,358,227. Minor work modifications and contract escalation clauses increased the contract value to US$9,824,058 and settlement of contractor claims made the finEl total US$10,937,726. 3.05 Paynesville-Totota road (71 mi). As with the Paynesville- Robertsfield road, the consultant had prepared con-ract documents for this section on the basis of reconstruction of the full length. As the pavement evaluation indicated that only about 25% of the length required this approach, MPW authnized the consultant to amend the contract documents so as to require patching and overlay of about 75% of the length and full reconstruction of the remainder. The revised draft bidding documents were approved in mid-December 1978. Ten contractors were prequalified and bids were received on February 8, 1979. -42- 3.06 MPW accepted the consultant's recommendation of aware to the low bidder and the Bank concurred on April 12, 1979 although the low bid was US$935,000 over the appraisal estimate of US$13.05 million (including contingencies). The Bank estimated that taking into account price escalation this would result in an eventual cost of between US$15.0 and US$16.0 million and suggested that the Government should make budgetary provisions to cover the overrun. The eventual negotiated contract price was US$13.6 million and the contract was signed in July 1979. Contractor mobilization began in October and work started officially on November 1, 1979, two years after the pavement evaluation survey was completed. 3.07 This two year time lapse was particularly unfortunate. A selective pavement rehabilitation program should start as soon after the evaluation study as possible if it is to be cost effective. In the case of the Paynesville-Totota road the effects of two rainy seasons between the evaluation and start of construction caused increased deterioration with resultant extra work not foreseen at the time the modified designs and contract documents were prepared. The consultant also failed to take into account the amount of asphalt that would be required as a levelling course prior to applying final surfacing over the patch and overlay sections. 3.08 Furthermore, it became clear during the initial construction season that the bill of quantities on which the engineer's estimate and the contract price were based did not include major contract quantities of asphalt, shoulder widening and side drains. The contract drawings and Instructions to Bidders provided for this work but, in adjusting the Bill of Quantities from that requited for full reconstruction to selective rehabilitation, these items were overlooked. These factors were compounded during the first construction season by major increases in the costs of fuel, bitumen and labor, all of which were subject to Price Variation under the contract. By December 1980, a Bank supervision mission estimated that the final contract cost would be over US$18.0 million, a US$5.0 million increase over the appraisal estimate. Cost Estimates and Actual Costs 3.09 Table 1 gives details of the estime es and actual costs of the various components and identifies the executing entities responsible for each component. 3.10 The Government and the Bank undertook a series of reviews and discussions concerning alternate approaches to resolving the problem. A February 1981 mission noted that unless additional funds could be made available the works should be terminated as soon as possible to avoid incurring contractor stand-by charges for which funds were not available in the loan or from the Government. The Government was already faced with a funding gap of US$10 - 15 million on other MPW projects (MPW report # 604/GOL/FYRMAD/81, August 28, 1981). - 43 - 3.11 The construction contract was terminated on June 7, 1982. At this time some 40 mi of the original scope of work (over 71 mi) had been rehabilitated leavin; about 31 mi and the reconstruction of the Nyaforla bridge without implementation. Total cost of the contract was US$16,550,010 including settlement of contractor's claim of US$1,502,200. Outstanding et the time of cancellation were payments in settlement of the claim and the retention money. As the Government was not in a position to meet these payments it agreed with the contractor to issue promissory notes; four each in the amount of US$375,550.05 in settlement of the claim, and four each in the amount of US$288,315.02 to repay the retention money. Due dates of the promissory notes ran from August 15, 1983 through May 15, 1984. However, because of sev4re budgetary constraints, Government has not been able to honor the last three notes and as a result about US$1.1 million is still owed to the contractor. 3.12 The Nyaforla bridge was a key element on the Paynesville- Totota road and due to abutment settlement of the old bridge a new - structure was required. The contractor began demolishing the original bridge in October 1980 in preparation for reconstruction. Thereafter, delays ensued while contractor-proposed alternate construction methods and siting were reviewed by the consultant and MPW. By the time of XPW approval of the final construction plans, funds were no longer available under the original project. An existing low-level bridge was kept in service but the Government was seriously concerned that a failure of this bridge due to flooding would cut off the hinterland from the capital, Monrovia. The Government was unable to provide funds for the bridge work and approached IDA for supplemental financing. 3.13 After lengthy discussions IDA agreed, in May 1982, to provide additional funds to cover the reconstruction of the bridge and the updating of engineering on the remaining 32 mi of road. At the same time the Bank Group assisted the Government in its discussions with the AfDB leading to the AfDB's commitment to finance the remaining road reconstruction and supervision thereof. Some delays were experienced while the Government prepared formal documentation in support of the supplemental financing request but eventually US$1.8 million (SDR 1.7 million) in supplemental financing was approved under Cr 1311-LBR, which became effective on January 31, 1984. 3.14 While supplemental financing was being processed MPW agreed, with IDA's concurrence, on a lump sum contract for the bridge reconstruction with the original contractor. Reconstruction began in February 1983 and a substantial completion certificate was issued on August 11, 1983. The work was completed within the original contract price of US$1,181,118. 3.15 AfDB and the Bank Group required the consultant for the engineering update of the remaining road section (Kakata-Totota) to be selected through normal short-listing procedures. The chosen consultant subcontracted the soils and survey work to a Liberian firm. The consulting assignment was completed in January 1984 with the submission -44- of the construction bid evaluation report. The recommended contractor's bid was US$10.9 million (Engineer's estimate - US$19.6 million), Construction Supervision 3.16 The construction supervision contract for the Paynesville- Robertsfield road was completed with the submission of the consultant's report of substantial completion of construction. The supervision contract for the Paynesville-Totota road was terminated at the time of cancellation of the construction contract. The consultant prepared a construction contract termination report and assisted MPW in the review of the contractor's claim. 3.17 Supervision of the Nyaforla bridge reconstruction financed under Cr 1311-LBR was done by a joint venture between the original supervision consultant and a second firm (primarily to ensure the presence of a well qualified bridge engineer). The joint venture consultants reviewed the bridge designs and the consultant's assignment was satisfactorily completed with the submission of the substantial completion report in August 1983. Supervision costs of US$202,406 came to about 17% of the bridge construction costs. Detailed Engineering 3.18 Ganta-Sanniquellie & Ganta-Tappita roads. The consultants began work in November 1979. A draft final report was submitted in November 1980 but final.material on soil, materials and detailed bridge survey was not available until October 1981. Detailed engineering was based on feasibility studies carried out by consultants under the Third Highway Project. Construction of these roads was originally envisaged under the Fifth Highway Project but were subsequently dropped due to funding constraints. Feasibility Study 3.19 The original project included a feasibility study of the Gbarnga-Voinjama-Kolahun road. Subsequent to appraisal the Government entered into an agreement with the Japanese International Cooperation Agency (JICA) for this work. At the Government's request the project funds allotted for this study were assigned to a feasibility study of the Tappita-Zwedru road (71 mi). Although consultant proposals for this study were received, cost overruns in other project components caused the stddy to be dropped from the project. Technical Assistance for Road Maintenance 3.20 The Second Highway Project financed four years of technical assistance by a consultant team to assist MPW in reorganizing its maintenance activities. This technical assistance was extended for a further three years through July 1981 under the Fourth Highway Project, -45- In December 1980 the consultant's terms of reference were modified to include preparation of a follow-up five-year maintenance program to be funded under the Fifth Highway Project. 3.21 During the first four years the consultant fielded a substantial team of on-the-job road maintenance and equipment maintenance personnel, administrators and procurement/warehousing specialists. In the succeeding years the number of consultant staff was cubstantially reduced as a cost-saving measure. 3.22 Only marginal improvement in the maintenance of the highway system tame about through the technical assistance. MPV was unable to assign sufficient qualified counterpart personnel to the consultant team so as to obtain maximum benefit from the team members' experience, and reduced maintenance funding following the severe fiscal crisis that developed in 1980 were the primary reasons for the lack of lasting improvement in MPW's maintenance competence. Nevertheless, much of the training material as well as the on-site guidance gave MPW personnel an insight into the need for, and the operational necessities of, adequate road maintenance. 3.23 The consultant's voluminous draft final report covering recommendations for the proposed Fifth Highway Project was a compilation of essential data and specific recommendations for improving maintenance operations. The recommendations were based on the experience of the consultant during the initial phases of its assignment and were therefore particularly applicable to Liberia's road maintenance requirements. The recommended program was somewhat unrealistic in magnitude but the supporting data proved helpful in the eventual preparation of the Fifth Highway Project. Technical Assistance to MPW's Planning and Programming Bureau (PPB) 3.24 Under the Third Highway Project two technical assistance positions were financed to provide a qualified Transport Economist and a Transport Engineer to work with PPB. Only the Transport Economist was engaged under the Third Highway Project but his services were extended under the Fourth Highway Project. Under this Project, the second position, the Transport Engineer, was filled from December 1979 through December 1982. The work by the two individuals was of great assistance in the development of MPW's Planning and Programming Bureau. 3.25 This component also provided for foreign study of four Liberian students. One completed his work on a Master's degree in Transportation Engineering (started under the Third Highway Project) and is now assigned as Chief Engineer. A second took advanced studies but did not complete the work for a degree and has returned to the Ministry. Two others, also pursuing advanced studies outside of Liberia, have not returned to Liberia. -46- Program Schedule 3.26 As explained above, of the two civil works items, one, the Paynesville-Robertsfield road, was finished in mid-1980 as foreseen in the appraisal report. Construction of 40 mi of the second road, Paynesville-Totota, was terminated in mid-1982; it is now estimated that, as an AfDB-financed project, the final 31 mi could be completed by the end of calendar 1985 (at appraisal it was estimated that this road would be completed by mid-1981). Meanwhile, with supplemental financing from IDA, the Nyaforla bridge, in the second section, has been reconstructed. 3.27 Of the other project components the substituted Tapitta- Zwedru road feasibility study was dropped for lack of funds; the technical assistance to the Planning and Programming Bureau was carried on beyond the time originally foreseen with beneficial results; of the four fellowships, only one was totally successful and two of the sponsored students have not returned to Liberia; and the technical assistance for maintenance completed its contract period on schedule although the Draft report for the proposed Fifth Highway Project was never issued in final form due to lack of funds and time. IV. ECONOMIC REEVALUATION 4.01 The economic return of the civil works components of the project were recalculated using the same methodology as at appraisal but with actual and reestimatod costs, revised traffic data and updated vehicle operating costs. Costs and benefits were expressed in 1981 prices. The recalculated rates of return for the civil works items were much lower than expected at appraisal; increased construction costs and substantially lower traffic than anticipated were only partially offset by higher unit vehicle operating costs savings. The recalculated rate of return for the improvement of the Paynesville-Totota road was estimated at 14% (20% at appraisal) and for the Paynesville-Robertsfield road at 16% (22% at appralsal), making the investments still justified. Paynesville-Totota Road 4.02 Due to delays in implementation, underestimation of original quantities, high price escalation and faster pavement deterioration of the existing road than anticipated, construction costs turned out to be about twice those at appraisal. Under the project only the first section of about 40 mi between Paynesville and Kakata and the reconstruction of the Nyaforla Bridge were completed. The remaining road works on the section between Kakata and Totota (31 mi) are currently ongoing under a separate project with AfDB financing and are expected to be completed by the end of 1985. The economic rate of return was recalculated for each section separately. -47 ~ 4.03 Traffic on the Paynesville-Kakata section declined by about 7.7% per annum between 1977 and 1981 as opposed to a projected growth rate at appraisal of 6.5% per annum. This development can be explained by the economic downturn in Liberia, rapid increases in fuel costs, travel restrictions imposed after the change in Government in 1980 and periodic shortages of fuel. In view of the continuing economic recession, traffic has been assumed to remain at its 1981 level until 1985 and to resume growth at 5% per annum thereafter. On the basis of the new traffic data and other revised inputs the economic return on the Payneaville-Kakata section was reestimated at 15% (Table 2). 4.04 For the Kakata-Totota section traffic counts carried out in 1981 and 1983 also show that traffic development fell short of appraisal expectations; between 1977 and 1983 traffic grew only at the rate of 0.8% per annum compared to 6.5% anticipated at appraisal. Revised traffic forecast assume zero growth between 1983-85 and 5% thereafter. For the purpose of recalculating the rate of return the cost estimate for the section was based on the recently awarded contracts for the civil works and supervision, and the actual costs of the reconstruction of the Nyaforla Bridge located on this section. The estimated rate of return is 13% (Table 3). This should be considered a conservative estimate as the appraisal assumption that full reconstruction of this section would only be necessary by 1989 proved rather optimistic given the serious pavement failures that developed over the past few years. The reestimated rate of return for the Paynesville-Totota road calculated as a weighted average of the Paynesville-Kakata and Kakata-Totota sections is 14%, compared with 20% at appraisal. Paynesville-Robertsfield Road 4.05 The cost of reconstructing the Paynesville-Robertsfield road increased by about 14% relative to the appraisal estimate. Traffic declined by 9% per annum between 1977 and 1981 as opposed to the forecast growth rate of 6.5% per annum at appraisal. For the reevaluation traffic was assumed to remain constant between 1981 and 1985, and grow by 5% per annum thereafter. The recalculated rate of return is 16% compared to 22% at appraisal (Table 4). V . INSTITUTIONAL PERFORMANCE 5.01 At project appraisal, MPW's senior management had been stable over an extended period. Middle level managers were reasonably adequate and performance on Bank projects up to that time was considered generally satisfactory. Unfortunately the political changes in April 1980 brought about numerous changes in MPW's management. During the project execution period four different ministers of diverse backgrounds were in office and there were similar turnovers in the middle and lower management levels. Coming at a time of deteriorating economic conditions for the country as a whole, MPW's management problems were considerable. - 48 - 5.02 Despite this, MPW's management team contrived to keep the project - and other ministry responsibilities - in motion. The team in place at the end of the prolect had gained experience for a reasonable period and although MPW continues to be weak in the middle levels it should, with competent technical assistance, be able to gradually increase its efficiency from this point onward barring further political or economic deterioration in the country. 5.03 MPW's internal problems were compounded during much of the project period by friction and poor communications between MPW and the Ministries of Finance and.of Planning and Economic Affairs. The present Minister of Public Works has, however, moved to overcome this problem and over the past year has enjoyed better support from the two other ministries. VI. BANK PERFORMANCE 6.01 The Bank team responsible for the project suffered from similar problems as MPW in that there were a number of changes in staff responsible for the project. During preparation, appraisal and execution, eight different Bank engineers and six transport economists were involved. There were also two periods of up to nine months each without Bank field supervision. Given the problem situation recognized from appraisal onward, more intensive supervision by the Bank might have helped in identifying the problem source sooner and taking corrective action either to curtail the project or obtain additional funding. 6.02 On the other hand, the Bank's willingness to provide supplemental financing certainly salvaged a project situation which otherwise would have hampered Liberia's development and adversely affected country/Bank relations for some time to come. VII. CONSULTANTS PERFORMANCE 7.01 Road Component. The same consultant group was responsible for the detailed engineering, subsequent pavement evaluation and supervision of construction of the two road sections. The original detailed engineering, based on full reconstruction, was relatively straightforward but the initial economic analysis was consIdered somewhat inadequate and was reworked with Bank assistance. The pavemant evaluation was efficiently carried out. Supervision of the Payneaville- Robertsfield road was subject to some criticism in the early stages but improved as the project progressed. 7.02 The specifications and contract documents for the Payneeville-Totota road, as revised by the consultants in the light of the pavement evaluation study, proved faulty. According to the consultant's Final Report for this road the specifications and contract -49- documents underwent several amendments as a result of the change from total reconstruction to the selective rehabilitation indicated by the pavement evaluation study. The report states that "Though these modifications were incorporated in the contract drawings and in the Instructions to Bidders, the figures for these items in the Bill of Quantities were inadvertently left out on the bases of the Benkelman Beam Recommendations. Thus, whereas the Scope of Works in the Instruction to Bidders was based on the modified recommendations of the Report, the accompanying Bill of Quantities was based on the limited scope of works in the initial recommendations of the Beakelman Beam Study." Although there were other contributing factors to the formidable cost overrun it is evident that the difference between actual work required and that shown in the Bill of Quantities was a major reason for the difference between the actual costs and the engineer's estimate as well as the initial construction contract price. 7.03 The consensus derived from supervision reports and discussion with Bank staff involved with the project is that the consultant's performance was below normal standards. 7.04 Road Maintenance. The consultant team for this component underwent a number of changes during the contract period. Overall, the team made substantial contributions to the improved organization and planning of road maintenance in Liberia. Unfortunately a substantial part of the consultant's direct technical assistance effort was ineffective because of MPW's inability to provide adequate numbers of qualified counterpart personnel to work with the consultants. Also, during much of the period there was a continuing decline in the funding of road maintenance. This combination caused.the lasting impact of the technical assistance to be rather small. 7.05 The consultant's draft report for the proposed Fifth Highway Project (although rather poorly organized) provided a wealth of data and manual-type instructions for road maintenance activities. The material was useful during the preparation period for the Fifth Highway Project and much of it should be adaptable to the work under the new Project. 7.06 Technical Assistance - Planning and Programming (PPO). The Transport Economist and the Transportation Engineer provided under this component furnished excellent assistance to the Ministry in establishing a firm base for the Planning and Programming Bureau. Unfortunately, insufficient funding and a shortage of qualified counterpart personnel during the early part of the assistance period prevented the assistance from being as productive as had been hoped at appraisal. Nevertheless, the investment was well worthwhile. - 50 - VIII. CONCLUSIONS 8.01 The project was a logical step in the sequence of Bank assistance to Liberia's highway sector. The components were in keeping with Liberia's Five Year Road Maintenance and Development Program and were selected and justified during earlier Bank-assisted projects. 8.02 The MPW's past record on project execution shows consistent overruns in both costs and time. When major cost increases began to develop during and after appraisal, the Government and the Bank should have been more cautious in proceeding with the construction components, particularly when implementation delays developed with thePaynesville- Totota road. 8.03 With hindsight it is clear that the original terms of reference for the design consultant should have specifically required a pavement evaluation study. Where rehabilitation of an existing road section is contemplated with only minimum realignment, it is normally assumed that a pavement originally constructed to reasonable standards should be susceptible to selective rehabilitation which can be specified on the basis of pavement evaluation procedures such as the Benkelman Beam method used on the two project road sections. Had the pavement evaluation been carried out as part of the original design process prior to appraisal, the judgment factors concerning the extent of full reconstruction required could have been analyzed before or at appraisal and decisions taken without the pressure of impending negotiations. 8.04 The decision to proceed with full reconstruction on the Robertafield road was probably correct as the pavement evaluation confirmed that 70% of the road required total reconstruction. The decision to carry out selective rehabilitation on the Paynesville-Totota section was in keeping with the evaluation survey which indicated that less than 25% of the road required reconstruction and that major savings should result from a selective operation. 8.05 Although the respective decisions were correct based on information available at the time, more attention should have been given to the ability of the consultant and MPW to expeditiously and competently manage the Paynesville-Totota rehabilitation work. The early appearance of major cost overruns should have triggered a detailed review by the Bank and MPW of the underlying causes. If the faulty Bill of Quantities (the major culprit) had been detected earlier, at least the subsequent demolition of the Nyaforla Bridge and the abandonment of uncompleted road works could have been avoided and the reconstruction work closed out earlier and in an orderly manner. It should be noted that no small part of the contractor's final claims was based on charges for stand-by time which could have been avoided by early termination of the work due to lack of funds. 8.06 Bank-assisted projects in Liberia have traditionally provided for overseas fellowships. The idea is commendable but results - 51 - have been less than desirable considering the cost involved and the need for well trained professionals in MPW. Better selection criteria should be established; more attention should be given to the preparation of detailed curricula and school selection after candidate selection but before departure; more thorough review should be provided by the Bank of the proposed curricula (preferably at appraisal) and the candidate's qualifications; better administration of the fellowships (payment of fees, allowances, etc.) is advisable; and more regular monitoring of student progress through reports (at least quarterly) from the student and the educational institution is required. 8.07 After a protracted period of frequent changes, with ensuing shortages of management and qualified technical personnel, and with internal conflict and friction between MPW and the other two ministries most concerned with MPW's operations -- the Ministry of Finance and the Ministry of Planning and Economic Affairs -- the MPW is now in a position to develop into a workable organization. The current senior management team appears stabilized and staffed with limited numbers of technically qualified personnel who are gradually gaining much needed experience on the job. The Bank should be supportive of the effort the present team is making but both the Bank and MPW should recognize that the need for technical assistance in planning and programming, equipment management and road maintenance will continue for some time. The Bank should also use its good offices to encourage the continuance of the present generally cooperative attitude being developed between the three ministries. 8.08 Bank supervision missions totalled 14 over a period of five years with eight engineers and six economists involved at various times. During the first three years of the project these missions were also responsible for supervision of other ongoing projects such as the Feeder Roads and the Third Highway Project. More regularly scheduled missions and fewer changes of supervising personnel would have been advantageous, particularly when the Fourth Highway Project developed serious problems in its early stages. 8.09 Until MPW management is solidly on its feet again the Bank should make every effort to supervise the Fifth Highway Project at regular and more frequent intervals. For the project to be successful it would be imperative that Bank staff maintain an active and continuous dialogue with Government to ensure that road maintenance is accorded the highest priority in terms of manpower and financial resource allocations. 弋 ：織 洽必 久 h V 大 Llmula. - m~ 61CMaj !Mmcr (Ln.1573/cr.1311 ^ Lok) Actual änd V2"!wzGtlrt of Proloct gefte OM) Proj~ lam tweeffted by cont.Get contrect 9.1z at £02719t12 ----- cost tettmötet , ~luding cofttl,3~1,9) ----------------- -- ~ t i Regarks Cmtrw~ icmmlt«ta st~ «1 - --- - ---- At appraleal - --------- - ---- ACC.41 or force«£ on c~ Lation spung complete Coner. get. Loc*I Porelgn Total UM 154%. 1,9c81 foreign total 8~ '001k95 avi t 9~ 07/20/79 13.579 04/1942 06/01/82 3.650 9,4W 13.030 9.400 72 4.634 lå.916 14,550 9.571 se 16,550 100 v4~ 11X~ * c~ma mm de acctioft May. romb¥ lå~ tteld 94 1t41101% 12129/78 8.3m 07/16/80 07/31/80 2.670 6.900 9,570 - - 3.062 7,87s t0.937 - 10,937 Joo a u~ 11OM:t 87.4 mik ~041 Afft~ k) Sned Ula~ Ital~ s~ 01118/79 3.437 06130181 06130/81 m 2.490 M80 2.490 100 m 1,311 2,479 3,790 2.479 65 3.790 100 PI~ ~ Pcc*. Die. (i) TRINGO 9~ 49100/79 - 10/19/91 10/19/81 (100 ra 12 65 77) uo ~ tic: up. 0~ 82104M - 12/8t182 12/OIM 60 250 390 250 (too ra l 64 6$) 167 71 235 900 010 ftlu~pe M m (100 10% 10 03 93) ~ag~ 8~ 0~ k~an v~ l~ oce 9~ U~ 13111/79 1,073 0/30/42 <4/07/82 ile 718 830 720 100 m tog 1.015 1.203 1,022 85 1.203 100 12114/70 676 08/16/80 OB/29/40 90 520 610 - - 172 må $33 833 100 b) D***Xleå ans&=~ <u emercw~ ili 11/79 630 12143/W 101 /91 tio 420 530 421) 100 n 91 mo 651 ma 86 öst 800 00 c~ opacom o~lemåna 9~ steftmat*~*~ 100* 9~ - - 90 520 6t0 $20 - - 9~ ?.SM 21.210 26.790 13,9W 48 9,461 24,7t11 UlM timo 40 14.m 100 9~ 02/16/43 1,181 07/31/0 W tå/O »4 911 1,265 330 051 1.181 1,129 tjal 00 k) otmo 91128/83 121 - 53 lit 265 40 162 2n §ab 92 m 100 gnet. 913.163 ~leffit firm « ÖVID/83 274 - 011 194 74 2% 370 54 111 271 321 04 271 100 £*et. 943.390 dan cwymmtvvttm~ C^lt~ erm OCK. 1~ 401 1,419 1.90 46% 95 424 1.230 1.654 A.533 03 ljn4 100 0~ 8.861 22,621t 30,690 15,6w så 9.905 25.90 35.853 IS.M 43 to.050 - 54 - TABLE 2 PROJECT COMPLETION REPORT LIBERIA - FOURTH HIGHWAY PROJECT (LN,1573/CP.1311-LR) Economic Reevaluation of Paynesville-Kakata Road (40 miles) (US$'000, net of taxes at 1981 prices) VOC Net Benefits Year Construction Costs Maintenance Savings 2/ Benefits 3/ Stream 1979 1,031 119 -812 80 7,631 338 -7,293 81 7,500 338 873 -6,289 82 1,275 338 1,814 877 83 - 298 1,882 2,180 84 - 258 1,950 2,248 85 -7,000 61 2,018 9,079 86 -7,000 61 1,423 8,484 87 - 89 712 801 88 - 89 -1,000 795 -116 89 -6,000 -12 835 6,823 90-92 - - - - 93 - 700 - 700 94 - - - 95 - 1,000 - -1,000 96 - 300 - 300 Economic Return: 15% I/ Actual construction costs, including supervision; savings from deferred full reconstruction in 1985/86 (28 mt.) and 1989 (12 mi.) at US$500,000/mile. 2/ In "without project" case annual repairs estimated at 5% of road surface at US$12 per sq.yd. After rehabilitation routine maintenance expenditures estimated at US$1,000/mile plus resurfacing every 7 years at US$25,000/mile. 3/ Savings from normal traffic only. Savings extend from 1981-86 for 28 mi. and from 1981-89 for 12 mi. Road surface condition expected to develop from 60% of length poor and 40% fair in 1981 to 1002 poor in 1988 (see also Notes). Notes 1. Traffic Growth Rate Composition (%) Year AADT _a.) Pase.Car/Taxi Pick-up/Minibus Truck 1977 2,560 60 26 14 1981 1,860 57 31 12 1981-85 0 57 31 12 after 1985 5 57 31 12 Source: Planning and Programming Bureau, Ministry of Public Works. 2. Vehicle Operating Costs (USC/mi., net of taxes at 1981 prices) 1981 Road Condition VehicleJTpe Traffic Share Good Fair Pcor Passenger Car .2598 26.83 30.37 35.47 Taxi .3163 23.52 25.41 28.22 Pick-up/Minibus .2992 43.23 47.47 53.43 Truck (8 tons) .1247 71.18 76.38 84.38 Weighted Average 36.22 39.65 44.65 Source: Planning and Programming Bureau, Ministry of Public Works - 55 - TABLE 3 PROJECT COMPLETION REPORT LIBERIA - FOURTH HIGHWAY PROJECT (LN.1573/CR.1311-LBR) Economic Reevaluation of Kakata Totota Road (31.6 miles) (USS'000, net of taxes at 1981 prices) VOC 3/ Net Benefits Year Construction Costs Maintenance Savings 2/ Benefits Streas 1983 1,743 -- -1,743 84 5,092 267 - -4,825 85 7,543-5,000 182 513 -1,848 86 - 182 782 964 87 - 160 821 981 88 - 160 862 1,022 89 10,800 -22 905 11,683 90-91 - - - 92 - -540 - -540 93-95 - - - 96 - 540 - 540 97-98 - - - 99 - -540 - 540 Economic Return: 13% I/ Construction costs of road works based on recently awarded contract plus 102 contingencies and supervision; includes actual reconstruction costs of Nyaforla Bridge as well as actual costs of engineering update of road works. Savings from deferred full reconstruction in 1985 (10 mi.) and 1989 (21.6 at.) at US$500,000/mlle. 2/ In 'without project" case annual repairs estimated at 5% of road surface at US$12 per sq.yd. After rehabilitation routine maintenance expenditures estimated at US$1,000/mile plus resurfacing every 7 years at US$25,000/mile. 3/ Savings from normal traffic only. Savings extend from 1985/89 depending on section. Road surface condition expected to develop from 90% of length poor and 10% fair in 1985 to 100% poor thereafter. (see also Notes). Notes 1. Traffic Growth Rate composition ( Year AADT (K_p.a.J Pass.Car/Taxi Pick-up/Minibus Truck 1977 1,051 60 36 14 1983 1,100 ) 0.8 :1 51 8 1983-85 0 41 51 8 after 1985 5 41 51 8 Source: Planning and Programming Bureau, Ministry of Public Works and Consultants. 2. Vehicle Operating Costs (USC/mi., net of taxes at 1981 tices) 1983 Road Condition Vehicle Type Traffic Share Good Fair Poor Passenger Car .1016 26.83 30.37 35.47 Taxi .3093 23.52 25.41 28.22 Pick-up/Minibus .5077 42.23 47.47 53.43 Truck (8 tons) .0816 71.18 76.38 84.38 Weighted Average 37,75 41.27 46.34 Source: Planning and Programming Bureau, Ministry of Public Works - 56 - TABLE 4 PROJECT COMPLETION REPORT LXBERIA - FOURTH HIGHWAY PROJECT (LN.1573/CR.1311-LBR) Economic Reevaluation of Paynesville-Robertsfield Road (28 miles) (US$'000, net of taxes at 1981 prices) VOC Net Benefits Year Construction Costs Maintenance Savigs Benefits Stream 1978 1,151 118 - -1,033 79 6.188 237 - -5,951 80 4,5SO 237 779 -3,454 81 - 209 1,429 1,638 82 - 209 1,429 1.638 83 -7,000 -28 1,429 8,401 84 -7,000 -28 - 6,972 85-86 - - 87 - -700 - -700 88-90 - - 91 -6,000 700 - 700 92-93 - - - 94 - -700 - -700 95 -- - Economic Return: 16% 1/ Actual construction costs, including supervision; savings from deferred full reconstruction in 1983/84 (28 mi.) at US$500,000/mile. 2/ In "without project" case annual repairs estimated at 5% of road surface at US$12 per sq.yd. After rehabilitation routine maintenance expenditures estimated at US$1,000/mile plus resurfacing every 7 years at US$25,000/mile. 3/ Savings from normal traffic only, extending through 1983. Road condition rated as poor (see also Notes). Notes 1. Traffic Growth Rate Composition (%) Year AADT (% p.S.) Pass.Car/Taxi Pick-up/Minibus Truck 1977 2,541 70.8 21.7 7.5 1981 1,739 )-9.0 69.3 21.2 9.5 1981-85 0 69.3 21.2 9.5 after 1985 5 69.3 21.2 9.5 Source: Planning and Programming Bureau, Ministry of Public Works. 2. Vehicle Operating Costs (US:/mi.. net of taxes at 1981 prices) 1981 Road Condition Vehicle Type Traffic Share Good Fair Poor Passenger Car .3461 26.83 30.37 35.47 Taxi .3472 23.52 25.41 28.22 Pick-up/Minibus .2122 42.23 47.47 53.43 Truck (8 tons) .0945 71.18 76.38 84.38 Weighted Average 33.35 36.62 41.39 Source: Planning and Programming Bureau, Ministry of Public Works $BRO 13313R (PCP) L I BER t A dOrRTd HIGHWay PrRe:OerECTgnn costue-a 4nde 2nd14h.ly Prmift )4 F¥~1a ON 14~ p~" ~'~iY 1 1t~d~e$.~.2,d H.~.,,p~ ~-.r- THIS MAP IS 8~12 ON ---N TY - --IB 13313. DECMBER ode , ~mxý 1972, THE INSET H4AS -c LO FA * "-' BEEN UPDATE. ... naa.n~nI na COUNTY f"",z ~ - / / MOUNT COUNT>ZOW. BONG -! NIMBA r é -~S ~ MONTSRRAD a -Q COUNTY cOUNTY / *1* GRAND BASSA COUNfY 5-GRAND GEDEH COUNTY ö n..c- 4- T-bc Iof[.809 aSINO COUNTY . O, MARYLAND.-- sZ COUNTY 0.07- 19 a mitt%ifI JANUARY 1986