Colombia - Seventh Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7494 PROJECT COMPLETION PSPORT SEVENTH HIGHWAY PROJECT (LOANI 1471-CO) COLOMBIA November 15, 1988 Department III Infrastructure and Energy Operations Diviqi6n Latin America and the Caribbean Regional Office This document has a restricted distribution end Way be used by recipients only in the performance of their ofircial duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OMCIL USE ONLY THE WORLD BANK Washington. D.C 20433 U.S.A. Office of Directot-Cefal Oper tm Evahbitmn November 15, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Colombia Seventh Highway Project (Loan 1471-CO) Attached, for information is a copy of a report entitled "Project Completion Report on Colombia Seventh. Highway Project (Loan 1471-CO)" prepared by the Latin America and the Caribbean Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFCIAL USE ONLY PROJECT COMPLETION REPORT COLOMBIA SEVENTH HIGHWAY PROJECT LOAN 1471-CO TABLE OF CONTENTS Pape No. PELACO S...O.......................................... li BASIC DATA 8T ......, 1 EVALUATION SUMMARY v --. INTRODCIO* .. CSION ...l** II. PROJECT IDENTIFICATION, PREPARATION AND APPRAI....... 1 Ill. IMPL ATION ...................... ................... 4 IV. INSTITUTIONAL PEUPORMANCE ... .................... * 8 V. COST ESTIMTSE AND DISBRSEMENTSo................. ..... 9 VI. ECONOMIC RZEVALUATION .... o................. .lO.. .... e . 10 vII. ROLE OF TEE BANK........................so ........ 11 Vll. CONCLUSIONS ............................... 11 TABLES 1. Project Cost Estimate vs. Actual ........................ 13 2. Economic Reevaluation ............................... * 14 1. Comments from Borrower 15 ******** * * ~ 4 ***...... ........ . ........ ..*...... IBRD No. 12553R 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.  - ii. - PROJECT COMPLETION pEPORT COLOMBIA SEVENTH HIGHWAY PROJECT LOAN 1471-CO PREFACE 1. The following is a Project Completion Report on the Seventh Highway Project in Colombia for which Loan 1471-CO, in the amount of US$90.0illion, was approved by the Board on June 28, 1977. After a period of six onths beyond the final Closing Date granted to finalize disburesm_nts, the loan account was closed leaving an undisbursed balance of US$2,170,000 which was cancelled. The Government and the Bank agreed to include incomplete components and/or uncomplied conditions under the follow-up operation (Loan 2121-CO). 2. This Coanletion Report wv prepared by the Bank's Latin America and the Caribbean Regional Office and is based on information obtained from the LAC Information Center, Appraisal and Supervisions Reports for Loan 1471-CO. and a final report prepared by the Borr' er, the Ministry of Public Works and Transport. 3. In accordance with the revised procedures for project performance reporting, this PCR was read by the Operations Evaluation Department (OED) but the project was not audited by OED staff. The draft PCR was sent to the Borrower on August 8, 1988. The comments received from the Borrower are reproduced as an Annex to the PCR.  - iii - PROJECT CONPLETION REPORT COLOMBIA SEVENTH HIGHWAY PROJECT LOAN 1471-CO BASIC DATA SHEET KEY PROJECT DATA Original - Item Esectation Actual Total Project Cost (US$ million) 153.75 187.6 Cost Overrun (Z) 22.1 Financins (US$ million) IBiD Loan Amount 90 0 Disbursed 87 8 Cancelled 2.2 Repaid - Outstanding - Copletion of Physical Component 12-30-81 06-30-86 Proportita Actually completed by above date (2) 98 EconomcL tate of Return (2) 90 27 CUMULATIM ESTIM&TED AND ACTUAL DISDURSEMENTS (US$ million) 1978 1979 1980 1981 1982 1983 1984 1985 1986 Appraisal Estimate 15 43 69 84 90 Actual - - 11 42 64 75 85 87 88 Actual or Z of EtZate - - 16 50 71 83 95 97 98 OTHER PROJECT DATA Actual or Item Original Aoeded Current Estimate Conception Date - 0813-71 Negotiations 05-27-77 Board Approval 06-29-77 Loan Agreement Date 07-05-77 Effectiveness Date 10-14-77 _ 11-28-77 Closing Date 10-31-82 - 12-31-85 Borrower The Republic of Colombia Executing Agency The Ministry of Public Works and Transport Follow-on Project Highway Sector Project (Loan 2121-CO)  -iv MISSION DATA Staff Date of TyDe at Staff Weeks Weeks Report Preparation 10/71 1 1 1 12118/71 Preparation 3/72 4 0.5 2 3/31/72 Preparation 6/72 1 0.5 0.5 7117/72 Preparation 9/72 1 0.5 0.5 10/11/72 Preparation 2/73 2 1 2 3/30/72 Preparation 5/73 1 1 1 7/03/73 Preparition 6/73 1 1 1 7/27/73 Preparation 7/73 2 0.5 1 9114/73 Preperation 11/73 3 1 3 1130174 Preparat.'on 2/74 1 1 1 3/28/74 Preparation 5/74 3 0.5 1.5 5/20/74 Pro-Appraisal 2/75 2 3 6 4/3/75 Pro-Appraisal 4175 3 2 6 6/05/75 Pre-Appr0sal 9/75 2 3 6 10107/75 Pre-Appraisal 4/76 1 2 2 5/20/76 Pro-Appraisal 7/76 2 2.5 5 7/26/76 Pre-Appraisal 10/76 1 1 1 11/11/76 Appraisal 10176 2 3 6 11/19/76 Post-Appraisal 2177 1 1 3 3/11/77 Supervision 10/77 3 1 3 11/02/77 Supervision 4/78 2 3 6 5/04/78 Supervision 10(78 1 0.5 0.5 12/01/78 Supervision 2/79 4 2.5 10 5/11/79 Supervision 5/79 1 0.5 0.5 7/10/79 Supervision 9/79 1 2 2 9/14179 Supervision 11/79 2 1.5 3 1/16/80 Supervision 12/80 2 0.5 1 1/28/81 Supervision 8/81 2 0.5 1 10/07/81 Supervision 1/82 4 0.5 2 2119/82 Supervision 6/82 2 0.5 1 7/14/C2 Supervision 11/82 4 1.5 6 11/124/82 Supervision 5/83 3 1 3 6/22/83 Supervision 11/83 3 3 9 2110/84 Supervision 4/84 1 0.5 0.5 4/23/84 Supervision 6/84 3 0.5 1.5 7112/84 Supervision 11/84 1 0.5 0.5 1/23/85 Supervision 6/85 3 0.6 1.5 6/28/85 Supervision 185 2 1 2.U 12/13/85 Supervision 4/86 3 0.5 1.5 4/30/86 Supervision 9/86 1 1 1 9/12/86  - v - PROJECT COMPLETION REPORT COT O3BIA SEVENTH HIGHWAY PROJECT LOAN 1471-CO EVALUATION SUtMARY 1. The Seventh Highway Project (Loan 1471-CO) partially achieved its objectives which consisted in rehabilitating parts of the main highways, eliminating the damaging effects of overloading vehicles, improving the efficiency of maintenance operations, including the highway maintenance fleet, and improving transport sector management. The project consisted of: (a) a rehabilitatioa program of about 978 km of trunk aaphalt-paved roads, including supervisions (b) a vehicle weight control program: (c) a highway maintenance program Sd) assistance in transport managements and (e) logistic support for project execution. The scope of the rehabilitation program was later reduced, the vehicle weight coutrol program and som of the studies included in the project had to be postponed to be completed under later loans, and implementation of the recommendations from the technical assistance in maintenance management and institutional strengthening 'wer not implemented satisfactorily. 2. Final total project cost with the revised scope of the rehabilitation program and cancellation of the vehicle weight control component rose to US$187.1 million, about 211 above the appraisal estimate of US$154 million for the total original project, mainly due to cost intreases of the road rehabilitation works resulting from poor designs, inadequate contractors' capacity, shortage of funds to sustain technicallr conceived schedules, slow procurement procedures and unforeseen road deterioration which took place between the time when the designs were completed and the works' execution actually started. The cost increase required'additional allocation of funds in the Government's 198l, 1982 and 1983 budgets. 3. In October 1983, the Bank accepted MOPT's request to reduce the scope of the civil works component from 978 km to 777 kw of roads and to finance the balance under Loan 2121-CO (April 1982). The reduced component was completed and fully disbursed. After the reduction in scope of the civil works component from 978 to 777 km, the final cost of rehabilitation works including supervision totalled US$159.3, about 402 above the appraisal estimate of US$113.9 million for the original scope of this component. The main reasons for this increase weret (a) additional work quantities to correct deficiencies in sections which had been completed before the designs were revised, and those resulting from such revision, once completed, to take into account the deterioration of roads in the period elapsed between completion of engineering and actual start-up of work execution; and (b) higher-than-anticipated price escalation due to low and over-extended work implementation schedules.  - vi - 4. The quality of executed rehabilitation works has not been satisfactory because of premature damage caused by insufficient thickness of pavement structure. Inadequate maintenance and extended exposure of unprotected black bases to traffic wear further contributed to accelerated deterioration. The Bank's letter of July 10, 1983 recommended remedial as well as preventive actions for future works. HOPT failed however to act fully upon the Bank's recommendations. 5. Execution of the vehicle weight control program was cancelled after several years of delay due to: (a) slow contracting and execution of the study to develop appropriate vehicle weight and dimensions and establish control systems (the final report was eventually produced in December 1983); (b) repeated delays in procurement of the weighing scales (several unsuccessful bidding and negotiation attempts). Finally, it was agreed that five portable weighing scales would be acquired under Loan 2121-CO, and procurement of fixed weigh-in-motion scales would be included in the program to be financed under the Second Highway Sector Project, Loan 2829-CO (June 1987). 6. Technical assistance for the Road Maintenance Program was providedtby a French consulting firm and completed in January 31, 1982. A complete set of documentation was proposed and a large group of engineers were trained to carry out systematic maintenance of the national network (about 25,000 km). One area, however, where the consultants fell short of addre sing satisfactorily the problem was in spare parts administration. Sustainability and follow up on the recoinndations of this technical assistance program have been poor. The programs which were to be implemented at the level of the districts as part of the maintenance management system were not executed satisfactorily; part of the staff trained has been disbanded, establishment of required controls has been slow, flow of information remains unreliable. equipment. management has not improved, and finally, expenditures appropriated for highway maintenance decreased in real terms and continued to be used in an inefficient manner. All of these problems have been discussed, to little avail, between the Bank and successive administrations. 7. Road maintenance equipment and some office support elements for US$23.0 million were procured with several years delay. Additionally, MOPT purchased maintenance equipment for about US$61.0 million with suppliers' credits. 8. The National Transport Plan, preparation of which was a loan covenant, was submitted to the Bank with three years' delay. It was later updated under Loan 2121-CO. The effort had limited impact because the exercise was largely descriptive, and neither analytically nor policy-oriented. 9. The road materials inventory was successfully completed in 1984 and provided comprehensive information for maintenance and construction. Updating of information has been inconsistent and unreliable and, therefore, the use of the system is becoming more constrained. MOPT is to take corrective action under Loan 2829-CO. 10. The component for technical assistance to train managerial staff of the construction industry, which was introduced in 19aO after a recommendation made by the Bank, was not carried out. The sensitive nature of such assistance and the uncertainty as to whether it would correctly address a major issue, caused successive administrations at MOPT to delay its implementation. The component was finally cancelled under this project and transferred to Loan 2121-CO.  . vil - 11. Two principal lessons are derived from this project. A first one is the need to have in place, particularly when the loan is of the se.tor-type, sufficiently developed programing and monitoring capacity. Adequate prograaing and monitoring of engineering studies, procurement procedures and implemntation activities are sine-qua-non conditions for satisfactory quality and costs of work. Thie integration of physical and financial programming, and the subsequent monitoring need to be effectively practiced. Timely payment for work performed is also key as otherwise MOPT, as it happens, is not able to enforce contractors to comply with agreed work schedules. This, in turn, causes unduly long delays, increases costs due to time-related cost contingencies and, when occurring systematically, leads the contractors to acquire obligations beyond their actual capacity. A second lesson is for the Bank which should review and obtain a good and clear understanding of issues before proposing solutions which may not address properly the problems, not be entirely acceptable to the borrower or be unattainable within a reasonable period. The lowering of the loan disbursement percentages at a time when MOPT was suffering a budget crunch; the late inclusion in the project's scope of a component to train managers of civil engineering contracting firms; the readiness to relieve MOP? from complying with loan covenants, exemplified in the more than three- years extension of the Loan Closing Date and the transferring of obligations to follow-up projects, are actions which atteat to the need for careful understanding of the problems.  PROJECT COMIPLETION REPORT COLOMBIA SEVENTH HIGHWAY PROJECT LOAN 1471-CO I. INTMODUCTION 1.01 Colombia has a road network totalling about 104,000 km: 25,000 km form the national highway system under the jurisdiction of the Ministry of Public Works end Transportation (MOP?); a further 52,000 km are under the responsibility of the Departmentas and 27,000 km are managed by the National Rural Roads Fund (lNCV). In the early 19503, Colombia's largely regionally oriented transport network began to evolve into a national system, in response to economic' growth requirements. By the early 1960s, the basic skeletal structure of the Western Trunk Road (Cartagena-Medellin-Cali-Pasto), the Eastern Trunk Road (Santa Marta-Bucaramanga-Bogota-Niva) and two main transverse roads connocting the Eastern end Western trunk roads were opened to traffic, but not fully upgraded or paved. 1.02 The Bank has had an instrumental role In the development of Colombia's transport sector. Since 1951 and prior to the Seventh Highway Project, it lent a total of US$136.0 million equivalent for the road subsector. These projects helped to develop the basic national highway network, with the Seventh Highway Project focusing upon the reh ailitation of the paved trunk roads and the improvemeat of MOPT' s capabilities to maintain the national highway system. Subsequently, the Bank financed a First Highway Sector Project (Loan 2121-CO, US$152.3 million, May 13, 1982) aimed at improving subsector planning and project implementation.. A Second Highway Sector Project was approved by the Board on June 9, 1987. It includes, inter alia, a policy reform and institutional improvement action Plan that would support the strengthening of MOPT's policy-making and management capabilities. 1 03 This completion report is based upon information obtained from the LAC Information Center, Staff Project Appraisal Report, Bank staff supervision reports, correspondence files, the Loan Agreement and the project completion report prepared by MOPT. II. PROJECT IDENTIFICATION. PREPARATION AND APPRAISAL 2.01 The Government proposed a Seventh Highway Praject in August 1971 to support construction, reconstruction and upgrading of specific road sections. 2.02 Due to the Governmeit's increasiag concern with the need to improve road maintenance practices, the proposed project was designed to place substantial emphasis upon assisting the Government in protecting the capital stock in highways, thus avoiding future costly reconstruction of roads. The project was to: (a) rehabilitate parts of the main trunk highway srstem; (b) impl eme nt a program to reduce vehicle overloading; (c) improve the  conditiona and availability of the highway maintenance equipmnt fleet; (d) improve efficiency of road maintenz'ae operations; and (e) improve transport planning. 2.03 To achieve its objectlves, the project consisted of: Part A A rehabilitation program (712) including about 978 km of trunk asphalt paved roads, and comprising improvement of terrain stability and drainage, strengthening and widening of the roadway, where necessary, and overlaying the existing pavement, as well as supervision of civil works by consultant firms and coordination of the program by HOPT; Part B A vehicle weight control program (62) including a study and installation of about 20 weighing stations on main trunk roads, and training in their use, and supervision of civil works and equipment installation by consultants; Part C A highway maintenance progras (21S) including acquisition of about 800 units of equipment, spare parts for overhaul and preventive maintenance, workshop av4 store extensions and technical assistance including training, all in support of improved methods for highway maintenance and equipment utilization; Parc D Studies (l2) for transport sector planning; and Part E Logistic support equigmsnt (l2) such as vehicles, road marking, laboratory and drilling equipment. 2.04 The rehabilitation program evolved from a survey carried out in 1973 by a French consulting firm under the Fifth Highway Project, Loan 550-CO (July 1968), which showed that bout 1,700 km of the 6,500 km paved national highway network required urgent rehabilitation. The road maintenance program was largely developed by HOPT and Bank staff. The original scope of the project, however, had to be reduced in view of financial constraints imposed by increasingly higher cost estimates; final designs were produced before loan negotiations for the rehabilitation of 978 km. 2.05 The vehicle weight control component of the project evolved from the assessment by HOPT and the Bank of the major factors responsible for the rapid deterioration of the roads and, hence, of the major road rehabilitation effort needed. Preliminary analysis to estimate the number and location of the weighing stations required was done by MOPT in the course of project  -3- preparation, and a three-phase study to develop a comprehensive enforcement prograa was carried out by consultants under the project. The first phase was an assessunt of the esiiting vehicle weight and dimension regulations; the second phase consisted in defining the most suitable system, including equipment for weight control and enforcement; and the third phase included final designs and bid documents for procurement of civil works and weighing equipmnt. 2.06 The Highway Maintenance Program of the project included introduction of improved equipment, workshop and store management procedures; purchase of equipment and spare parts; and technical assistance. The emphasis on equipment utilization and mana8ement of workshops and stores resulted from the work of a UNID01' team (financed by UNDP) that had assisted MOPT iince 1973 in equipment maintenance and utilization. The equipment and spare parts purchase program was based upon an assessment of MOPT's equipment fleet carried out by a Bank consultant *as part of the project's appraisal. The technical assistance component was designed to be an extension of the ongoing UNIDO program and reflected a joint assessment, by MOPT and the Bank, of the advisory services required to carry out needed improvement in equipment and store management and in the programming and executing road maintenance operations. Rather than concentrating on general analysis of road maintenance procedures, the technical assistance was oriented to provide on- the-job training through direct involvement in all critical aspects of maintenance operations, especially those for paved roads. 2.07 For this project, two conditions were complied with: completed engineering for the loan negotiations, and stated recognition or the importance of road Haintewace fowever, and with hindsight, project preparation failed to asisess realistically MOPT's executing capacity and commitment to carry out the envisaged project scope. 2.08 The initial estimated cost of th.' project was USS153.75 million equivalent. Foreign exchange expenditures we Se estimated at US$90.75 million or about 592 of the total project cost; the Bank agreed to finance US$90 million with the loan. The table in the following page shows the breaLlown of the cost estimates and financing af the project as originally appraised. 1/ United Nations Industrial Development Organization.  -4- Appraisal Cost Estimates and Financina Local Foreign Total -- US$ Million Equivalent -- Estimated Costs Road Rehabilitation Program 4C.95 41.10 82.05 Vehicle Weight Control Program 2.85 4.00 6.85 Highway Maintenance Program 1.10 23.60 24.70 Transport Sector Management 0.25 1.00 1.25 Loglstic Support - 07 070 0? Total Base Cost 45.15 70.40 115.55 _ ~ _- Contingencies 17.85 20.35 38.20 Total Project Cost 63.00 90.75 153.75 Percent of Total Cost 41 59 100 Financing Plan Bank - 90.00 90.00 Government 63.75 - 63.75 Total Project Cost 63.75 90.00 153.75 2.09 After preparation was deliberately slowed to allow for the Fifth Highway Project (Loan 550-CO) to be completed in 1975, three years after the original completion date,Z and for the Sixth Highway Project, Loan 680-CO (Hay 1970) to make some progress,3 negotiations were held in Washington in May 1977, and the loan was approved by the Board of Directors on June 28, 1977. III, IMPLEMENTATION Road Rehabilitation Program 3 01 This component, contracts for which were awarded following ICB procedures to firms that had been prequalified in MOPT's Registry of Contractors, including foreign firma, suffered substantial delays almost from the start. The main reasons for these delays were MOPT's cumbersome bidding 2/ Project Completion Report dated September 14, 1977; Project Performance Audit Report dated Febriary 27, 1978. 31 Albeit a substantially reduced project scope, this loan was fully disbursed in July 1980. Project Completion report dated October 29, 1980.  and contracting procedures and the fragpentation and complexity of the administrative steps between contract award and payment of advances. These, in turn, caused significantly higher cost estimates exacerbating budgetary constraints and leading to extremely slow implementation which required, in October 1983, a retduction of the size of this component. 3.02 Civil works started in 1980 with an initial scope of 978 km comprising 33 contracts and supervision carried out by consultants selected according to Bank Guidelines. The poor quality of the original designs which were prepared by consultants and clearly not supervised by MOPT, and the additional deterioration of the roads to be rehabilitated in the period eLapsed between completion of the engineering and actual start-up of project execution, required later revision of the designs and resulted in higher base costs. The whole situation was aggravated by the extension of the execution period and the consequent effect of price escalation. The severe cost inrzeasse, coupled to insufficient budget funding, induced the Bank to reduce, in May 1982, the disbursement percentage for civil works from SO to 202, in what was considered an effort to ensure the Bank's participation through project completion. This action required MOPT to unrealistically increase the counterpart funding with its own resources. The Government was unable to provide the additional funds (as it already had proven unable to provide for the original cost sharing arrangeoent), and project execution was delayed even further. In October 1983, the Bank agreed to reduce the civil works component to 776 km and to provide the financing needed to complete the -riginal scope of works under the follow up Highway Sector Project, Loan 2121-CO, reinstating disbursements under this category to the origiral 502. 3.03 Delays of work in progress, some attributable to poor contractors' performance but mostly due to MOPT's insufficient funding, caused not only further cost overruns but also damage to work which had already been accomplished but not completed. Moreover, the existing pavement in some sections was not sufficiently strong and suffered structural and superficial fractures beyond those identified at the tim the rehabilitation designs were carried out. Henceforth, the original designs not only had insufficient capacis; to bear the traffic, but deterioration was exacerbated by MOPT's inability to carry out maintenance prior to execution of works and subsequently enforce the contractors' maintenance obligation during the excessively extended execution periods. This inability as well as the inadequacy of the original designs were also evident on road sections where works had been finalized prior to revision of designs and corrective actions. Some districts received roads to be maintained which were already defective from the outset. In some cases, the quality and sequence of construction activities followed during execution of works was inadequate and also evidenced the inadequacy of supervision efforts; for example, asphalt carpets were placed along some road sections without prior corrective work to the base which had long been exposed and had deteriorated. 3.04 Under the revised project scope, civil works were completed and funds were fully disbursed by January 1985. Completion of the revised works scope required two and a half years longer than initially planned under the original scope.  -6- Vehicle Weight Control Program 3.05 Based upon the first phase of a study carried out by a Colombian consultant in 1978, MOPT recoumended increasing the miniua load allowed from 8.2 tons to 9.3 tons for single azles, and from 14.5 tons to 17.5 tons for tandea axles. Measures outlining regulations to enforce compliance with axle loads were also recoemended. 3.06 The second phase of the study financed under the loan and contracted in November 1980 with the same Colombian firm that had carried out the first phase, covered the determination of a suitable system of weight control and enforcement, the location of stations and method of weight control and othefr operational requirements and the definition of the equipment most suited to the purpose. The composition of the truck fleet and import regulations limiting vehicle dimnaions were also reviewed. fowever, due to lack of interest from the Governmeat, the program suffered long delays. These delays were exacerbated by changes in MOPT's administratLon, indecLsion in defining the plans of actLon and the unusually long tim required for awarding and legalizLng the consultants' contracts. 3.07 A more extensive second phase program presented by the consultants ln February 1982 was consldered inappropriately large and was scaled down to: a) the installatLon of three comblnad dynamic-static scales to be operated at key locations covering 80S of long dLstance heavy trafflc, and of three static scales at international crossLng points; b) procurement of portable scales for auxiliary control; and c) enactment of modifications of the existing legislation and procedures for implementatLon of the weight control system, and for control of weight and measureoents of imported or locally assembled freight vehicles. The speciflc plan (third phase) of action for installing the scales at stations and operating and enforcing axle load control was prepared by MOPT and presented to the Bank during negotiations of the follow-up project, Loan 2121-CO. Operation of the weLghing scales which was agreed wnuld start by December 31, 1983, continues to be delayed due to problems in the bldding and procurement processes. 3.08 The project'sclosing date, which had to be postponed several times, was supposed to allow HOPT inter alia to solve the procurement problems faced in relation to thls component. By December 31, 1985, the final loan closing date, the contracts had stlll not been signed and lt was agreed that this component would be carried out under the following projects. After a period of six months granted to finalize pending disbursements, on June 30, 1986, the loan account was closed leaving an undisbursed balance of US$2,170,000. HiLhway Maintenance Program 3.09 The objective pursued by the Project of improving road maintenance under MOPT was not accomplished basically because of lack of comaitment from the Government. Both budgeted and actual expenditures for highway maintenance decreased, in real terms, during the project implementation period and until 1985, not complying with agreed target levels. The problem was compounded by the lack of adequate measures to compensate the shortage of funds by building-up the maintenance organization, becomang cost-effective and ensuring that the limited funds were actually being spent on highway maintenance. The availability of budgeted funds somewhat improved ln later  -7- years; not so the effectiveness of MOPT. The project supported maintenance through provision of consultants' technical assistance services and purchase of new equipmnt and spare parts for repairs of existing equipment. Delays in the appointment of technical assistance consultants, slow analysis of bids and slow finalization of contract documents for purchase of spare parts, which in turn delayed equipment repairs, accounted for most of the program's slippage. The purchase of new equipment lagged a year behind schedule. 3.10 The first step taken towards implementation of the highway maintenance program was the contracting of a French consultant firm in 1980 to identify the needs and establish a plan of action for this program, and to provide technical assistance on road maintenance. Such technical assistance was expected to lead MOPT to develop and implement a pavement management system, an equipment and spare parts management system and a training system. The technical assistance contract ended by January 1982. 3.11 Based upon the technical assistance recomendations, MOPT was expected to carry out the reorganization of purchasing, warehousing and distribution procedures for spare parts. However, implementation of these institutional strengthening components was delayed for years, first awaiting the introduction of computerized monitoring systems, and later expecting that internal divergencies between different MOPT departments involved be solved. Implementation has now been shifted in time and scheduled in the action program agreed under the latest operation, Loan 2829-CO. 3.12 In 1982, HOPT started implementing some recommendations of the French consultants regarding pavement and equipment management in four of the regional districts. Subsequently, the syutem was to be extended to other HOPT districts by 1984. However, by 1985, MOPT had totally neglected the maintenance program recommended by the French consultant and the team of local staff which had specially been trained for that purpose was split and assigned to other unrelated tasks. 3.13 For the procurement of maintenance equipment, MOPT initially focused on purchases of support equipment such as mobile workshop and lubrication units to improve preventive maintenance of the fleet. Eventually, seven hundred and thirty-two units of maintenance equipment and vehicles, including spare parts, were purchased by MOPT under the project following ICB procedures, and a further 1,413 units were purchased through supplier credits (for ehout US$61.0 million). Studies for Highway Engineering and Management (i) Inventory of Locally Available Road Materials. 3.14 A preliminary study was financed by FONADE. The subsequent main Bank-financed study was conceived as, and divided into three contracts. Three different local firms were each awarded one contract covering a specific geographic area. Information was compiled on location and available quantities of materials complying with road construction specificatiora, and made available to all interested Road Directorates and District Offices of HOPT. The study provided comprehensive information but was not subsequently updateds quantities of materials used from different sources was not consistently and reliably recorded, and therefore the data have become  -8- partially obsolete. Under the last project approved, Loan 2829-CO, MOPT is required to update and complement this study. (ii) Medellin-RIo Negro Access Road. 3.15 Local consultants were contracted in January 1981 to undertake this Bank-financed feasibility study (US$0.25 million). With Bank-financing the new airport of Medellin was being constructed, but the airport loan did not provide for studies of the new access road. A contract was signed with a local consultant following the review and analysis of proposals submitted by three previously short-listed firms, all from Colombia. Ten alternative roads were studied by the consultant who was awarded the contract. A detailed engineering study was later completed in February 1982 for the solution prefered by MOPT. As this solution involves construction of a costly tunnel, no final decision has as of now been m=de. (iii) Professional Management Training Prosram for Contractors. 3.16 A 1980 Bank mission to study performance of the Construction Industry in Colombia recomended inclusion in this project of a component for training of related managerial staff. It was agreed that USS0.44 million would be financed with loan funds. Terms of reference were agreed in 1981 and a French consultant firm was selected. However, in 1982 the incoming new administration decided, with Bank's acquiescence, that this effort would be better carried out through assistance from local universities. During the following four years two further unsuccessful attempts were made to contract this technical assistance with a joint venture between a Colombian consulting firm, a French one, and a local university. The sensitive nature of the assistance, and the doubts as to its adequacy to address the issue caused successive administratios at MOPT to hesitate and delay its implementation. Nothing had been accomplished by the loan closing date when this component was cancelled. Again, it was decided that this component be financed under the follow-up project, Loan 2121-CO. Logistic Suoport Equipment 3.17 This component was partially carried out: vehicles were procured to support the execution of the Rehabilitation and Maintenance Programs as well as laboratory, road striping and pavement deflection and roughness measuring equipment. Equipment procurement was carried out by ICB; spare parts for specific makes of existing equipment were procured requesting quotations from established dealers. Boring and testing equipment were not purchased with loan proceeds because the evaluation of responsive bids and the award recommendation made by MOPT were inconsistent with the Bank's guidelines on procurement. MOPT finally decided to rent this equipment. IV. INSTITUTIONAL PERFORMANCE 4.01 As stated in the completion report for the Sixth Highway Project, Loan 680-CO (October 29, 1980), the reorganization of MOPT, carried out in 1976, had in the beginning little effect in overcoming MOPT's management deficiencies, and it was not until a new Government took over in 1978 that  -9- improvnments became apparent. Effective start-up of the Seventh Highway Iroject was aelayed for two years because of cnange in administration and in HOPT'. practices, which delayed most procurement actions for almost a year. Key consultants became involved only in 1980. Some of the civil works initiated during the first two years encountered administrative, technical and financial problems, and failed; new contracts had to be negotiated or retendered. It was not until the end of 1979 that project execution really began to get underway. 4.02 Subsequent project execution was affected by insufficiencies in the original designs and the additional deterioration that occurred in the period elapsed between engineering completion and actual start-up of project execution on the roads to be rehabilitated. MOPT's regulatory and budgetary constraints contributed to inefficient implementation of the project, compounded by the weak performance of some contractors. However. euccessive HOPT administrations, particularly after 1983, impro-ved contract administration and project execution, and agreed with the Bank on the reduction of the scope of the civil works component which allowed completion, albeit late. 4.03 ;mplementation of an effective highway maintenance program was also impaired, despite budgetary increases, by ths delay in contracting the required technical assistance and by HOPT's weakness in following up on the recomsendations of the technical assistance. Execution of the equipment procurement program, of the vehicle weight control program and of the different technical studies were also hampered by HOPT's cumbersome procurement procedures and by frequent changes in criteria of successive administrations. V. COST ESTIMATES AND DISBURSEMENTS 5.01 The final cost of US$187.07 million is 21.72 above the initial estimate of $153.75 million, even with the project scope reduction and the fact that several components were not completed. This increase in costs with respect to appraisal estimates was mostly due to underestimated costs at appraisal, and cost overruns due to delays and higher quantities of civil works elements. The Highway Rehabilitation Program experienced a cost increase of 46C despite the 202 scope reduction because of the reasons given in para. 3.02. The Road Maintenance Program was unable to use, before the loan closing date, the funds allocated and the equivalent of the programmed price contingencies was then reallocated to finance the cost increases of the highway rehabilitation civil works. The Highway Engineering and Management Studies experienced a cost increase of 742, mainly because they required much more time and effort than originally envisaged. The physical component for vehicle weight control as not carried out and that of logistic support was only partially implemented. 5.02 Disbursements lagged about 18 months behind appraisal estimates from the start and during the first five years (1979-83), when 85? of the loan was disbursed. The remaining 15 was slowly disbursed, as shown in the following tabulation, reflecting the slow pace of the construction works and the considerable delays in completing thems  _ 10 - DISBURSDENTS (USM millions) ACTUAL APPRAISAL ACTUAL AS OF FY TOTAL ESTIMATE APPRAISAL 78 0 15 0 79 0 43.0 80 10.9 69.0 16 81 42.3 84.0 50 82 63.7 90.0 71 83 75.0 90.0 83 84 85.5 90.0 95 85 87.4 90.0 97 86 87.8 90.0 98ol a/ About 2.2 million were cancelled. V'. ECONOMIC REEVALUATION 6.01 The Seventh Highway Project was justified at appraisal, mainly on the basis of quantifiable benefits accruing to road users from reduced vehicle operating costs and travel time which would result from improvements in road conditions. Highway Rehabilitation Program 6.02 Following the same approach used at appraisal, but applying a state- of-the art methodology to calculate vehicle operating costs, every one of the 33 civil works contracts was analyzed separately to estimate its ex-post ERR. An assessment was also made of the ex-post ERR corresponding to the Road Rehabilitation Program as a whole. 6.03 For each contract economic benefits from user cost savings were calculated, mainly vehicle operating and passenger travel time cost savings resulting from the rehabilitated road sections, over a 10-year period of service life. The basic inputs used in the analysis weret (a) MOPT's actual traffic counts up to 1986 and future (beyond 1986) estimates of traffic volume and vehicle composition; (b) physical characteristics (predominantly roughness condition) of the road, once rehabilitated and also without rehabilitation taking place; (c) actual capital expenditures including supervision; and (d) estimates of the value of time saved by passengers riding vehicles on each road section. The streams of annual cost and benefits were expressed in constant 1985 US$. 6.04 Table 2 shows the investment costs, traffic volumes and ERRs whlch were estimated at appraisal and obtained ex-post for each contract and the whole rehabilitation program. The comparison, which shows generally lower ERRs than those originally expected is not entirely valid due to the use of a significantly different vehicle operating cost methodology. Actual traffic  - 11 - volumes are generally lower than those estimated at appraisal, and capital costs are substantially higher. In this respect, it must be pointed out, once again, that financing had to be provided from the follow-up loan (Loan 2121-CO) to complete the physical targets (and contracts) of the rehabillitation progrm. Twenty-nine of the 33 highway sections are nevertheless proven economic as well as the overall program. The ERR for the overall rehabilitation program is 231. Highway Maintenance Program 6.05 For the maintenance component, of which the loan financed the purchase of equipment, spare parts and laboratory elements, as well as technical assistance, no es-post economic evaluation was possible for lack of basic information on the presumably better maintained national network. VIl. ROLE OF TUE BANK 7.01 Although an average of 2.5 supervision missiouls were carried out per year, this effort was not sufficient given the complesxity of the project, the country wide distribution of the project works and HOPT's deep-rooted weakness in dealing with all the technical and administrative difficulties encountered. The Bank showed fleziLility in agreeing to changes in scope and time extensions, and in incorporating in following loans, those components and conditions which were not met under the Seventh Highway Project. This grolling over of loan obligations, also carried out under previous loans may however have contributed to weaken MOPT's perception and understanding of priorities and loan conditionality; 7.02 The Bank's major contribution was to help the Borrower focus upon the need for institutional strengthening to allow for more efficient implementation procedures, avoiding future delays in contracting and payments which caused most of the Project'. cost and time overruns. The First (Loan 2121-CO) and Second Highway Sector (Loan 2829-CO) Projects continue to pursue institutional improvements. VIII. CONCLUSIONS 8.01 The project was not fully successful in meeting the objective of rehabilitating 978 km. about 200 km were transferred to be completed under Loan 2121-CO. Nevertheless, the rehabilitated roads are benefitting the economy by reducing vehicle operating costs, extending the useful life of past capltal expenditures, and providing adequate and safe levels of service to users. 8.02 The vehicle weight control program has a high priority to the road transport industry. However, the scales and equipment were not purchased and the component had to be cancelled by the Bank. At present, the contract for five portable scales has just been completed under Loan 2121-CO. 8.03 Although the physical portion of the maintenance component was completed (equipment and spare parts were purchased as planned), the institutional strengthening objective was not achieved. Low Governmnt  - 12 - co itmnt and interest in the project were key factors contributing to reduce the impact of the technical assistance, hinder acquisition of vehicle weighing scales and not monitor actual maintenance performed and its cost- efftct4veness. 8.04 The Project's short-falls show that HOPT needs further institutional strengthening to improve its management capabilities in key areas, viz: (a) Preparation of engineering studies; (b) procurement and contracting procedures; (c) administration of contracts; (4) planning, budgeting and finencial controls; (e) road maintenance administration including cost-based budgeting for routine maintenance works; (f) pavement and equipment management systems; (h). information systems; and (i) personnel training. Tosue broad areas are being addressed by the subsequent First and Second Highway Sector Projects (Loans 2121-CO and 2829-CO).  - 13 - TABLE 1 COLOMBIA SEVEMN? RIGMWAY PROJECT LOAN 1471-CO PROJECT COMPLETION REPORT Proiect Cost Estimate vs. Actual 1, Actual Cost as a Proportion of Original Apiraisal 2/ Actual Estimate - X Rehabilitation Program 109.19 159.31 146 - Civil Works 101.45 147.97 146 - Supervision Services 7.40 11.31 153 - Coordination 0.34 0.03 9 Vehicle Weight Control Program 9.25 .51 6 - Studies 0.25 .51 204 - Equipment and Civil Works 8.18 - - - Supervision 0.82 - - Road Haintenance Program 33.11 25.07 76 - Source Material Inventory 1.00 1.60 160 - Training 0.03 - - Medellin-Rio Negro Access Road 0.25 0.55 220 Logistic Support 0.95 - _ TOTAL PROJECT 153.75 187.07 122 11 Cost of project under new scope - Reduced Rehabilitation Program and cancellation of purchase of Vehicle Weight Control Equipment. 2/ Includes contingencies.  '"IMPR w -u am aeum puauuI mol 8o01