India - Second Bombay Water Supply and Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9265 PROJECT PERFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) DECEMBER 31, 1990 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. Country Exchange Rates (Yearly Averages) Currency and (Abbreviations) Rupee (Rp) Year Rupees/USS 1978 (Project Approved and Effective) 8.19 1979 8.13 1980 7.86 1981 8.66 1982 9.45 1963 10.10 1984 11.36 1985 12.37 1986 12.61 1987 12.96 1988 (Project Closed) 14.60 Covernment of India Fiscal Year April 1 - March 31 Acronvms GOI - Government of India BMC - Bombay Municipal Corporation ICB - International Competitive Bidder LCB - Local Competitive Bidder TH* WORLD SAm FOR OFFICIAL USE ONLY WagtoM4n. 0 C. 20433 U.S A Office of Director-aeeral OperanIms avaluation December 31, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on India Second Bombay Water Supply and Sewerage Project (Credit 842-IN) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on India - Second Bombay Water Supply and Sewerage Project (Credit 842-IN)" prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) TABLE OF CONTENTS Page No. PREFACE ............................................................. ..... . BASIC DATA SHEET .................................................. ii EVALUATION SUMMARY ................................................... iv PROJECT PERFORMANCE AUDIT REPORT I. Project Summary ................................. ........... 1 A. Background .....................................1...... 1 B. The Project and Its Objectives .......................... 3 C. Water Supply ........................................... 3 D. Sewerage ....................................... ...... 5 E. Implementation .......................................... 7 F. Procurement ....................................... . .10 G. Performance of Consultants and Contractors .............. 12 H. Institutional Development ............................ 14 I. Operations ...... . .............. ......................... 15 J. Financial Aspects .............. ................... 16 K. The Role of the Bank .................................. 18 L. Economic Rate of Return .. ........................ ... 19 II. Conclusions and Lessons .... ................. ...... .... 20 ANNEX 1 Comments from the Borrower .......... .......... .....22 PROJECT COMPLETION REPORT PART I - BANK PERSPECTIVE .................................... 26 PART II - BORROWER PERSPECTIVE -...................... ...... .35 PART III - PROJECT PROFILE DATA o .............. ........ ..... 44 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. 1 PROJECT PERFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) PREFACE 1. This report presents the results of the Performance Audit of the Second Bombay Water Supply and Sewerage Project for which an IDA Credit of US$196.00 million was approved on July 25, 1978. The Borrower, India, made available the proceeds of the Credit "on ; ; normal terms" (Development Credit Agreement, Section 3.01 (b)) to the StatL of Maharastra which, in turn, relent the proceeds to the Municipal Corporation of Greater Bombay (MCGB) on terms of 25 years. including a grace period of four years and at interest rate of 6-3/4% per annum. 2. The Credit Agreement was signed on November 13, 1978 and the Credit became effective on June 12, 1979. The original closing date of the Credit was March 31, 1985 but this was extended three times to March 31. 1988. The last disbursement was made on August 27, 1988 at which time the Credit was fully disbursed. 3. The PPAR is based on the Project Completion Report (PCR) of the project prepared by the Asia Regional Office and Part II by MCGB. In preparing the PPAR,, OED reviewed the PCR, the Staff Appraisal and President's Reports, the legal documents and Bank project files, and the transcript of the meeting of the Executive Directors at which the Credit was approved, and discussed the project with involved Bank staff. An OED mission visited India in March 1990 and discussed the project experience with central and state government and MCGB officials and visited several of the facilities constructed under the project. 4. The Audit finds that the PCR gives a brief and selected but concise account of the project experience and draws appropriate conclusions. The PPAR further analyzed certain aspects of the PCR's findings and provides independent comments and conclusions and additional findings on various aspects of the project. 5. Copies of the PPAR were sent to the Government and the implementing agency for comments. The comments received have been incorporated in the report as appropriate and reproduced as an Annex to this report. ii PROJECT PiRFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) BASIC DATA SHEET KEY PROJECT DATA Item Appraisal Revised Actual Total Project Cost (US$ million) 311.6 625.0 Credit Amount (US$ million) 196.0 196.0 Credit Negotiations (Month/Year) 06/78 06/78 Board Approval 07/78 07/78 Credit Signing 11/78 11/78 Credit Effectiveness 06/79 06/79 Credit Closing 03/85 03/88 03/88 Project Completion 08/85 09/88 09/88 CUMUIATIVE DISBURSEMENTS (US$ million) FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 Appraisat Estimate 1.0 17.0 50.6 99.6 150.2 187.0 196.0 196.0 196.0 196.0 Actual 0.0 3.0 12.9 17.2 27.8 51.8 87.8 121.1 168.9 196.0 Actual as % of Estimate 0 18 25 17 19 28 45 62 86 100 STAFF INPUTS (Staff Weeks) FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 TOTAL PreappraisaL 33.5 33.5 AppraisaL 29.1 29.1 Negotiation 1.2 1.2 Supervision 2.0 7.7 10.6 13.5 16.8 22.8 19.4 16.5 12.9 20.7 142.8 Other 2.4 .2 .8 5.4 .4 9.2 Total 63.8 2.0 10.1 10.9 14.3 16.8 28.2 19.7 16.5 12.9 20.7 215.8 iii MISSION DATA No. of Purpose Mo/Year DAyAs Persuns Identification 07/76 7 1 Preparation 05/77 7 1 Appraisal 08/77 15 1 Board Presentation 01/78 28 2 Supervision 1 12/79 7 2 Supervision 2 05/80 5 2 Supervision 3 03/81 7 2 Supervision 4 01/82 7 2 Supervision 5 07/82 7 2 Supervision 6 02/83 10 2 Supervision 7 0'2/84 28 4 Supervision 8 10/84 13 2 Supervision 9 03/85 13 4 Supervision 10 02/86 4 1 Supervision 11 05/86 10 1 Supervision 12 11/86 20 3 Supervision 13 05/87 12 2 Supervision 14 07/88 5 2 iv PROJECT PERFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) EVALUATION SUMMARY Background 1. In India, the provision of water supply and waste disposal is the responsibility of the respective states which, normally, exercise these functions through various government departments and agencies. However, in the case of most large cities, the full responsibility is delegated to the municipal authority. 2. From independence to the late 1970s, competing demands for resources restricted sector investments to 1% to 2% of total public expenditures with the consequence that, according to the World Health Organization's (WHO) 1975 "Mid Decade Review," in India, only 31% of the population had access to safe water supply and only 20% had acceptable waste disposal facilities. These figures were lower than the average for all developing countries (PPAR, paras. 1 and 2). 3. The project under review was designed to serve the Greater Bombay area., Bombay, the second largest city of India and the capital of the State of Maharastra, had an estimated 1977 population of 7.6 million. Lack of adequate investments and general neglect resulted in deplorable water and sewerage services in the city and not until the mid 1960s was there a serious attempt to develop comprehensive, long range, sector development plans for improving the situation at which time the Government of India (COI) requested the Bank to assist Bombay in the financing of water supply improvements (PPAR, paras. 3, 4, and 5). 4. Following an extensive preparation period, the First Bombay Water Supply and Sewerage Project was appraised in 1972 and IDA Credit 390-IN, for US$55.0 million was approved on May 15, 1973. The project, forming the first stage of a long range water supply and sewerage development program, consisted of the provision of additional water supply source capacities, treatment for all water supplies for the city and transmission and distribution improvements and extensions. On the waste disposal side extensive additional sewer network and new pumping and treatment/disposal facilities were to be provided. The project also provided for institutional improvements for the municipality's Water Supply and Sewerage Department (WSSD). 5. The project encountered severe implementation problems. The consequent delays and the projected large cost overrun (140%) resulting from the re- estimation of costs on completion of the final designs, necessitated a restructuring, under which the majority of the proposed sewerage investments were postponed. The revised project was completed with a 2-1/2 years delay with the Credit being closed on June 30, 1981. Even with the postponement of the sewerage V investments the revised, final, cost of the project was US$250.8 million, 58% over the appraisal estimate of US$158.2 milli .n equivalent. This was largely due to: (i) low initial cost estimates; (ii) changes resulting from final design and (iii) cost escalation over the construction period. The most successful element of the project was the institutional improvement of WSSD and, in particular, its excellent financial performance. The project was subjected to a full evaluation by OED and Project Performance Audit report No. 5875 recorded the project experience (PPAR. paras. 5-7). The Proiect and Its Obiectives 6. The objectives of the Second Project were identical to the objectives of the Fist project and, indeed, the entire program namely the progressive improvement and extension of Bombay's water supply and sewerage services and to develop an efficient and financially self supporting water/sewerage entity. 7. The more specific objectives for the water supply services, however, did not include targets for the achieving of a continuous, 24-hour, supply. The immediate and long range targets only specified construction of incremental source, production, transmission and distribution facilities and limited improvements in the hours of supply were projected. Because of this "incremental" approach no detailed demand forecasts were made and the entire long range planning process lacked an ultimate target on which rational staging of the long range program could be based. 8. The Audit had extensive discussions with WSSD and the consultants and urged. the development of specific plans for the provision of 24-hour water supply for the entire Bombay. The present system, in effect, does provide such service for those who can afford in-house storage but subjects low income consumers to an unsatisfactory service ard the whole of Bombay to the danger of contaminated water supply due to the repeated de-pressurization of the pipe network. In the Audit's estimate, the provision of 24-hour supply is not out of reach, technically or financially (PPAR. paras. 10-13). 9. The water supply components of the project, as designed, consisted of the construction of intake, treatment and transmission facilities for an additional capacity of 450 m1d, pumping, storage and distribution improvements, meter replacement and repair program and equipment for the control of Unaccounted for Water (UFW). The total estimated cost of the water supply components was US$114.5 million equivalent (PPAR, para. 14). 10. In terms of quality and coverage of service, the sewage collection and disposal was far below that of the water supply. Only about 44% of Greater Bombay was connected to sewers and there was no environmentally acceptable-disposal system. The housing densities and the soil conditions coupled with high water tables do not permit the use of alternative waste disposal methods (pit latrines etc.). 11. The sewerage works proposed but postponed under the First project were, with substantial additions, included in the Second Project. These comprised of extending the collector network to virtually the entire Greater Bombay, rehabilitation of existing and construction of new pumping stations, two major vi and one minor sea outfalls and, in the inland areas, aerated lagoon treatment plants. The estimated cost of these facilities was US$94.0 million equivalent. 12. The provision of stores, vehicles, engineering services and contingencies and training added another US$203.1 million, raising the to. 1 estimated cost of the project to US$411.6 million or, in local currency, Rs 3,540 million (PPAR, paras. 14-17). Project Preparation 13. The appraisal of the project was based on preliminary design and final engineering design was to be carried out during implementation by consultants to be appointed as a condition of effectiveness. In the Audit's view, not having final design at appraisal was a serious omission in view of the size and complexity of the project. Procurement problems, familiar from the First project which were not expected to reoccur but did, delayed the appointment of consultants by 18 months. creating a corresponding delay in effectiveness and start up and 2-1/2 years after Board approval only 3% of the credit was disbursed. Furthermore serious design errors which subsequently delayed the sewerage works might have been uncovered early had the designs been available at appraisal. 14. Apart from the delay of final design, project preparation was generally efficient and appeared to augur well for future progress. Unfortunately this was to be a false hope. Bank resources for the preparation were generally adequate with the notable exception of not providing special expert services to oversee. the preparation for the submarine sewer outfalls. The required expertise to handle these relatively rare and technically complex structures was clearly not available in the Bank (PPAR, paras. 17-20). Implementation 15. Project implementation became a long and arduous process. The water supply facilities started production in 1986 but a number of major components, including a critical Master Balancing Reservoir will not be completed until mid/late 1990 with completion costs financed from WSSD resources. However, emergency solutions devised permit 90% utilization of the additional capacities. The completed components show good quality construction and efficient operations. The relatively trouble free implementation of the water supply components and the, apparently, consistently satisfactory financial performance of WSSD seem to have resulted in relatively perfunctory Bank supervision in these areas, however, without adverse effects (PPAR, paras. 21 and 23). 16. By contrast, the implementation of the sewerage components was little short of disaster and dealing with this, together with the exceptionally troublesome procurement process, dominated Bank supervision throughout the project's life (see also para. 22). Although the sewage collector network was essentially completed as planned, none of the major pumping stations (the largest ever built in Asia) or the treatment/disposal facilities have, as yet, been completed. Current estimates put the completion of these works at 1994-1995, at the earliest and at a cost exceeding appraisal estimates by about the factor of three. ds situation was brought about by a combination of factors. including vii incompetent management, serious design errors and incompetence in procurement, material shortages and appointment of unqualified contractors (PPAR, para. 22). 17. Bank supervision of the sewerage components while intensive, lacked sufficient expertise and decisiveness. Only a late 1989 supervision report revealed the disastrous situation in full. The Audit has confirmed the complete validity of this report, .ncluding the exceptionally poor constructio workmanship, partially completed structures abandoned by contractors three year. ago and expensive electrical and mechanical equipment which, stored on site without protection, deteriorated to the point of uselessness. It is essential that the findings of the 1989 super--sion report and of the Audit be adequately considered In the Third Project .qich is funding the completion of these components (PPAR. para. 24 and 25). 18. Of the wide spread problems of the sewerage components by far the most serious is the issue of the two main submarine outfalls which were to discharge the major proportion (60%) of Bombay's sewage into the Bay of Bombay. The award of this large contract -- two outfalls, each 3,000 meters long and 3.5 m diameter -- took over two years (1982-84) and the first pipes were not laid until February 1986, one year after the original closing date of the credit. Subsequent discovery of serious design problems, followed by the inability/unwillingness of the contractor to proceed, resulted in the dismissal of the consultants, the eventual abandoning of the works by the contractor and the latter taking legal action against BMC for substantial damages. 19. WSSD appointed another consultant in January 1988 to report on the remedial. actions required on the sewerage works. The consultant submitted his report in November 1989 recommending the calling of 'Jids for alternative design solutions for the outfalls and redesign and remedial actions for the main pumping stations. WSSD is in the process of considering the report and has approached the Bank for financial assistance for the design and construction costs. 20. In the absance of the sea outfall disposal system and the delay in the construction of the aerated lagoons, the completed collector system discharges raw sewage at various points into inland waterways and the sea creating unacceptable environmental pollution and health hazards, essentially negating the projected health benefits of the project. An additional environmental issue arising is that the original design of the outfalls envisaged the construction of pretreatment and disinfection facilities at each outfall. Recent reviews confirmed that these facilities can not be built due to lack of available land and the potential nuisance effect of such plants in the heart of Bombay. As the sh.Ilow depth of the offshore waters will not permit adequate dilution of raw s dage at the 3,000 m distance from the shore, the probable solution is likely to be the extension of the outfalls to a length of some 8,000 meters (PPAR, paras. 25-27). 21. The necessary changes in the project which emerged at final design, together with the accumulated delays and high inflation escalated the project costs. Estimates in 1983 indicated a potential final cost of Rs 7,594 million compared to appraisal (1978) estimates of Rs 3,540 million. As no financing provisions could be made for the additional cost, the project was revised to a target cost of Rs 6,556 million and some components were postponed to a third viii project (already in preparation at the time) with an estimated cost of Rs 6,100 million. This project is now under way with Bank financing under Ln. 2769 of US$40.0 million and IDA Credit 1750 of US$145 million (PPAR. para. 28). Proctrempnt 22. Procurement problems and delays were a prominent feature of the First project but they scaled new heights under the second project. File references to poor bid documentation, design errors, alleged political interference and collusion, unfair evaluations, all were present.' These resulted in delays, frequent rebidding of contracts and persistent complaints by bidders. Dealing with these problems occupied an unreasonable proportion of the time of Bank supervisory staff as well as forming the bulk of the project correspondence. It is noteworthy that the majority of the procurement problems occurred on the sewerage components, a further indication of the poor management of this part of the project. While the Bank was diligent in pursuing the procurement problems it has never taken a itrong stand to stem the tide and, considering the size and complexity of the project (some 92 major contracts were awarded) it would have been prudent to utilize a procurement expert which would have permitted the supervision staff to concentrate effori:s on the technical problems of the project and would have also reduced the problem of imperfect bid documents (PPAR, paras. 29-32). Performance of Consultants and Contractors 23. The consultants for the water supply components, an Indian and foreign, joint venture (under the First project the foreign consultant led, in the Second the roles were reversed) performed to full satisfaction. The Audit's only criticism is the lack of proposals to provide 24-hour supply for Bombay. The consultants, again a foreign/Indian joint venture, on the sewerage works did not perform well and were, eventually, dismissed. In fairness, the Audit notes that the foreign consultant encountered difficult and hostile relationship with some WSSD staff and had only advisory role in construction supervision. While this may limit his responsibility for the poor workmanship noted, in no way does it excuse the major design errors, considering its international reputation. Other consultants providing financial and management system assistance performed satisfactorily (PPAR, paras. 33-35). 24. The performance of construction contractors and equipment suppliers presents a very mixed record. Some of the water supply facilities were constructed to high standard and, apparently, efficiently while a few are still far from finished with no work in progress. On the sewerage side virtually all the major components, which are only partially complete, show very low standard of workmanship and some are essentially abandoned by the contractor. The Audit concluded that lack of pre-qualification. inadequate supervision and WSSD's inability or unwillingness to apply contractual remedies resulted in the massive Government comments express reservations on these matters. The Audit considers that the magnitude of the problems warrant the highlighting of the issues recorded on the files. ix loss of resources in these works. On the incomplete sewer outfalls the foreign contractor, of good repute, started well but soon ran into major problems and, eventually, abandoned the works. The untenable relationship that has developed among the contractor, consultant and WSSD staff undoubtedly contributed to the problems (PPAR, paras. 36 and 37). Institutional Development & Operations 25. Under both the First and the Second projects Bank reports gave high marks for the institutional development of WSSD. The availability of skilled manpower, sound training program and its relatively affluent status certainly raised WSSD well above the average Indian and, indeed, other developing country institutions of similar nature. However, the generally high level of technical competence (verified by the Audit) existing makes it all the more difficult to understand the utter failure to manage the sewerage investments. The often quoted "lack of familiarity with sewerage works" can not be accepted as an excuse, considering the vast amount of accumulated technical experience in the Corporation. In the Audit's view the principal problems were the lack of decision making at the highest levels and a peculiar, traditional, promotion system which, in most senior positions, often prevents the appointment of "the best man" for the job. The political sensitivity of senior staff and outside interference seems to account for the appalling procurement process. The exceptionally candid Part II of the PCR, produced by the borrower, is a highly encouraging sign of the recognition of the problems by BMC. 26. The operation and maintenance of the major water supply facilities visited, by the Audit were satisfactory by any standard. Maintenance of the distribution facilities were more difficult to judge. The complex process of manipulating the intermittent supply system is, for the time being, satisfactory but likely to become unmanageable in the future because the increasing precision required to direct the flows into different parts of the city. Since most of the sewerage facilities are incomplete, the Audit had no means of forming a judgement on sewerage operations (PPAR, paras. 38-40). Financial Aspects 27. With the current level and structure of the combined water/sewerage charges and water/sewerage taxes the revenue generation of WSSD is highly satisfactory. For the past several years. total revenues exceeded total direct expenditures 2- 1/2 to 3 times. Actual contribution to investment from internally generated sources have, consistently, exceeded the 40% covenanted in the Credit Agreements and BMC has been able to cover the substantial cost overruns which characterized all its projects. 28. Nevertheless the WSSD has serious emerging problems, the principal among them is the steadily increasing accounts receivable which, in 1989, reached nearly 69%. Of the total, outstanding, arrears of Rs 1,356 million nearly one fifth is over three years old, mostly due from government and industrial organizations. At the same time, provisions for bad debts is a mere Rs 51 million and no debts have ever been written off. The Credit covenants require no more than 20% accounts receivable. The resulting reduced liquidity has been x largely compensated by substantially reduced annual capital investment requirements due to the extensive delays in construction. 29. The 1988/89 audit report on WSSD's accounts, although only marginally qualified, severely criticized several aspects of the financial management, among them the particularly poor performance of the metering/meter repair process which has resulted in reduced water revenues despite substantially increased supplies. Another worrisome aspect is the limited information on UFW. Although the estimated 15-20% appears low, the lack of detailed information (due to the intermittent supplies) and the poor metering practices cast some doubt on the validity of these figures. 30. The generally sound financial performance of WSSD seem to have given rise to some complacency and a tightening of the management is required. Perceptions of excess cash generation and overcharging for the still inadequate services appear to be forming and increased levels of this may jeopardize WSSD's ability to continue to impose adequate tariff levels in the future (PPAR, paras. 42-44). The Role of the Bank 31. Th- Bank's sustained and substantial (total lending US$336 million) support for Bombay's water/sewerage services is both commendable and justified. It is, therefore, surprising that this level of commitment to lend was not accompanied by the allocation of adequate resources, commensurate with the complexities of the project, particularly at the engineering level. The Bank never seemed to have recognized the exceptional scope and complexity of the projects (program). and did not accord any special attention to them. This lack of attention, and possibly Bank staff's preoccupation with the monumental procurement problems, undoubtedly contributed to the lack of early solutions to the project's implementation problems. It has also generated the only criticism of the Bank by the top management of BMC which evidently relies heavily on the Bank for early warning of problems. Future Bank assistance for the completion of the delayed work and future development is still needed and expected, but, if granted, it must be on the basis of utmost professionalism (particularly in the technical areas) without fear or favor (PPAR, paras. 45 and 46). Economic Analysis 32. The elaborate economic analysis presented in the SAR could not be repeated either by the PCR or the Audit, due to the non-completion of the project (PPAR, para. 47). Conclusions and Lessons 33. The conclusions and lessons emerging from this project are both simple and obvious. The size and technical complexity of the project demanded a higher level and more extensive technical supervisory input than the Bank, and WSSD, have allocated. Previously good performance on water supply works (which continued under the Second project) may have led to complacency but the results were disastrous for the sewerage works resulting in financial losses, delayed benefits, and environmental damage. xi 33. Institutional and financial performance were, on the whole, highly encouraging and should serve (minus the shortcomings mentioned) as a good example for other agencies in India and elsewhere. 34. The Bank's contribution to the water supply and sewerage developments in Bombay are highly valued but, in this case, in the Audit's view, the Bank's performance was found wanting in the areas of technical expertise and the handling of the procurement issues (PPAR, paras. 48-55). PROJECT PERFORMANCE AUDIT REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) I. PROJECT SUMMARY A. Background 1. In India, the responsibility for the provision of water supply and waste disposal services rest with the states, although the central government exercises considerable influence on sector development through provision of external financing and general policy directions. The states exercise these functions through various government departments and agencies but, in many cases, the full responsibility is delegated to major municipalities. 2. From independcnce to the late 1970s, the states' efforts to meet the rising demand for services, caused by the rapidly increasing population and unprecedented urban growth, were limited, by competing demands for resources, to sector investments representing only 1 to 2% of total public expenditures. As a result, the already inadequate service levels continued to decline and, in 1975, it was estimated that only 31% of the population had reasonable access to safe water suppl, and only 20% had acceptable waste disposal facilities. According to the World Health Organization (WHO), these levels were lower than the average for all developing countries for which the corresponding levels were reported to be 38 and 33%. 3. The project under review was designed to serve the Greater Bombay area, a part of the Bombay Metropolitan Region, in the State of Maharashtra. Maharashtra is the third largest state in India and, at the time of appraisal, had a population of about 59.3 million of which some 18.9 million were located in urban communities (7.6 million in Bombay alone) and 40.4 million were regarded as rural. Government estimates showed that of the 11.3 million urban population, outside Bombay, some 10.5 million had access to piped water of varying quality and quantity, some 4 million had water borne sanitation and about 27 million (66%) of the rural population had access to wholesome water -figures clearly well above the national average. To further improve the service levels in the State, (excluding Bombay) the Maharashtra Water Supply and Sewerage Project was launched in 1979 with IDA financing of US$48.0 million (Credit 899-IN). The project encountered severe implementation problems and, although the Credit was fully disbursed and closed on June 30, 1985 (after one year extension), it was far from complete at the time and current estimates show an 88% expected cost overrun (appraisal cost estimate: US$100 million) on eventual completion. OED's Project Performance Audit Report No. 7202 recorded the project experience. 4. Bombay, the largest port and industrial center and the second largest city in India, is the capital city of the State of Maharashtra. The Greater Bombay area covers some 440 square kilometers and had a 1977 population of 7.6 million. From the 1940s onward the lack of investment, appropriate organizational and management systems and general neglect led to a deplorable state of the city's 2 water supply and, even more so, of the waste disposal services. Water supplies were intermittent, providing only a few hours supply to the different parts of the city and the water received only partial treatment. The sewer system covered only part of the city and disposal was inadequate. During the rainy season storm water overflows forced raw sewage onto the streets, creating extreme health hazards. The population densities and the local soil conditions did not permit effective use of individual, on-site, disposal systems. 5. The first serious attempts at comprehensive long range improvements surfaced in the mid 1960s when the Government of India (GOI) requested the Bank to assist in the financing of water supply improvements. After a very extensive preparation period, during which the plans were refined, the First Bombay Water Supply and Sewerage Project was appraised in August 1972 and an IDA credit (Credit 390-IN) for US$55.0 million was approved on May 15, 1973. The project represented the first stage of a long term water supply and sewerage development program for Bombay. As designed, the project consisted of the construction of additional source capacities, water treatment facilities to fully treat all water supplied (for the first time) and distribution improvements. On the waste disposal side some 139 km of sewer were to be laid and new pumping and treatment/disposal facilities were to be constructed. The project also provided for the development of the Municipality's Water Supply and Sewerage Department (WSSD) in all areas of planning, operations, management and training. The total estimated cost of the project was US$158.2 million equivalent. 6. The implementation of this project also encountered major difficulties. Administrative and procurement delays and the need to redesign the water, treatment works following pilot plant tests led to a slow start. Subsequent reassessment of the implementation schedule and cost estimates revealed the likelihood of massive cost overruns, in the order of 140%. This, in turn, prompted a further revision which resulted in the postponement oi substantial parts of the proposed sewerage investments. During the construction period, acute shortages of cnstruction materials (cement, sand, steel), extensive labor problems and the large scale migration of skilled workers to the Middle East compounded the delays. The revised project was, ultimately, completed in May 1981 and the Credit was closed on June 30, 1981, a delay of 2-1/2 years. The final cost of the project was US$250.8 million equivalent, some 58% over the expenditures estimated at appraisal. This was largely due to: (i) low original estimate of unit costs; (ii) changes resulting from the final designs and (iii) cost escalation during the project period. 7. The project was su .ted to a full evaluation by OED and the Project Performance Audit Report keeport No. 5875) was issued in October 1985. The PPAR highlights the extensive implementation delays and the consequent fact that the substantial increase in available water supplies (450 mld or 30%) did not result in improved service hours but merely sustained the existing levels. The postponement of the majority of the planned sewerage investments further aggravated the waste disposal problems, -obably negating the health benefits of the improved quality of water supplijs. Or the positive side, high praise is given to the quantum improvements in WSSD'L management and operations and, in particular the excellent financial performance of the entity. In spite of high accounts receivable, yet to be improved billing and collection, MCGB, over the period 1975-81, managed to contribute 71% to investments from 3 internal cash generation, greatly exceeding the 40% covenanted target. Tariff increases were timely and appropriate. The tariff structure is designed to provide a very high level of cross subsidy from industrial/commercial consumers to domestic consumers at or below the poverty level. 8. The Second Bombay Water Supply and Sewerage Project (Credit 842-IN, US$196.0 million approved on July 25, 1978), the subject of this Audit, was a logical continuation of the First project and, in fact overlapped with it by nearly three years. The Second project, in turn, was followed by the Third Bombay Water Supply and Sewerage Project (Credit 1750/Loan 2769-IN, for US$185.0 million, approved on December 16, 1986), now under implementation. B. The Project and Its Objectives 9. The simple and logical objectives of the project were the same as those of the First project (and which are likely to remain applicable for several more stages of the program), that is to pi )gressively improve Bombay's water supply services - eventually achieving a continuous 24 hours supply for all the population; to expand the sewer collection network and provide environmentally safe disposal of sewage and to develop an efficient, well managed and financially self supporting water supply and sewerage entity within the Bombay Municipal Corporation. C. Water SuDly 10. According to historical data, the last time the population of Bombay enjoyed uninterrupted, 24 hours, water supply was in the mid 1940s. Since that time, despite substantial investments in additional facilities which, in 1976, provided a total yield of 1600 million liters per day (mld), Bombay's water supply has been intermittent. The hours of supply vary throughout the supply area, depending mainly cn the operating characteristics of the system and the available distribution storage but, in 1976, the city's 7.3 million population received the following service: Supply Hours Population % 2 - 3 36 4 - 6 55 6 - 8 9 House connections served about 4.8 million people while some 2.5 million were supplied by standpipes. 11. The first, coherent, long term plan for improving the water supply (and sewerage) situation in Bombay were drawn up in 1971. However, the nearly three decades of living with intermittent supplies appear to have elevated this wholly inadequate form of service to nearly "normal" level and there is little in the available documentation which would indicate that 24 hours supply was other than a distant dream. Staff Appraisal Reports (SAR), for both the First and Second projects, state that, for reasons of shortage of funds, management and implementation capacity and the high cost of developing new sources, the water supply services will show only slight improvement and 4 "... supplies will continue to be intermittent for the foreseeable future." However, the Audit could find no presentation showing what would have been required (at any stage) to provide continuous supply either in the terms of additional source works or reinforced distribution system (or both) and funding. It is, therefore, not clear from the project documents whether such plans were ever developed and then scaled down or the various stages of the long term program were defined on the basis of some predetermined funding (or other) limits without full analysis of the various alternatives although, each project is stated to have been the least cost solution within the technical alternatives. 12. A peculiar consequence of this planning approach seem to have been that the normally fundamental first step in the planning of any water supply project, the establishment of detailed demand projections, could be foregone. The SAR does not, in fact, analyze the actual water demand but presents only global projections of "Average (per capita) Available Quantity for Domestic Consumption" for a given design production capacity and projected population in any year. As it was, apparently, decided a priory, by all concerned, that the "demand can not be met" both the population and the per capita consumption projections had only academic significance. The Audit is inclined to question both the approach and its conclusions. The 1976 data indicates that of the 7.3 million population, 2.5 million (slum dwellers) were served by standpipes and 4.8 million by connections, of which "a large proportion (50%?) lived in single room tenements." Bank experience indicate that physical factors limit water use to 40 and (say) 70 lpcd at standpipes and "single rooms" respectively. It follows that the remaining 2.4 million consumers had over 286 lpcd available to them, indicating that, given a strict quota imposed on industries, a continuous, 24 hours, supply to domestic consumers ought to have been within the capacity of the system. 13. During the field visit, the Audit had the opportunity to discuss this issue, in detail, with WSSD and its consultants and, also, to review briefly the consultant's draft feasibility report for the next (fourth) extension of Bombay's water supply. It was clear from the report that the philosophy of the "intermittent supply" still prevails as the report merely considered the "next installment" of augmentation without aiming for a 24 hour supply. The Audit strongly urged WSSD to have this matter reviewed so that, at least, the scale of the needed investments be known. A very brief aasessment seems to indicate that this may not be out of reach as the principal constraint appears to be in the distribution system rather than in the source works. The main problem is to find suitable sites for service reservoirs within the inner areas of Bombay. The multitude of outlets from existing reservoirs and their precisely scheduled control (fractional opening and closing valves) will sooner or later present insurmountable operational problems. 14. In the event the limiting criterium for the additional production capacities under the project was the storage/release capacity of the Bhatsai Dam, the principal new source of water for Bombay, which was under continuous, staged, construction by the State of Maharashtra. The second of three identical stages of this release capacity was 450 mId and the main production and transmission facilities were sized for this volume. Other water supply components (including some postponed from the First project) were for storage, 5 pumping capacity and distribution system expansion, improved metering and leak detection, renovation of existing transmission mains and provision of vehicles and equipment. According to the SAR some 47% of the water connections were metered but about 40% of these meters were not functioning due to sediments in the untreated water. A systematic replacement and repair program was to be initiated. The SAR reported 15% unaccounted for water (UFW) at appraisal. This was expected to rise to about 20% due to increased pressure and to fall, again, as a result of improved controls. In view of the reported shortcomings of the consumer metering, these figures may be on the conservative side but, in any case, the intermittent supply system makes realistic UFW control or even its measurement impossible. The estimated cost, at appraisal, of the construction of the proposed water supply facilities, excluding engineering and contingencies was US$114.5 million equivalent. D. Sewerage 15. In terms of quality and coverage of service, the sewer system has been lagging far behind even the inadequate water supply service. At the time of appraisal, almost the whole of the city of Bombay was covered by a sewer network but, with the suburban areas included, only about 44% of the population of Greater Bombay was connected to the sewers. Even this coverage relied on an old, undersized and neglected system in which most of the pumping facilities were inoperative and no treatment was provided. Raw sewage was carried by storm drains, overflowing onto the streets and the various receiving waterways and an inadequate outfall delivered untreated sewage to the Arabian sea causing extreme pollution on the beaches and in Bombay harbor. Alternative, on site, disposal methods (pit latrines, septic tanks) proved inappropriate for Bombay due to the housing densities and soil conditions. The substantial improvements proposed under the First project were, virtually, all postponed as the delays and cost overruns forced restructuring of that project and priorities were accorded to the water supply components. 16. The postponed works were, eventually, included in the Second project under which major improvements were targeted. These included extending the sewage collector network to, virtually, all areas of Greater Bombay, rehabilitation of all existing and construction of new pumping stations, the construction of two major and one minor sea outfalls and the construction of aerated lagoon treatment plants at four inland locations. Studies have also been carried out on possible reuse of sewage effluent for irrigation. The estimated cost of the construction of the sewage collection and disposal facilities, excluding engineering and contingencies was US$94.0 million equivalent. 17. The provision of stores, vehicles, equipment, engineering services, an extensive training program, physical and price contingencies and duties and taxes added another US$203.1 million raising the total estimated cost of the project to US$411.6 million. Expressed in local currency (appraisal exchange rates), the total cost was Rs 3,540 million. 18. The project, as appraised, was based on preliminary designs which were, for the water supply components, prepared under the consultant's 1971 long term program report, duly updated, while, for the sewerage components another 6 consultant prepared a comprehensive report in 1977. Detailed, final, designs for both parts were to be carried under the project by consultants to be appointed as a condition of effectiveness. The PCR (para. 7), discussing project preparation, cannot seem to be able to make up its mind whether this was a good or bad arrangement, although, in paragraph 24 (lessons), it categerically states that "detailed engineering designs should be completed ... prior to project appraisal." In fairness, the (Bank) authors of the PCR had little documentary evidence of the consideration given to the degree of preparation, at the time of the appraisal. The Audit, however, even without hindsight, would have no hesitation to say that, considering the size and complexity of the project, final design ought to have been required prior to loan approval. In fact, one could say, that Bank staff just "got away with it" since OMS 2.28, setting such requirements came into force in October 1978, two month after appraisal. It is true to say that the major water supply components were, virtually, a duplication of the facilities constructed under the First project (these were, in fact, still under construction at the time of appraisal) and their "preliminary design" could be considered adequate for cost estimating and scheduling. However, for exactly the same reasons, it should have been relatively simple matter to produce the final designs under the First project. The same can not be said for the sewerage works which were to be the largest ever executed in the region and the implementing agency had no experience in sewage works even approaching this magnitude. Perhaps equally important, Bank experience was also limited as submarine outfalls, of such magnitude are few and far between. 19. The total, overall, effects of not having final designs at loan approval are difficult to assess. The "insurance" of using up to 25% physical contingencies for undesigned work, as argued by the PCR, has its negative side since financing had to be secured for this, whether eventually utilized or not. It is clear that familiar procurement problems delayed the appointment of consultants for final design by some 18 month, creating a corresponding delay in effectiveness and project start. As a result, some 2 1/2 years after Board approval, only 3% of the credit was disbursed. In the longer run, major design problems on the large sewage pumping stations and the outfalls, which might have been uncovered early, came to light only very late in the project and which, to this day, prevented the completion of these vital components. The extra costs to be incurred for these components, due to these problems, are not yet known but are estimated to be in the order of 200 to 300% over the original estimates. 20. Apart from the issue of final designs, the preparation cf the project appear to have been, generally, efficient and the project documentation reveals remarkably prompt and effective response from the implementing agency on all early issues, indicating competent management and readiness to implement the project. Regretfully this did not continue on all aspects of the project in the later stages. On the Bank's side, resources for project preparation appear to have been adequate (although the use of an expert on submarine outfalls would have been prudent) and regional management commitment to the project was solid with the exception of a curious period, prior to appraisal, when another department, inexplicably, raised strong objections to the proposed investments in Bombay. 7 E. Implementation 21. The implementation of the project turned into a long and arduous process with the water supply facilities starting production in mid 1986 but the sewage treatment/disposal facilities are not likely to be completed until about the mid 1990s. In reviewing the implementation history of the project, correspondence and supervision reports reveal the distinctly different degree of attention devoted to different aspects of the project by the Bank. The difference appeared to be directly related to performance. The consistently good progress of the water supply components, soon after the start, elicited almost perfunctory (but adequate) reporting only. Tae consultants performed very well and worked harmoniously with WSSD staff and construction was relatively trouble free. The eventual delays (compared to appraisal estimates) were mostly due to acute shorta-e of construction materials, particularly cement, some land acquisition problems and, toward the end, certain contractors inability to perform. It should be noted that similar performance was given, by the same parties, under the first project. Another aspect, where minimum (but competent) Bank supervision was generally adequate, was the financial performance of MCGB. Sound financial performance was already established under the First project, and supervision reports continued to state that, at least as far as the financial covenant was concerned (40% contribution to investment from internal cash generation) WSSD consistently exceeded expectations. That all was not quite so perfect will be discussed later in this report. 22. In contrast to the two successful areas mentioned above, two other aspects virtually dominated the implementation process, both with disastrous consequences. First, procurement was a nightmare from the beginning and only got worse, absorbing an inordinate amount of Bank (and no doubt WSSD) staff time -- this will be reviewed in more detail later in the report. Secondly, the much delayed (naturally largely due to procurement problems) major sewerage components, particularly the two main sea outfalls, ran into major engineering problems which are yet to be fully resolved. Although much of the Bank's attention was focused, from the early days, on the outfall design, and later construction, the Audit has no doubts that adequate specialized expertise has never been deployed by the Bank on these large and rarely encountered components. This is well demonstrated by the year long argument in 1980, conducted by cables, letters and missions about the length of the proposed outfalls. MCGB wanted 3 km long ouatfalls on the grounds that only this length will do the job of environmentally safe disposal while the Bank, (not very convincingly) insisted on 1 km lengths, almost entirely on the grounds of lower costs. The Solomonic decision to call bids for both I and 3 km outfalls arrived in late 1980 (the 3 km solution prevailed). The Bank's "undermanned" approach was all the more unfortunate since it is made very clear in a succession of supervision reports that, presumably due to long preoccupation with water supply, MCGB also has never managed to field staff on the sewerage works of comparable caliber, experience and integrity, to that of its water supply department. 23. As mentioned above, most of the project's water supply components were, completed successfully albeit with significant delays, largely due to material shortages, strikes and land acquisition problems. However, in mid 1989, six 8 substantial works were still incomplete, all of them suffering contractual disputes. During the field visit the Audit found that the construction of a critical, 120 ml capacity Master Balancing Reservoir has been at a virtual standstill for some three years and will require, at least, another year to complete. In spite of this, about 90% of the capasity of the combined facilities is being be utilized due to some inventive emergency solutions employed by WSSD. Regretfully the PCR provided no cost data at all for comparing estimated and actual costs nor could these be obtained by the Audit in a desegregated form from the records of WSSD. 24. The preoccupation of all pa,ties with procurement problems and, in particular with the issue of the submarine outfalls appear to have diverted all attention from other, major components of the sewerage project with, possibly, very serious longer term effect. The first, comprehensive, engineering Bank supervision report, for many years, on the status of the project as a whole, was prepared in September 1989. This report is an extremely disturbing catalogue of management, design and implementation shortcomings, demonstrat-ing many years of neglect of vital issues and it appears to hold out little hope for the efficient operation of the sewerage facilities if and when they are eventually completed. 25. From the start, virtually every element of the massive sewerage works presented problems. The early hints of the documentation of lack of capacity within WSSD and the poor relationship with a consultant who's performance and staffing left much to be desired, blossomed into wide spread incompetence, accusations and counter accusations of collusion and corruption across the full spectrum of authority, management and staff. During the Audit's discussions with a wide range of officials of MCGB ample confirmation of this was obtained and it is also starkly spelled out in Part II of the PCR. The bidding process for and the approval of some 72 major contracts turned into an unending mess. The construction of the civil works and the provision and installation of equipment for 20 sewage pumping stations, ranging in capacities from 2 to 475 million gallons per day (mgd) were reported in 1989 (!) to be incomplete, full of poor quality work and deteriorated equipment which have been lying on site for years and will require reconditioning. Some of this equipment (and the pumping stations) are the largest ever installed in south Asia. The Auait regrets to have to fully confirm these reports. Two of the largest pumping stations are merely holes in the ground with no work proceeding. Associated buildings (control station, administration etc.) are mere skeletons (standing for some three years) exhibiting some of the poorest quality construction the Audit has ever seen. In addition, the kA'esign of the complex hydraulic regime of the Bandra pumping station has to be reassessed as the existing design will not permit stable control. Several other construction sites visited by the Audit are in similar state of incompleteness, with work at a standstill due to contractual disputes. 26. But still, the crowning pieces of the project were the two submarine sewer outfalls, again, comparable in size to the largest ever constructed. There is little in the project files on the selection of the design consultants which, on paper, appeared to have had the requisite experience. The design produced is not discussed and no independent expert seems to have reviewed it. The dispute regarding the length of the outfalls has already 9 been referred to. The first bidding proceius, started in 1982, was a failure. Accusations of collusion between the Indian co-consultant and a contractor, questioned validity of the bids as well as the evaluation process led to the rejection of all bids and re-tendering (this became a regular event for se-eral contracts). The re-bid contract was, eventually, awarded in February 1984 and the first pipes laid in February 1986, nearly one year after the original closing date of the credit. After some reasonable initial progress on the land portion of the outfall, the undersea excavation of the entire 6,000 m long pipe trench (for two outfalls) and the manufacture of about 60% of the total quantities of the 3.5 meter diameter concrete pipes (which now form a spectacular stockpile on the site), work came to a standstill when the contractor, in October 1986, started disputing the outfall design and questioned the validity of the subsoil data provided by the consultant. There followed a period of ugly exchanges in which the consultant claimed that the contractor was not competent to question the design (!), the contractor refused to proceed with what he considered an unsafe design and WSSD and the Bank lacked the expertise to intervene decisively. In July 1987 the consultant's services were terminated, new consultants were appointed in January, 1988, the contractor terminated his work in September, 1988 and sued MCGB for substantial damages. During the field visit, the Audit found that although the new consultant's exhaustive soil investigations more or less confirm the original data provided to the contractor which, incidentally, casts severe doubt on the authenticity of the claimed results of the contractor's own soil investigations. The Audit also agrees with the expert opinion that, with the equipment used, the contractor would have been unlikely to be able to complete the job satisfactorily even if no questions arose regarding the stability of the design. 27. The consultants have now submitted to WSSD proposals for revised, alternative, designs for the outfalls which were reviewed by WSSD and an independent expert panel (the Audit participated in the final discussions). The new proposals recommend the inviting of bids for alternative designs of a concrete pipe (similar to the original design) and a bored tunnel solution. A third alternative of an immersed tube solution has since been discarded. This process would enable specialist contractors to bid competitively for the alternative of their respective area of expertise. Preliminary estimates put possible completion of the outfalls to the end of 1994 (if an immediate start is made) with the estimated costs ranging from US$76 million for the tunnel to US$110 million (excluding taxes and duties) for the RC pipe. In the meantime, untreated sewage from virtually the entire Bombay area is discharged into waterways and the sea shore creating worse pollution then ever. In this connection, another major issue has emerged during the revision of the outfall design. The original design envisaged the eventual provision of primary treatment and disinfection of the sewage, prior to discharge into the sea, to meet appropriate environmental standards. It is fairly obvious that there is neither the land available at the head of the two outfalls to build a major se:iage treatment plant nor would the location of such plants be acceptable in the heart of Bombay from the point of view of nuisance not to mention the problems of sludge disposal at full capacity and the potential danger of storing large quantities of chlorine gas (for disinfection) in a densely populated area. As the currently planned outfalls will discharge raw sewage at barely 15 meters of water depth, adequate dilution will not be achieved and 10 (eventually) unacceptable plumes of sewage will appear off-shore. The only solution appears to be the eventual extension of the outfalls to some 8 km and any new design must investigate this issue thoroughly and include appropriate provisions if it is to be environmentally acceptable. Overall the Bank has not really distinguished itself through this exercise. There were frequent staff changes on the project team. In the critical period of the outfall problem only a consultant sanitary engineer (competent but no expert) visited the project and, understanlably, refrained from decisive participation. Important discussions, relating to the outfall design, have taken place, in the Bank and in the field, without qualified technical participation. In April 1987, a memorandum from the Regional Vice President to the Senior Vice President Operations, requesting authority for a third extension of the closing date gives the baffling explanation of "...the outfalls encountered delays ... due to shifting sea bed." However, major credit is due to the Bank for recognizing the absolute necessity to complete these works as quickly as possible and for agreeing to the financing of the new consultant's services and for offering the consideration of further, supplementary, financing. Without this support, the sewerage investments already made could well have been wasted or, at least, their benefits postponed almost indefinitely. 28. The Second project, as designed was to include the implementation of the substantial sewerage components postponed from the First project, add the next stage of the water supply developments and provide the sewage treatment/disposal facilities. This project, while very substantial by any standard, still would not meet the service requirements of Bombay. Furthermore, a reassessment of the progress and the project cost estimates indicated, as early as 1983, that the final costs would far exceed the original estimates and, consequently, the financing provisions. The revised total cost estimates then were Rs. 7594 million compared to appraisal estimates of Rs. 3540 million. The main reasons for the cost increases were reported to be: (i) accumulated delays; (ii) inflation running at 20% instead of the projected 7.5% and (iii) extra costs of Rs. 528 million resulting from final design (compared to the preliminary estimates). A scaled down plan was, again, prepared with an "affordable" cost of Rs. 6556 million and, at the same time, the outline of a Third project was drawn up with an investment target of Rs. 6100 million which would include the cost of completing the postponed Second project components. The principal component of the Third project would be the construction of the third and last stage of the Bahatsi dam based water production facilities and corresponding expansion/strengthening of the distribution system and the substantial improvement of all services in the poorer areas of Bombay. In addition, feasibility studies were to be carried out for future water supply sources for Bombay. Bank financing for this project under Loan 2769 and Credit 1750 (US$40+ 145 million) was approved on December 16, 1986. Progress is reported to be reasonable but the Audit has learned that familiar procurement delays are still occurring and the award for the contract for the new treatment plant was delayed by over 18 months. F. Procuremeit 29. Procurement problems are common features of many Bank projects. For different reasons and in different forms they are, generally, the principal causes of delays and consequent cost overruns. In this area, the Second 11 Bombay Water Supply and Sewerage project scaled new heights in many ways. The "normal" problems of extensive delays in bid evaluation, disqualification of certain bidders on the slightest excuse, the final authority (Standing Committee of MCGB) reversing the management's recommendations were all present throughout the project. Poor reporting, delayed transmittal of relevant documents to the Bank by the borrower and, on the other side, long time taken by the Bank to give approval to the proposed awards, al.so added to the delays of contract awards. However, where this project exceeded all other similar experiences was the frequency and intensity of complaints by bidders of unfair evaluations, collusion and corruption. The Audit has not compiled and accurate list but there seem to have been few of the 90 plus major contracts awarded which did not generate such complaints. The sheer volume of such complaints was bad enough but the form of some of them were quite astonishing. Many started immediately after bid opening, informing the Bank why a particular offer should be disqualified. All bidding and evaluation documents and correspondence between bidders and the client appear to have been public property judging by the details quoted. One bidder submitted to the Bank a six page evaluation of his competitor's bid, explaining in detail why that offer should not be considered, all this well before the Bank received any information on the evaluation of these bids. There was little the Bank could do to stem this tide beyond doing its own complaining to MCGB. The correspondence on these issues fills more than half the project files. The Audit has learned that major efforts are being made to improve the situation. A major achievement appears to be the curbing of the Standing Committee's (which contains few if any experts) powers to alter the Management's recommendations. It is now obliged to render a decision within 15 days and the State Government can override any unreasonable decision. The Audit also learned of an additional and potentially troublesome problem which is that MCGB is obliged to get central government clearance for every individual contract involving Bank financed foreign exchange even though the project as a whole and its financing has been already approved. This is an issue which the Bank ought to be able to resolve to eliminate the additional delays resulting from it.' 30. Examination of the complaints relating to several major contracts, almost all for sewerage works, shows not only that many of the complaints were justified but that grounds for several of them were created by design errors or inadequacies and imperfect bid documents, specifications and qualification requirements. The joint inability of the Bank and MCGB to resolve these issues resulted, in several cases, in the rejection of all bids and calling of new offers. One large sewage pumping equipment contract was re-bid three times prompting one of the bidders to try to obtain a court order to prevent yet another re-bid. While several steps were proposed to improve matters, just how effective were MCGB's actions to remedy this situation is impossible to decipher from the project files nor could they be fully clarified by the Audit. Government commented that this control is regarded as essential. Bank Regional staff confirm the issue as a major problem and is under discussion. 12 31. The prevalence of procurement problems under this project was far from being a unique phenomenon. They were present in the iirst project and indeed, in virtually every project in India. While the Bank was diligent in its warnings to the borrower, its efforts, particularly in the early stages, were insufficient to ensure that the problems will be minimized. The size and complexity of the project and the individual contracts, in the opinion of the Audit, more than warranted the employment of a procurement specialist, not only to relieve the project engineer(s) of the time consuming duty of dealing with the mountains of procurement documents, but it also (most likely) would have prevented the repeated issue of imperfect bid documents. It is also worth while to note that across the board pre-qualification only became a standard practice in mid 1985, nearly seven years after Board approval. 32. A further point of interest to emerge from the records is that the vast majority of the procurement problems emerged on the sewerage side with few difficulties reported for the water supply components. A January 1985 Bank Supervision Report, analyzing the elapsed time between first advertisement and award of contracts reports the following: Type of Contract Elapsed Time (months) No. of Contracts Average Range Water Suply Equipment ICB 12 9-16 4 Civil Works ICB 3 4-12 19 Sewerage Equipment ICB 23 19-27 4 Equipment Local 13 10-23 7 Civil Works ICA 17 10-27 5 Civil Works Local 12 7-25 11 The data above indicates a quite dramatic diaference between the time required to award equipment and civil works contracts as well as between water supply and sewerage contracts. The latter, in particular, seems to indicate a collective lack of efficiency and comperence among the borrower, the consultant and the Bank in dealing with sewerage related components (as compared to the water supply works) which, in turn, may have created the climate for increased outside interference and the alleged collusion. The numerous changes in the senior staff of WSSD's sewerage section and the eventual dismissal of the consultant seem (at least partially) to confirm this view. On the Bank's side, the several changes of project staff and the long period (over one year) during which no Bank engineer was assigned to the project, undoubtedly contributed to the problems. G. Performance of Consultants and Contractors 33. The PCR rates the performance of the foreign/local consultant joint venture responsible for the water supply components of the project as "exceptionally good." This view appears to be confirmed by: a) the generally 13 trouble free, high quality and timely iaplementation and subsequent smooth operation; b) the fact that the same consultants were entrusted with the review/redesign of the sewerage works and c) the project files which, more by lack of criticism than outright praise, confirm satisfactory performance. 34. By contrast, the performance of the foreign/local joint venture consultants, responsible for the sewerage system, appears, on the whole, to have been unsatisfactory. No detailed evaluation exists and the PCR's relevant comments refer only to the poor client/consultant relationship and "serious unanswered questions" about some of the consultant's work on the geotechnical investigations and the outfall design. The project files and supervision reports, however, reveal much more than that. From the early stages of the project, critical comments surfaced regarding the consultants staffing, poor and inadequate reporting, unsatisfactory bid documents and specifications which necessitated re-bidding of contracts, major design errors in large pumping stations and equipment and, finally, the now confirmed less than satisfactory design of the submarine outfalls. Minutes of meetings record the extraordinary attitude of the consultant in rejecting the outfall contractor's warnings on the outfall design on the grounds that the contractor is "not qualified to comment." The latest Bank supervision report provides an alarming list of design shortcomings on some twenty major sewage pumping stations. The consultant's contract was, eventually, terminated in July 1987 and new consultants were appointed (but only in January 1988) to continue the work on the sewerage components. There is no record of the Bank formally raising the issue of the consultant's performance, at any stage. While all the above comments are valid, the Audits discussions and Part II of the PCR uncovered some extenuating facts. It appears that the unsatisfactory composition of WSSD's management of the sewerage works made the consultant's working environment extremely difficult. Personality conflicts resulted in demands for several abrupt changes in the consultant's field management. The construction supervision role of the consultant was only advisory and, therefore, it can not be held directly responsible for poor quality construction and contract management. 35. Other consultants, providing services for financial modeling and for the development of a project management system performed satisfactorily. 36. Regarding the performance of construction contractors and equipment suppliers, there is very little detailed information in the project documentation. There were reports that the major water supply works were constructed to a high quality although problems were reported on the components incomplete at the time of the closing of the credit. Both these are confirmed by the Audit. There is extensive documentation regarding the contractor who was awarded the sewer outfall contract but these are mainly concerned with the dispute concerning the outfall design. The contractor appears to have performed satisfactorily in the early stages of construction but the Audit found that there is considerable doubt about his preparedness for the undersea works as well as his veracity about his claims for underwater 2 Government comments express reservations on this statement. 14 works which, in the shallow and turbid waters of the bay were difficult to verify. As a result of the unresolved dispute regarding the outfall design and because his substantial claims were not being met, the contractor terminated his contract in September 1988 and initiated legal action against MCGB. According to the latest Bank supervision reports, as well as the Audit's own experience on several site visits, the performance of other civil works contractors, engaged on the several sewage pumping stations, left a great deal to be desired. Some of the poorest concrete works ever seen by the Audit were, apparently, accepted and paid for. Works have been abandoned on the slightest excuse (some for several years). The Audit verified that the internationally accepted remedial powers of the employer are included in all contracts but these have, apparently, never been applied and, consequently, contractors ceased to regard them as deterrents. 37. It is difficult to find satisfactory explanation for the poor performance of the sewerage consultant, a well known and internationally experienced firm. The PCR comments that WSSD's management and staffing shortcomings and the poor relationship of the two might have hampered the consultant. This could account for certain shortcomings in (say) construction supervision (see comments above), but such matters certainly can not and should not coffect the quality of the design of works of such magnitude. The poor performance of some construction cont. ctors has, almost certainly, resulted from the unsatisfactory procurement procedures and lack of pre- qualification. Unfortunately, effective supervision (including the Bank's) and contract management, which should nip such practices in the bud, were also lacking. These are issues which require the urgent attention of the Bank in the context of ongoing and possible planned operations. H. Institutional Development 38. The Project Performance Audit Report (PPAR), evaluating the First Bombay Water Supply and Sewerage Project, issued by OED on October 4, 1985 gives high overall marks to the organization and management of WSSD. High technical competence, sound financial management, good operation and maintenance and an excellent training program are highlighted. The PCR for the Second Project provides little detailed information on institutional performance. It confirms the continuing soundness of MCGB's training program, praises the management and operation of the water supply facilities but criticizes heavily the management of the sewerage component. The review of the project documentation (both the facts and "reading between the lines") presents a mixed picture. Very good financial performance (with some emerging problems), continued excellent training, efficient implementation of the water supply components and satisfactory handling of many project issues are counterbalanced by the incompetence evidenced in handling the sewerage works and the all round appalling 11andling of procurement. There are frequent references to the "lack of experience within WSSD on sewerage works" as an explanation for the many problems. The Audit considers this of only limited validity since the cumulative technical experience to be found within MCGB should still have produced a much better performance. Regarding the latter, the Audit was particularly disturbed to note the frequent changes made by the "Standing Committee" in the WSSD management's recommendations for contract 15 awards. This has, apparently, also not escaped attention locally and effective changes have been made as described above (para. 29). 39. The Audit had extensive discussions with the MCGB/WSSD officials regarding institutional issues, particularly, where these have effected or are likely to effect project implementation. From several quarters, including Part II of the PCR, the Audit received adverse comments on the decision making ability and/or willingness in WSSD's managerial hierarchy. The "buck", it seems, does not stop anywhere. In the Audits opinion the principal cause of this may well lie in the promotion policies of MCGB. According to the information received, promotion (particularly to the senior positions) is strictly on the basis of service seniority, regardless whether the person is the best qualified for job even if the position requires specialist experience. This can result in mechanical engineers in charge of civil works and vice versa, obviously not serving the best interests of the Corporation. WSSD has an excellent cadre of highly experienced senior engineers who should be fully capable of handling all aspects of the department's work provided the right man is in the right job. The Audit urged the top management to review these matters and the Bank also needs to keep these issues in sight, particularly, in view of the imminent retirement of some of the most senior officers. A truly encouraging sign that the nature and importance of the institutional (and indeed all other) problems are recognized by MCGB is the exceptionally candid and sober Part II of the PCR produced bj the borrower. I. Operations 40. The several water supply facilities visited by the Audit demonstrated a highly commendable standard of operation and maintenance. Treatment plants, pumping stations, reservoirs and major pipelines were clean, in good repair and operated by knowledgeable staff. The communication system permits adequate monitoring of the operational status of the major facilities and recording instruments functioned normally. The safety prnvisions for high voltage electrical equipment and dangerous chemicals were exemplary. Operations of the distribution system involves highly complex manual control arrangements due to the intermittent supply system. Operators are required to control the outflow of service reservoirs according to a strict schedule to ensure the flow of water for a prescribed period of time. For the vast network of Bombay this has to be regarded as a very precarious arrangement. While the Audit has not been able to verify this, it is safe to assume that the system can not work to perfection. Any malfunctions are not likely to effect the higher consumer who, as rule, has in-house storage tanks but it would severely impact on the standpipe and low income housing consumers. Monitoring of the performance of pipelines and the location of leaks is, generally, by visual inspection only as the intermittent flow in the pipes does not permit the use of more advanced methods. The functioning of water meters is checked by a reasonably effective system but the repair of faulty Government comments that this should be regarded as an internal matter and of limited use in evaluation discussions. The Audit differs in that it should be considered a vital institutional issue. 16 meters is unsatisfactory. This is described further in the following sections. 41. As hardly any of the major sewerage facilities are as yet operational, similar assessment for these was not possible. J. Financial Aspects 42. All references in the project documentation unanimously claim that the WSSD is one of the very rare financially truly viable water undertakings. The consistently sound performance and meeting the Bank's financial covenants resulted in Bank supervision of this aspect that was almost perfunctory. The relevant reports routinely stated a satisfactory situation, timely and appropriate tariff increases, good billing and collection and an ever growing sophistication of the financial management and accounting practices. The PCR is also restricted to the brief statement of satisfaction, supported by a table of key financial indicators in paragraph 19. However, it provides neither the reasons nor the method of achieving this success and, perhaps, through this brevity, valuable lessons are losc. 43. Nevertheless, a closer look at the situation by the Audit, following discussions with WSSD's financial management and a review of the audit report on WSSD's FY 1988/89 accounts, did raise some food for thought. Although the audit report is only marginally qualified, its annexes (normally Report to Management) contain numerous observations on unsatisfactory practices. Many of these relate to minor procedural transgressions but a number of them do have significant bearing on WSSD's true financial position and, possibly, on its future ability to fund investments on the current scale. Critical observations on the financial situation were also made in Part II of the PCR. The more important aspects are commented upon in the following: (i) Contribution to Investment: The Project Agreement required MCGB to contribute, annually, not less than 40% to capital investment from internally generated resources. The Bank has praised MCGB for substantially exceeding this target in most years with only on a few occasions mentioning in supervision reports that the persistent delays in project execution substantially reduced the annual expenditures and, often, postponed major funding requirements by several years. The audit report highlights this underspending in noting that for the FYs 1986/87, 1987/88 and 1988/89 only 81.5%, 78.6% and 74.4% of the respective annual capital budgets were spent, noting also the declining trend. For FY 1988/89, of the Rs 120 crores budget only Rs 89.2 crores were spent and of this Rs 37.9 crores were indirect expenditures (interest capitalization and overheads). The principal cause of this is the inordinate delay in the sewerage works with overall effects of higher costs, delayed services and loss of revenue. (ii) Account Receivable: The audit report notes that, under the Project Agreement, WSSD was obligated to reduce consumer accounts receivable to not more than 20% of billings by March 1984. Against this, as of March 31, 1989, the actual arrears stood at 17 a massive 68.77% or Rs 1,356 million (a 20.2% increase from the previous year). The aging classification of the receivables is as follows: Less than one year Rs 647 million One to three years Rs 450 million Mo :e than three years Rs 259 million Total Rs 1,356 million Major accumulation of arrears, noted by the audit report, are from the Central and State Governments: Rs 177 million (some going back to 1950) and the Bombay Textile Mills: Rs 122 million (accumulated from 1965). Against this amount of receivables the accounts show Reserves for Bad and Doubtful Debts of only Rs 51 million and the audit report notes that "no amount has been written off against this reserve since the inception of WSSD." The report also notes that "...the continuous rise in outstandings of tariff income.... may pose liquidity problems when the work under Phase III get momentum." The magnitude of the receivables and, in particular, the growing trend clearly signals a very serious problem and, correctly interpreted, casts serious doubts on the eminently rosy picture presented by the Income statements and the financial indicators quoted in the PCR. The Audit has learned that many of the larger arrears are not written off in order not to prejudice long standing litigations on these issues but this can only partially excuse the current practice. Clearly the most important aspect of this matter is the insignificant level of reserves against bad debts which, in turn, is defended on the grounds that sudden provision of large reserves would seriously affect the current financial picture. (iii) Other significant issues raised by the audit report refer to excessive inventories, largely due to major steel plate purchases for the Bombay III project which are slow to be utilized; obsolete assets are not written off; there is severe criticism of the water meter repair department which is reported to be operating some 62% below expected capacity with the result that about 69% of the metered water connections had to have their monthly charges computed on a non metered basis. This may also (partly) account for the fact that income from water charges has decreased slightly from the previous year despite nearly 5,000 additional connections. 44. Overall, WSSD is clearly in a sound financial position but there are areas where significant improvements are desirable. The Audit agrees with the observations that the internal resource generation which the 1989 accounts show as 144% of (budgeted) capital requirements is, on the face of it, excessive and likely to invite accusations of overcharging for services if annual capital investments continue to be well below target. Justification for the "Water/Sewer Benefit Tax" which, together, represent some 32% of the revenues may well be questioned since water is still only available to the consumers a few hours a day and the lack of sewage treatment facilities 18 results in hazardous health conditions in many parts of the city. A notable omission in WSSD's financial/commercial reporting is the total absence of references to revenue losses through unaccounted for water. The Audit could not detect any serious concern for this issue at any level of the corporation. The main reason is clearly the intermittent nature of the water supply which provides a plausible excuse for the half-hearted attention to losses. The issues listed above, inter alia, require close and continuous attention both from WSSD and the Bank to ensure that the generally very good financial management and performance of WSSD does not deteriorate in the future nor do the current problems give rise to public and government attitudes which may jeopardize WSSD's future ability to introduce appropriate tariff increases. K. The Role of the Bank 45. The role of the Bank, its attention and commitment of resources to the project need to be viewed in the perspective of the entire Bombay program. The first two projects resulted in the investment of US$876 million equivalent with the ongoing third project adding an estimated US$304 million. Without allowing for possible third time cost overruns, the three projects will cost a total of US$1,180 million and will have been supported by Bank loans totaling US$336 million. By any standard, these are very large amounts. Apart from the cost figures, the nature and scale of (some of) the project components such as the water treatment plants, transmission pipelines and the sewer outfall elevate these projects among the largest handled by the Bank anywhere in the world. The Audit found no evidence that the Bank, in any way, accorded the special attention that the scale and complexity of these investments deserved and appear to have handled the matter as just another water supply project. In this respect the Audit finds the Bank's performance wanting. At the most crucial stages of the project, some Bank supervision missions visiting Bombay consisted entirely of outside consultants. The complex technical issues of the sewer outfall demanded specialized expertise but no such was ever employed. The overall inadequacy of technical supervision is clearly indicated by the devastating comments of the September 1989 Aide Memoire cataloging the design and construction shortcomings of the sewerage works. This may have been due to general resource constraints but, in the Audit's view, more likely to the inadequate appreciation of the project's complexity. There can be no doubt that the inordinate amount of time spent on trying to resolve procurement problems diverted Bank staff energies from other implementation issues. Although supervision reports regularly identified major problems and delays, there was little in the way of decisive action by the Bank, at any stage, beyond polite warning letters. That these shortcomings were not lost on the borrower was made abundantly clear to the Audit mission by MCGB's top officials some of who clearly see the Bank as the ultimate scrutineer and advisor rather than just a money lenjer. 46. On the positive side, the Bank did not give up. The importance of continuing the program, both to maximize the value of past investments and to achieve the target of satisfactory water and sewerage services to the whole of Bombay, appear to have been fully recognized and the sustained support given is, eventually, likely to achieve this. In general, Bank/borrower relationship was good throughout the project and this continues today. Under the ongoing Third project water supply expansions continue but still without 19 targets for a 24 hours supply. Completion of most "left-over" sewerage works are also included with the notable exception of the submarine outfalls. The redesign and construction of these, together with the development of new water sources are envisaged for a Fourth Bombay project. Continued Bank assistance for this is considered by the Audit to be justified on several grounds. First, the Bank must share a degree of responsibility with WSSD for the failure to construct the outfalls at the first attempt. Second, Bank funding facilitated the construction of a sewer network covering, virtually, the entire city but, at present, there is no technically and environmentally acceptable means of disposing of the sewage and, therefore completion of the disposal works is a must. And third, while WSSD is far better than the average developing country water utility, it still needs considerable assistance for its continued development and for that there is no visible alternative to the Bank. However, the Audit would urge that if and when this assistance is provided the Bank ensure that: (i) future water supply development works include specific plans for the provision of uninterrupted, 24 hours, supply for Bombay to eliminate the ever present risk of contaminated supplies and to ensure acceptable level of service to the low income population and (ii) project planning for the design, construction and supervision of the sewer outfalls provides for uncompromising technical competence on all sides (WSSD, Consultants, Contractors and the Bank) and unambiguous organizational and managerial arrangements, again, for all parties involved. There must not, indeed can not, be a third attempt. Once suitable qualified consultants are selected with the approval of all concerned they must be given the appropriate powers and the full responsibility for ensuring the efficient implementation of the works.4 Dilution of the consultant's supervisory powers was one of the main cause of the past problems and the poor quality workmanship. In addition, the complexity of the works to be executed may well justify the appointment of a separate Construction Management firm to ensure complete coordination of the construction of the mutually dependent components such as the pumping stations, the outfalls and the lagoons. L. Economic Rate of Return 47. The economic analysis, presented in the SAR, calculated a maximum Economic Rate of Return (ERR) for the combined project as 6%, using 1984 as the completion date and the water/sewerage revenues as proxy for the benefits. In addition it invited the consideration of extra benefits accruing to industries from improved water supply and provision of sewerage as well as of the unquantifiable health benefits which were to result from improved water supply and sanitation and reduced environmental pollution. Neither the PCR nor the Audit were able to replicate these calculation mainly because the project is not yet complete. As far as any of the "additional" benefits are concerned, the Audits views are that the improvements in available quantities of water provides minimum extra benefits to industries or for general public health. As for sanitation, while the sewer network undoubtedly improved conditions in most built up areas, the concentrated discharge of increased 4 Government considers that this issue should be reserved for future discussion. 20 quantities of untreated sewage vastly increased environmental pollution in certain other areas of the city. II. CONCLUSIONS AND LESSONS 48. The Audit concludes that the water supply components of the project, essentially, met all the objectives set out at appraisal. Although some elements of the scheme are yet to be completed, over 90% of the additional supply capacities are being utilized. The sewage collection network has been completed but the implementation of the primary trunk sewer system and of the disposal facilities was a signal failure. As a result, individual households who are connected to the sewer system are receiving the full benefits but the population in the areas at or near to the current sewage discharge points are certainly much worse off than before. 49. The institutional performance of WSSD, for all its good points, has to be rated inadequate bearing in mind the disastrous management of the sewerage works and the very poor procurement process. 50. Financial performance of the entity was, on the whole, highly satisfactory but the trends of steady deterioration (over a long period) in the handling of accounts receivable need to be corrected. The Audit also formed the opinion that the good financial position may be generating a perception of virtually unlimited funds being available which reduces the vigilance of the powers that be with regard to cost overruns and delays. For the same reason, public and political backlash is also possible if the water/sewer charges are perceived to generate excess revenues. It should also be noted that very large amounts of funds are locked up in incomplete construction works and deteriorating equipment resulting in economic and financial losses to the Corporation. 51. The Audit has no reason to doubt that the benefits of the water supply system are entirely sustainable but, at this stage, it can form no opinion on the sustainability of the sewage collection and disposal system. 52. The Bank staff's performance on the project, on the whole, has been sound within their capacity. They have earned the respect of the Bombay authorities and are regarded as full partners in Bombay's development program. However, the Bank's overall performance has to be criticized on the basis of the inadequacy of the resources allocated to the project. Extraordinary size and complexity in Bank supported power, energy and irrigation projects (Indus Basin etc.) have normally been recognized and additional resources appropriate to these projects have been allocated. Regretfully this does not seem to be the case in water supply/sewerage projects, even on the rare occasions such complex projects materialize (see Lesotho Highlands Project). 53. The principal lesson to be learned from the project is obvious. Any technically highly complex project, even in the highly developed countries, usually has independent technical experts forming a "second line of defence." 21 Such provisions should be automatic in a developing country project of this nature. In the Bombay project, the sum total of technical expertise was clearly inadequate. 54. On the positive side, the financial performance of MCGB, even with the identified shortcomings, is clearly outstanding, by developing country standards. Even if all aspects of the financial policies and practices of WSSD are not replicable everywhere (Bombay is a relatively "rich" city), its systematic and pragmatic approach to revenue generation should form an example to other cities in India and elsewhere. 55. There are few Bank projects (in any sector) where procurement difficulties do not lead the list of problems. The Bombay II project is a frightening example of where these problems can lead to if no firm action is taken by the Bank in the earliest stages. 22 ANNEX 1 Page 1 of 3 COMMENTS FROM THE BORROWER TELEX TO: SHRI P. V. BHIDE, ADVISER TO ED (INDIA) WORLD BANK, WASHIN;TON, D.C. FROM: HARDEEPAK SINGH, DIRECTOR (FB) ECOFAIRS, NEW DELHI. OED COMMENTS KINDLY PASS ON THE FOLLOWING MESSAGE TO MR. ALEXANDER NOWICKI, CHIEF OF OEDD2, OPERATIONS EVALUATION DEPARTMENT, WORLD BANK. QUOTE PLEASE REFER TO YOUR LETTER OF 11TH JULY 1990 AND TO THE TELEX MESSAGE OF 1/11/90 REGARDING COMMENTS ON DRAFT PPAR ON SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT - IDA CREDIT 842-IN. OUR COMMENTS ARE AS FOLLOWS. (AAA) FINANCIAL ASPECTS (PARA. 43 (III) AUDIT HAS After discussions OBSERVED THAT OUT OF RS 2318.6 MILLION IDA CREDIT with Bank Regional DISBURSEMENT TO GOI, AS OF APRIL 1989 ONLY RS 1642.4 staff, reference MILLION HAS BEEN RELEASED TO MCGB ON 30/4/89. IT HAS was deleted from ALSO BEEN INDICATED THAT THIS ISSUE WAS RAISED IN BWSSP-I EVALUATION REPORT AND THAT INSPITE OF GOI'S DENIAL THERE IS A CLEAR PROBLEM IN FINANCIAL FLOW. IN THIS CONNECTION REFERENCE IS INVITED TO OUR TELEX MESSAGE NO. 3218 DATED 11/7/1985 WHEREIN IT WAS CLARIFIED THAT THE QUESTION OF PASSING ON OF FUNDS BY GOI TO THE STATES IS AN INTERNAL MATTER AND ONE TOUCHING ON THE FEDERAL STRUCTURE OF THE COUNTRY AND THAT THIS MAY NOT BE REFLECTED IN THE PPAR. AS THE AUDIT IS AWARE THERE IS NO DIRECT NEXUS BETWEEN AID DISBURSEMENT AND FINANCIAL FLOW TO THE BMC. AS AMPLIFIED IN SECTIONS 2.02 AND 2.03 OF MAHARASTRA READ WITH PARA. 5.00 OF SAR, GOM ARE REQUIRED TO PROVIDE 60 OF THE PROJECT COST INCLUDING THE FUNDS RELEASED BY GOI. IN SO FAR AS FUND FLOW FROM GOI TO GOM IS CONCERNED THIS WAS TO BE SUBQUOTE ON BORROWERS NORMAL TERMAS - AS PART OF CENTRAL ASSISTANCE FOR STATE DEVELOPMENT PROJECTS ON TERMS AND CONDITIONS APPLICABLE AT THE TIME SUBUNQUOTE. REFERENCE PARA. 3.01 (B) OF DCA AND SUMMARY APPEARING IN BOARD DOCUMENT. IN THE ABOVE SCHEME OF ARRANGEMENT MCGB HAVE NO DIRECT ACCESS TO FUNDS FROM GOI. 23 ANNEX 1 Page 2 of 3 (BBB) WHILE DISCUSSING PROCUREMENT ISSUES (PARA. See Footnote, 29 OF PPAR) REFERENCE HAS BEEN MADE TO CENTRAL ' GOVERNMENT CLEARANCE FOR EACH INDIVIDUAL CONTRACT INVOLVING FOREIGN EXCHANGE OUTGO AS AN ADDITIONAL AND POTENTIALLY TROUBLESOME PROBLEM. WHILE EFFORTS ARE BEING MADE TO STREAMLINE PROCEDURES THESE ARE ESSENTIAL INTERNAL REQUIREMENTS WHICH CANNOT BE WAIVED IN THE CONTEXT OF INDIVIDUAL PROJECT. PART OF THE DELAY COULD BE AVOIDED BY DUE COMPLIANCE WITH THE REQUIREMENTS WITH ADEQUATE DOCUMENTATION BY THE PROJECT AUTHORITIES. (CCC) INSTITUTIONAL ASPECTS: THE AUDIT HAVE COME UP WITH ADVERSE COMMENTS ON THE FUNCTIONING AND DECISION MAKING AT VARIOUS LEVELS OF THE MCGB AND HAVE ALSO COMMENTED ON PROMOTION POLICY (PARA. 39, PARA. 25 OF SUMMARY) FRICTION BETWEEN CONSULTANT AND WSSB MANAGEMENT DUE TO UNSATISFACTORY COMPOSITON OF BMC MANAGEMENT (PARA. 34, PARA. 39 AND 23 OF SUMMARY) AND REFERRED TO INCOMPETENCE COLLUSION AND CORRUPTION IN MANAGEMENT AND STAFF (PARA. 25) ETC. THESE OBSERVATIONS APPEAR TO HAVE BEEN PRIMARILY BASED ON THE WRITE UP PROVIDED BY MCGB FOR PART II OF THE PCR. RECRUITMENT PROMOTION AND OTHER POLICIES AND FUNCTIONS OF THE CORPORATION WHICH INCLUDED ELECTED REPRESENTATIVES AS PART OF THE SYSTEM IS AN INTERNAL MATTER AND DISCUSSION ON IT WOULD BE OF LIMITED USE IN THE EVALUATION OF THE PROJECT. ALSO See Footnote, GOI HAVE RESERVATION IN THE POSITION TAKEN IN PARA. Para. 39 of PPAR. 34 OF PPAR WHERE THE DESIGN AND OTHER FAULTS AND THE CONTROVERSY ON MARINE OUTFALL WORKS IS SOUGHT TO BE WATERED DOWN UNDER THE COVER OF UNSATISFACTORY COMPOSITION OF WSSB MANAGEMENT. (DDD) PROCUREMENT ISSUES: THE CONCERNS ON PROCUREMENT See Footnote, MATTERS HAS BEEN TAKEN NOTE OF AND THAT SINCE ISSUES Para. 34 of PPAR. RELATING TO PROCUREMENT INCLUDING BID DOCUMENTS IS A PROCESS OF CONTINUED DIALOGUE BETWEEN GOVERNMENT OF INDIA, WORLD BANK AND PROJECT AUTHORITIES, GOI WOULD RESERVE ITS COMMENTS ON PROCUREMENT 1SSUES. ALSO WE See Footnote, WOULD REQUEST OMISSION OF REFERENCE TO POLITICAL Para. 22 of PPAR. INTERFERENCE, COLLUSION, UNFAIR EVALUATION, ETC. APPEARING IN PARA. 22 OF THE SUMMARY. (EEE) CONSULTANCY APPOINTMENT. WHILE DISCUSSING CONSULTANT'S PERFORMANCE AND APPOINTMENT AND POOR PERFORMANCE IN RESPECT OF SEWERAGE WORKS, AUDIT HAVE REPEATEDLY REFERRED TO THE APPOINTMENT OF "THE SAME CONSULTANT THAT PERFORMED WELL ON WATER SUPPLY WORKS" TO WORK ON SEWERAGE WORKS OF THE 24 ANNEX 1 Page 3 of 3 PROJECT. THERE IS A REITERATION OF THIS FACT IN A NUMBER OF PLACES (PARA. 19 OF SUMMARY AND PARA. 26 AND 34 OF DRAFT PPAR). THIS COULD LEAD TO FORECLOSING OF THE CONSULTANCY ISSUE WHEN IT IS REALLY TO BE EVALUATED ON CURRENT REQUIREMENTS. ALSO AS REGARDS THE RECOMMENDATION CONTAINED IN PARA. 46 FOR ASSIGNING FULL POWERS INCLUDING SUPERVISORY ROLES TO THE CONSULTANTS THESE WOULD See Footnote, NEED TO BE DECIDED BOTH IN THE CONTEXT OF Para. 46 of PPAR. COMPLEXITY OF THE PROJECTS, COMPETENCE OF THE CONSULTANTS, IN-HOUSE EXPERTISE AVAILABLE AND THE NEED AS PERCEIVED BY THE BORROWERS. THESE COMMENTS MAY BE TAKEN INTO ACCOUNT WHILE FINALIZING THE PPAR. REGARDS. UNQUOTE. 25 PROJECT COMPLETION REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) Population, Human Resources Urban an Water Operations Division Asia Regional Office 26 PROJECT COMPLETION REPORT INDIA Second Bombay Water Supply and Sewerage Project (CREDIT 842-IN) PART I - BANK PERSPECTIVE A. PROJECT IDENTITY Project Name : Second Bombay Water Supply and Sewerage Project Credit No : 842-IN RVP Unit Asia Country : India Sector : Urban and Water Supply Subsector : Water Supply B. BACKGROUND 2. During the 1970's the Bank was becoming active in supporting infrastructure investments in urban areas of India. It was recognized that since the early 1950's, rapidly expanding population and unprecedented rates of urban growth had led to increasing demand for water supply and sanitation. However. competing demands for resources for other sectors, lack of management and planning skills, shortages of key materials and equipment, and foreign exchange constraints had resulted in only about 2% of public expenditures having been invested in this sector. The levels of water supply and sewerage services in the 1970's reflected this history of relatively small investments against a background of rising population and urbanization. It was estimated that in 1975 about 193 million people in India, or only 31% of the total population, had access to reasonably safe drinking water and that about 125 million (20%) had acceptable means of sewage disposal. Rapid urbanization in India's four largest metropolitan areas -- Calcutta, Bombay, Delhi and Madras -- had created an urgent need to strengthen the water supply and sewerage systems serving these areas. 27 3. Until about 1941 water supply investments in Bombay had kept pace with demand, although sewerage services, particularly sewage disposal, had received low priority. The accumulated backlog of work after 1941, together with rapid population increase and continued insufficient investments in the sector resulted in an extremely low level of water services, and complete neglect of sewage disposal requirements. The first Bombay water supply and sewerage project (IDA Credit 390-IN) in 1973 marked the beginning of an attempt to reverse the trend. The Bank's sector objectives for the first project were to: relieve water shortages; improve water distribution; reduce water losses; rehabilitate and begin to expand the sewerage system; and develop a more effective and financially self-sufficient water supply and sewerage depa:tment (WSSD) within the Bombay Municipal Corporation. Many unforeseen difficulties were encountered during project implementation. Some parts of the engineering works required redesign to provide better solutions than those originally envisaged. This factor, and substantial increases in world prices for goods, resulted in a cost overrun and a consequent reduction in project scope, primarily in sewerage and water distribution works. Delays in project implementation also were encountered, and the completion date of the first project was extended from 1977 to 1979. In the end, the project succeeded in halting the long term trend in deterioration of water service. However, the limited availability of water restricted supply to between 2 and 8 hours per day, depending on location. Also, no significant progress had been made in reducing water losses, and work on expanding the sewerage system had to be deferred to the second project. C. PROJECT OBJECTIVES AND DESCRIPTION 4. The objective of the water supply component of the second project was to provide for the treatment, transmission and distribution of an additional 450 mld of water to the Greater Bombay area. This was to maintain the supply for domestic purposes roughly at its 1979 per capita level as the population increased over the next 10 to 15 years, and was to slightly increase the supply to industry. The water distribution system and facilities for slum areas also were to be improved. However, the hours of supply throughout most of the city would continue to be limited to about 3 to 8 hours per day. The project also contained provision for more inLensive detection of distribution system losses and repair of existing mains. The specific works under this component were extensive, and included a noticeably large (450 mld) water filtration plant. 5. The objective of the sewerage component was to improve and extend the collection system from 44% to 90% of the Greater Bombay area, and to provide treatment and safe means of disposing of sewage from the whole of the urban population, and to provide additional public latrines for the slum areas. The physical works for this component also were to be of large scale. Two marine outfalls and two pumping stations, in particular, were to be perhaps more difficult in engineering and construction than anything previously attempted by WSSD. 28 D. PROJECT DESIGN AND ORGANIZATION 6. There was a clearly understood conceptual foundation for the project. The source of water for the water supply program was to be the Bhatsai reservoir, for which in 1979 a dam was being constructed by the State Irrigation Department. The dam had been designed to include provision for year-round releases of water for Bombay, to be developed in three equal stages of 450 mld each. The first stage of the dam to provide sufficient water for the first project was completed in June 1978. The State planned to proceed with a continuous construction program under which the dam would be completed to its full design height by June 1985. The State agreed to construct the Bhatsai dam according to a schedule that would make water available as required for the second project. The water supply and sewerage program for Bombay itself was selected from a number of alternatives recommended in 1971 by engineering consultants to meet Bombay's water and sewerage needs. It recognized that water would be insufficient to meet demand, but concentrated on improving the hours of supply, treating all of the water, providing more reliable and equitable distribution, and rehabilitating and extending the sewage collection and disposal systems. 7. The project organization plan built upon WSSD experience with the first project by giving the WSSD overall responsibility for project design and construction. However, because final engineering designs of major components of water supply and sewerage systems had not yet been completed, and were critical items in the project schedule, the WSSD was to appoint consultants to complete the desi.as and supervise a major portion of the works. 8. In retrospect, it could be argued that appraisal of the project may have been premature insofar as significant detailed engineering designs still had to be completed, and some 480 hectares of land for the project still had to be acquired. Appraising a project in India at such an early stage of preparation was not unusual at the time. In fact the experience of this project was a factor in the India Department now requiring project preparation to be much further advanced before appraisal. But the appraisal team did address the risks associated with the incomplete designs by requiring the appointment of consultants, and by using conservative physical contingency factors of up to 25% for the undesigned works in the cost estimates. Hence, it could be counter-argued that appraising the project at the time was justified, and allowed the Bank to continue its involvement in Bombay's development program at a critical time. Nonetheless, the Bank appeared to have been overly optimistic in assuming that the needed land, much of which was privately owned, would all be acquired within two years. Moreover, it appears that it certainly was unrealistic for the Bank to propose or accept plans to implement the project in five years, given the incomplete engineering designs, the land acquisition issue and the fact that WSSD had little if any experience with marine outfalls and other major sewerage works. 29 E. PROJECT IMPLEMENTATION 9. Implementation of the project was hampered by continual procurement problems and delays. From the time the Credit Agreement became effective in June 1979 until the originally scheduled project completion date of March 1984, only about 25% of the credit amount had been disbursed. Mainly during the first three years of project implementation, repeated difficulties were encountered with obtaining acceptable tender documents from the borrower, and with procedures for tender evaluations and awards. The WSSD had extensive experience with Bank procurement guidelines, since this was their second Bank- financed project. Hence, these difficulties appear to have arisen not so much from a lack of knowledge of Bank procurement procedures by WSSD, but more from a reluctance by WSSD to depart from traditional procedures and, in a number of instances, from political pressures or other motives to favor certain contractors. 10. Difficulties with land acquisition also contributed to delays during project implementation. A number of individual parcels of land had to be acquired in order to initiate construction of various pumping and treatment facilities, or to complete laying sections of water distribution mains. The actual acquisition of this land proved to be far more difficult and time- consuming than anyone had foreseen. 11. In early 1981, some two years into the project implementation, the results of engineering studies revealed that the sewerage works were to be more complex than had been expected. This in addition to the procurement and land acquisition delays made it apparent that the project was to cost more, and take longer to implement than was planned at appraisal. In particular, WSSD decided that it would be more cost effective to construct two major marine outfalls to 3 km, rather than to 1 km as was being advocated by the Bank on grounds of cost savings and technical difficulties. Also, it was found that two major sewerage pumping stations were to be of more complex design than originally thought. Project cost estimates were increased some 63%, from Rs3,540 million to Rs5,780 million, and the project completion date was revised to September 1986. Eventually, the closing date of the credit was extended to March 1988, and by September 1988 the entire US$196 million credit amount finally had been dra.n down. However, major project works still had not been completed. Remaining water supply works comprised two reservoirs, two transmission tunnels and about 1 km of transmission main. Construction on these facilities was well underway, but final completion of all works was not expected before early 1990. The unfinished sewerage works were far more significant. Two major pumping stations, two major marine outfalls, and two large aerated lagoons remained incomplete. It is not likely that these remaining sewerage works will be completed before 1993. This remaining work could eventually increase the overall project cost to somewhere between Rs7,500 and RslO,000 million, or two to three times the appraisal estimate, depending on the eventual cost of completing the marine outfalls. 12. The construction of the two major marine outfalls was the most problematic aspect of the project. During the later years of project implementation the outfalls consumed the major portions of WSSD management 30 time and Bank supervision time. The outfalls became, and remain, the subject of considerable concern and controversy. Hence, it is relevant and useful to expand on this aspect of the project implementation. 13. Responsibility for design and works supervision of the sewerage components of the project, including the outfalls, was awarded to a team comprising foreign and local consultants. The sewerage design work proceeded slowly, being marked by working-level friction between the consultant engineers and the WSSD. The first tender award recommended by WSSD for the construction of the two major outfalls did not conform to Bank procurement guidelines and was rejected. Eventually a Rs470 million contract was awarded in 1984 to a foreign firm. The construction of these outfalls was to be an ambitious undertaking. As designed, each of the outfalls was to consist of reinforced concrete pipe sections, each 7.5 meters in length, 3.5 meters in diameter, weighing some 80 tons each, and extending 3 kilometers off shore. 14. The construction contractor experienced difficulties in mobilizing for the work and actual construction was delayed for about a year. When the work did get underway, the contractor was only able to lay pipe sections at much less than the planned rate, complaining that the pipe joint specifications were too stringent. The WSSD and their consultants contended the problem rested with the contractor's equipment and techniques. Further into the construction, the contractor then claimed that the sea bed conditions were not what was expected and that the integrity of the entire outfall design was questionable. The WSSD and their consultants took the position that there was no problem and that the contractor should continue with construction. The contractor continued laying pipe, but retained his own experts to reinvestigate the sea bed conditions. These investigations reinforced the contractor's view that the outfalls would not be stable as designed, and he prepared preliminary alternative designs for BMC's consideration. This only worsened the disputes among the contractor, WSSD and the consultants, and strong positions for and against the various parties began forming within the political structure of Bombay. 15. In December 1986, a Bank mission recommended that an independent "proof" consultant be retained by WSSD to resolve the disputed technical issues. This was agreed, but no action was taken for ten months. In November 1987 a foreign proof consultant investigated the situation. Based upon limited investigations he concluded that indeed the sea bed conditions were such that the existing outfall design was not appropriate. In effect, he reported that the outfalls would have to be redesigned, and that further engineering study was required to determine if the works already constructed could be used. He also concluded that, all things considered, BMC's best course of action was to negotiate a design-and-construct contract with the construction contractor, based upon an alternative design proposal the contractor had previously presented to WSSD. At this point some US$30 million of the US$47 million contract amount had been expended on the construction of the outfalls, with one outfall extending 500 meters into the sea, and the other extending only 350 meters, compared to the 3,000 meter design objective. The contractor estimated that completion of the outfalls according to his proposed design would cost an additional US$110 million. 31 16. In July 1987, in face of mounting political pressure, WSSD elected not to extend the consultant's contract. The consulting work then was awarded to the foreign firm which had been serving as WSSD's water supply consultant. The new firm reviewed the contractor's design proposals, together with other possible options. They found that the contractor's design was well done, and that the US$110 million cost estimate for that design was realistic. However, depending on actual sea bed conditions, te new consultant felt that a tunnelling approach to completing the outfalls could be significantly less costly, although it would present a new set of risks and uncertainties. The consultant recommended that a decision on which way to proceed with the outfalls be deferred until definitive geo-technical investigations were made after the 1988 monsoon rains. These investigations now are underway, and the final design approach recommendation and associated costs for completing the two outfalls will not be known until about August 1989. In the meantime, the contractor has ceased work, and has filed civil suits against the Bombay Municipal Corporation and their previous consultant. F. PROJECT RESULTS 17. The project has proven to be highly complex and difficult, and has had mixed results. The following table shows the major project works which have been completed, and the estimated completion dates for those works still under construction: Major Works Completed Under construction appraised (x) (estimated completion date) Water Supply: 450 mld pumping plant x 450 mld filtration plant x 120 ml balancing reservoir (1990) 35 km transmission mains 34 1 (1990) 2 transmission tunnels 2 (1990) 14 distribution reservoirs 12 2 (1990) 2 booster pumping stations x Sewerage: 3 pumping stations 1 2 (1993) 3 marine outfalls 1 2 (1993) 4 aerated lagoons 4 (1993) 7 km large sewers x Other trunk and branch sewers 90% 10% (1990) Major works intended to meet the project objective of treating and discharging the large majority of Bombay's sewage remain incomplete some eight years after tendering for the design work. Moreover, it will be at least another three years before these works are finally constructed and commissioned. The 32 underlying problem may have been that the lack of experience of WSSD engineers with these kinds of sewerage works was not adequately overcome. Although the project design recognized this weakness within WSSD, and attempted to correct it through consulting engineers, this consultant support did not prove effective. The works were especially large and complex; the ability of individual consultants to relate to WSSD engineers was often weak; the WSSD engineers were reluctant to admit to technical shortcomings in the sewerage field; and the ability of consultants to effectively supervise works was noticeably constrained. Hence, the management of the sewerage component was largely ineffective in identifying and remedying potential design or construction problems, or in dealing decisively with actual problems as they arose. 18. The experience with sewage treatment and discharge works on the project has been disappointing, but this should not detract from other results of the project that have been meeting objectives. About 90% of the sewage collection and conveyance works eventually were completed successfully by the WSSD. In addition, the water supply works of the project typically were well designed, properly supervisea and of generally good quality. Many of these works also were large and complex. Given the needs to complete some detailed design and to acquire land, the time taken to complete these works was not excessive. In contrast with the sewerage works, the WSSD engineers had good expertise for water supply works, and developed positive working relationships with their separate consultants. 19. The good financial performance projected for WSSD at the time of' project appraisal was achieved. The following table compares actual and projected performance for key financial indicators: FY81 FY82 FY83 FY84 FY85 FY89 (actual) Operating revenues (Rs. millions) Projected 782 803 929 945 1374 Actual 591 615 853 1041 1010 2068 Operating ratio Projected .40 .41 .41 .44 .47 Actual .58 .54 .60 .64 .55 .37 Current ratio Projected 2.6 2.4 2.4 1.7 1.8 Actual 2.5 2.3 2.4 2.1 2.3 2.3 Debt to equity ratio Projected .38 .42 .42 .59 .56 Actual .30 .26 .27 .28 .30 .29 Rate of return (on revalued assets) Projected 7.6% 7.2% 8.4% 7.3% 7.0% Actual 5.9% 5.4% 7.9% 7.5% 5.7% 10.3% 33 The Bombay Municipal Corporation maintained water tariffs at levels which allowed full recovery of WSSD costs, and enabled more than half the project costs to be covered by internally generated funds. In addition, a comprehens'.e computerized financial model of WSSD operations was developed and put in use. It has been enabling the WSSD to better analyze and prepare for water tariff increases, better manage cash and assess the financial aspects of capital investment strategies. The WSSD also developed and installed a computerized network-based project planning and control system. As operating managers are becoming comfortable with the system, its use is becoming effective in controlling ongoing project activities. Other water supply agencies in India now are becoming interested in adapting the WSSD financial model and project management system to their operations. 20. Its good financial performance should enable the WSSD to absorb the additional financing that will be needed to cover the cost overruns on the sewerage works still under construction. Given the currently strong financial position of WSSD, even if additional debt of Rs. 1,000 million was assumed, WSSD's debt to equity ratio would approximate an acceptable 1.8; and annual net earnings would be three to four times WSSD's total debt service requirement. G. BANK PERFORMANCE 21. Overall Bank performance on the project appears to have been good, although it could have been more effective had more time been budgeted and expended for project supervision. In particular, it would have been prudent for the Bank to have engaged an expert on marine outfalls to assist with the project preparation and supervision. During the early stages of the project the Bank was effective in ensuring that the financial aspects of the project were thoroughly analyzed and understood by the borrower. Also, the need for WSSD to engage consultants for the design and supervision of major elements of the project was properly recognized, and the actual engagement of consultants was insisted upon as a condition of credit effectiveness. During early supervision of the project, Bank staff appear to have been concerned mainly with numerous issues related to procurement, and considerable time was devoted to ensuring that WSSD conformed to Bank procurement guidelines. In fact, during the entire course of project supervision Bank rtaff devoted a disproportionate share of their time, both in the field and at headquarters, with reviewing tender documents and addressing procurement issues. While the time so spent was both necessary and effective, limited supervision budgets left little time for important inspections of work sites. The consequence was that supervision time increasingly was devoted to responding to fully- developed problems, with little opportunity being available to identify and address problems at an earlier stage. During the latter phases of the project supervision, Bank staff increasingly served as a kind of facilitator in resolving the disputes and problems related to the marine outfalls. Again, this role became necessary and Bank performance was effective, but it still remained a kind of crisis-driven supervision. 34 H. BORROWER PERFORMANCE 22. The WSSD performance was commendable as it related to construction of the water supply works, to financial management, and to establishing a project planning and control system. However, performance related to sewerage engineering, and to overall project administration was noticeably weak. The main underlying problems appear to have been a reluctance on the part of WSSD to recognize their limited competence with sewerage works, and a level of concern with procedures and political pressures that obstructed timely decision-making. The administrative and management shortcomings of WSSD may have been no worse than those of other public sector institutions in India. Nonetheless, on this project they seriously aggravated the problems on the sewerage component, where questions and issues related to the performance of consultants and contractors were continually arising. I. CONSULTING SERVICES 23. The role of consultants was central to the successes and failures of the project. There were four foreign consulting firms and seven local consulting firms involved with various technical and managerial aspects of the project. On the marine outfalls alone, all the foreign firms and five of the local firms were involved at different times with aspects of geo-technical investigations, works design and works supervision. The performance of the foreign and local consultant teams associated with the water supply works, the WSSD financial modeling and the project management system was exceptionally good. Their relationships with WSSD were positive and constructive, and their work was consistently timely and of high quality. On the other hand, the performance of consultants associated with the sewerage works, particularly the marine outfalls was mixed. To some extent the effectiveness of consultants on the sewerage works may have been hampered by WSSD technical and management weaknesses, and by the performance of contractors. Certainly the relationships among most of those consultants and WSSD were often marked with friction and mistrust. Nonetheless, serious unanswered questions remain about some consultant's work on geo-technical investigations and marine outfall designs. Possible answers to some of these questions await the results of geo-technical investigations currently being performed. '35 PROJECT COMPLETION REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE Mr. A. Kennefic, Financial Analyst, India Country Dept., AS4PW, World Bank, 1818 H. Street, N.W., Washington, D.C. Sub : Submission of Project Completion Report Dear Mr. Kennefick, At the outset, it must be confessed that, there is a delay in submission of final version of Project Completion Report. Though it was promised in the month of March that, the final version of P.C.R. will be sent within a, fortnight, it could not be achieved. This is mainly on account of leaves, non-availability of persons, etc. The final copy of the P.C.R. sent herewith will serve the purpose. It was expected, that disbursement will catch up by June 1990. The figures of disbursement on 31st March was 10.00 U.S. million dollars. The figure as of today is 11.1 U.S. million dollars. Though we were strongly hoping, that payment will accrue on contract No. 5, it could not materialize to our expectation. We are still hopeful that we will be able to put in disbursement the application to the maximum possible extent. However, it may be rather difficult to achieve the figure indicated to you in the month of March 90. Disbursement will positively show improvement in the later part of Budget Year of 1990-91. Incidentally, the report of M/s. Binnie & Partners regarding the appraisal of outfall alternatives is now received by us. Thanking you, Yours sincerely, (Signed) (R.G. Deshpande) 36 PROJECT COMPLETION REPORT INDIA SECOND BOMBAY WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 842-IN) PART II: W.S.S.D. PERSPECTIVE 1. The Back Ground: In 1971 M.C.G.B. prepared a water supply and sewerage facilities improvement and augmentation programme for the period 1973-81. The first stage of this programme known as First Bombay Water Supply and Sewerage Project (I.D.A. Credit 390-IN) was planned to be implemented during 1973 to 1978 at a total cost of Rs.121.7 crores. In 1975 the cost was revised to Rs.220 crores due to under-estimation and initial delays. The project was redefined at an estimated cost of Rs.216.2 crores to match the financial resources and extended to 1980 and subsequently by another six months. The Bank took the initiative in setting up a process for second stage programme preparation and implementation with the idea of maintaining the tempo of activities, without a gap. The project known as Second Bombay Water Supply and Sewerage Project (IDA Credit 842-IN) was planned to be implemented during 1979-84 at a total cost of Rs.354 crores. The project. completion date was revised to September 1986 (and eventually the credit was closed in September 1988) at a revised cost of Rs.740 crores. The project was not redefined and the balance of work will probably be completed most optimistically by 1994 and the eventual total cost may go up to Rs.900 to Rs.1000 crores. As of today major objectives under the Water Supply facilities under Bombay II are almost on the point of achievement within a period of 2 years after closure of the credit but the sewage disposal system which was the principal objective under Bombay II shows no hopes of completion at least for another 5 years. The third phase of the programme is already launched, known as the Third Bombay Water Supply and Sewerage Project (Cr. 1750-IN/Ln. 2769-IN) and is to be implemented during 1986 to 1994 at a total cost of Rs.625 Crores (Revised). 2. The Project preparation. Appraisal and organization: The decision, to launch the second phase of development with an overlap of about 2 years with First Phase, was taken with a view to continue to maintain the tempo of work at an annual minimum capital expenditure of Rs.30 to 35 crores for avoiding of demobilizing the large organization already built up. This was good enough for the water supply wing of the WSSD which had developed a project culture over a long period since 1950. But the sewerage wing's weakness in lack of expertise and experience was hardly made up during 37 few years of Bombay I (since they tackled only the sewage collection system) and these aspects were grossly under-estimated in assuming its ability to undertake & execute such important, novel and complicated works in such a short time. In fact it was a quantum jump. This is equally applicable to the operation and maintenance of the facilities when commissioned. In retrospect it is felt that the collection and disposal system for sewerage should have been spread over Phase-II and Phase-III evenly, catchment-wise. This would have also helped in ordering equipment in stages to match the increasing sewage flows and build up the organization for project implementation and operation & maintenance over a longer period. The team work of dedicated, sincere, hard working top level management of Bombay I was quite noteworthy; however, same level of performance remained to be achieved during entire span of Phase-II. 3. The Project implementation: The project has run into cost and time over-runs on an unprecedented scale and is far from complete especially on sewerage component. The originally planned gestation period of 5 years for Water Supply & Sewage disposal is likely increase by 100% and 200% respectively. The completion of laying of deep marine outfalls, which is planned to dispose off nearly 60% of planned sewage flows is riddled with very difficult legal, technical and financial problems. The balance sewage, disposal systems are also not even at a take off stage. This will have serious environmental impact if not completed on a war footing. The selection and performance of the consultants for Water Supply Project for detailed engineering and site supervision was fairly satisfactory, though not comparable to their earlier performance for Bombay I, perhaps due to change of leadership of the consortium an also unhappy selection of contractors. The supervision of works by the departmental staff on its own and under consultants counter part services was of acceptable level. However, in retrospect it is felt, achievements could have been better if it had an adequate and healthy support from top management. The performance of consultants for detailed engineering and site supervision for sewage disposal system coupled with in-house problem did not prove satisfactory, resulting in the contract being terminated mid-stream. There were abrupt changes in the expatriate staff for unexplainable reasons a) During a period of 14 months 3 expatriate civil CREs were changed and 4 expatriate CREs (M&E) were changed during a period of 22 months. b) Investigations for foundations were inadequate, leading to inadequacy of design and underestimation and delays during construction. c) Ill conceived designs and layout, disregarding problems of access to sites, access during construction, operation and replacement. 38 d) Specifications & drawings were at variance in many cases. e) Unduly long time taken to evaluate tenders and changing recommendations under pressure from the management. f) The contract periods fixed for execution of many contracts were unrealistic. g) The layouts and designs were not thoroughly discussed with the project & operation staff. h) The Indian counter-parts were not competent. One of them blatantly won many contracts though under a different name & possibly influenced preparation of tender documents and evaluation. i) They failed to co-ordinate between civil and mechanical contractors. j) Their programme prepared for their own work was unrealistic. k) Contract specifications were inadequate. 1) The 2 packet system caused considerable delays due to inadequate home work by the consultants. m) Progress Reports were unsatisfactory. n) Inapt handling of deep marine outfall from conception to construction. o) Failure to plan staged development for disposal system. p) Unsound structural designs. q) Collapse at Matunga & Sion Pumping Station was a result of their careless investigation, design and they acted as disinterested observers. In retrospect, it is felt that the consortium of consultaucs had underestimated the periods required for investigations and detailed engineering and tender invitation and consequently their man-months. Considering the weakness of the sewerage department, the participation of specially expatriate experts should have been much larger. The advisory nature of site supervision was a grave mistake and has caused considerable damage. It is also felt that awarding negotiated consultancy contract to the consultants who prepared feasibility report would have saved lot of time in mobilization and grasping and digesting the old reports and perhaps their performance would have been much better. The contract with the consultants proved to be deficient, progressive payments should have been related to their performance. 39 4. Selection and performance of contractors: Tenders were issued to parties registered in classified list which did not recognize specialization for specific type of jobs but was more related to financial capacity and broad categories of work. There was no provision for post qualification on specific experiences. This led to inexperienced contractors under-quoting and winning the contracts leading to longer mobilization periods, and delays and cost over-runs, poor quality of workmanship, creating unjustifiable extra items and claims and getting them sanctioned as a fait accompli. Short listing of contractors firms at least for major works would have automatically eliminated the inexperienced and the unworthy. Sewerage conveyance tenders were split up probably because the routes were through crowded localities or along busy roads. This resulted into non-maintenance of continuous falling invert levels, missing links, and plugged unrecorded dead ends, causing serious problems of joining two ends. The quality of workmanship on civil works on sewerage side left much to be desired due to inexperience of the contractors, coupled with deficiencies of supervisory staff, as well as consultants. IDA missions aide memoirs also highlights the quality of work and aspect of proper supervision. There are hardly any cases of any punitive action taken against any contractor. On the mechanical and electrical side many good manufacturers turned contractors performed very poorly during erection and commissioning because they were just not organized for such contracts. Fragmentation of contracts for one site or one system needed meticulous efforts for coordination from the client which proved very inadequate. Perhaps a consortium with a leader contractor could have proved better. There were considerable delays in awarding contracts after receipt of tenders and sometimes reinvitation. The classic examples are a) the deep marine outfalls. The original tenders were received on 17.03.82 and final award was made sometime in Jan. 1984. To gain the lost time the contract periods were reduced by 9 months each b) pumping equipment at Bandra - Tenders were invited in 1983. Then reinvited twice and finally awarded in Nov. 88. Fortunately the pumping stations are not yet ready and the outfalls may take another 4 years. Considerable delays were caused due to even small pockets of land acquisition. Cost of land acquisition for government land is about Rs.25 crores and Rs.5 crores for private lands. (combined for Bombay I, II and III). Latter is less than 0.3% of the combined cost of 3 projects and is insignificant but has resulted in enormous cost and time overruns. Under Section 90 of the B.M.C. Act on the lines of B.M.R.D.A. Act the M.C. can acquire any immovable property by agreement. Resorting to this section probably would have proved less troublesome and cheap in the long run. The 40 amending of the B.M.C. Act on the lines of B.M.R.D.A. Act & M.H. & A.D. Act can also speed up the acquisition through Govt. agency. Fortunately, land required for Phase III is acquired. Law and order situation caused delays on certain works which was a result of delays in payments of price of acquired lands. Direct purchases of land under Section 90 of B.M.C. Act and creation of a special police cell for projects in troublesome areas by the Govt. even at the cost of project agency could have helped in diffusing the situation. The delays in gettir.g clearance for Govt. forest lands, D.G.T.D. clearance, permission to award contracts to foreign contractors and release of foreign exchange to contractors proved, in many cases a frustrating experience. It would have been better if this was personally handled at the top most level of management with close monitoring by IDA. For ensuring speed and quality on contract works, help of an independent monitoring cell and a quality control cell reporting directly to the M.C. headed either by independent consultant or officers on deputation from Govt. bodies would have given advice without fear or favor, could have considerably improved the situation. Another way could have been to continue the top officers of these two departments in their posts till retirement; protecting their financial interest by upgrading the post from time to time. There was a need to introduce improved project planning and control and perhaps incentives to contractors for early completion. It was necessary, tn develop a project break down structure to identify individual work packages to serve as a basis for subsequent net work activities. This would have served a basis for companion cost monitoring system. Net works with selected mile stones could have facilitated project control. Reporting systems including delays due to BMC's inaction should have been introduced. The cost of delays highlighting should have been brought to the notice of M. C. frequently for his intervention. There are serious problems in taking over of the facilities by the operation department, sometimes due to clash of personalities. These must be redressed to and monitored. The stores department is in shambles. The reasons are not far ro seek. There is an atmosphere of fear and no one is ready to take bold decisions. This department at one time was humming with activities and staff was motivated. It appears to have become the Cinderella of W.S.S.D. Its non-performance has affected the progress and consequently the cost of work. It needs to be revitalized. The contractor's bad performance is not very seriously reflected in punishments, by way of degradation of class, fines, black-listing, rejection of work. This will certainly bring good results. On the other hand the timely payment of bills and claims can improve their cashflow and performance. 41 There is need to take special pains for coordinating the interface activities of the contractors. 5. Organization and performance of the top manapement: Till the negotiations for Bombay II Project, the top management consisted of the M. C. at the apex and the D.M.C.(S.E.) (Special Engineering) heading the WSSD, assisted by the Chief Engineers and the A.C.A. This worked well and a sound team of dedicated, sincere, hardworking personnel delivere4 the goods. The role of the D.M.C.(S.E.) was of Engineer-in-Chie. cL administrator solely as a W.S.S.D. Chief. On the retirement of the incumbent, a post of Director was created keeping the posts of the D.M.C. (Eng.) and D.M.C.(S.E.) vacant. The multifarious duties of his erstwhile post kept him busy and he was overburdened with the work of W.S.S.D. also which affected his time apportionment as whole time Eng.-in-Chief for W.S.S.D. As a matter of fact, the sewerage section being very weak and the Bombay II being large sized and also complex full time attention of a D.M.C. was required. This started the process of decline. In retrospect it can also be said that Director, as the Eng.-in- Chief and subsequent revival of post of D.M.C.(S.E.) must have caused considerable damage. The clearly demarcated line of command in the process was bye-passed. The atmosphere did not remain that healthy on account of disturbance in the unity of command. The top management's job is to create direction, vision and standards and motivate people by their own action and also know that the "buck stops here" (if something goes wrong, one should not blame sub- ordinates but say "it is my job, it is my responsibility"). The approach of the top management did not display the desired degree of dedication, sincerity and honesty. Its approach also disturbed the atmosphere. The consultants failed to behave professionally, removed competent expatriate staff unceremoniously. Its process of tender evaluation by consultants and clients remained unsatisfactory. Contribution of the top management remained somewhat questionable exception apart. The curse of the present Indian work cuLture in public organization is absence of "Accountability". Some of the trained staff was not deployed properly and the training expenditure proved infractious. Considering the weakness in sewerage organization, the training given should have been one of the secondment on actual jobs than visits. Important objective of the project was institution building and career development. The benefits and need for the rotation of the staff are not disputed but potential set backs of critical juncture in the project work and replacement by persons of matching skills were overlooked when transferring about 40 A.Es. overnight during peak load working season. On completion of Bombay II the annual cost of operation of W.S.& Sev. facilities will probably cross Rs.200 crores, consisting of about 80% 42 energy and consumables and 20% labor. There is need, specially on sewerage side, to ensure that the engineers who had been sent abroad for operation training are posted in right positions. It is also necessary to rigorously follow (i) an efficient cost accounting system (ii) a preventive maintenance programme and norms to measure maintenance work (iii) a system to monitor the condition of plant and machinery. Optimization of staff deployment and continuing training programme as also mechanization of operation using latest techniques will reduce cost of operation. Construction and operation of the water and waste-water facilities is a specialized branch of engineering dealing in public health, environmental impact, complex civil and marine structures and treatment and installation and maintenance of electrical sub-stations, flow monitoring system, treatment plant equipment, very large pumps and therefore it is felt that the 'C' Budget should be separate engineering cadre to ensure efficient and experienced specialized staff. In fact most of the state governments have now autonomous water supply and sewerage boards and considering the vast investments made and large operational budget it can easily be compared to any state board. It is therefore advisable to make it a separate entity completely like the B.E.S.T. with a single committee like the B.E.S.T. committee, which will be accountable for efficient management of water supply and waste water facilities. 6. The Bank's Role and Performance: The Bank was a little extra enthusiastic in agreeing to a very. ambitious, novel and complex sewage disposal system being undertaken in one big step. It was probably led away by the fairly successful implementation of Bhatsai stage I works but failed to properly estimate the lack of experience, expertise and absence of project culture in the sewerage wing of WSSD. Perhaps advocating a staged development and refusal to increase the length of deep marine outfalls from 1 KM to 3 KM at post negotiation stage could have avoided the current disastrous performance of the sewerage project. The supervisory missions must have been getting signals of bad management and unfair practices if they were alert enough but their approach was not aggressive which otherwise could have helped to remedy the situation. The Bank should maintain a dossier on performance of consultant and help the project agencies in selecting appropriate consultants. The stpervisory mission's visit should have been oftener as normal visits left them little time to address the supervision aspects of sewerage project. The Bank had to play the fire brigade role too often during the project implementation which they seemed to have played ably but could have taken effective preventive measures if mission's visits were increased or lasted longer. 43 7. Finance and Accounts: The performance of this Wing is very satisfactory but there is excessive generation of internal resources. The Bank covenant requires cash generation of 40% of the capital expenditure to be incurred during the year. The loans from GOM matching the IDA CREDIt have not been received in full for Bombay I and Bombay II. GOM cleared backlog subsequently for Phase-II. The Water & Sewerage tariffs have been increased but have proved as a burden on the present generation. Covenant provides that BMC reduce the level of its receivables to not more than 20% of billings. This has risen from 59.70% in 84-85 to 68.77 in 88-89 and merits serious attention. Revaluation of assets is now overdue since last revision took place 10 years ago. A large number of works are completed partially but not commissioned in a reasonable period. The interest on the cost of these works continues to be capitalised as they are accounted for as works-in-progress. It needs consideration whether they should be considered as assets after a lapse of predetermined period. 44 PROJECT COMPLETION REPORT INDIA Second Bombay Water Supply and Sewerage Project (CREDIT 842-IN) PART III - PROJECT PROFILE DATA 1. Related Bank Loans or Credits Credit No. : 390-IN it1 : First Bombay Water Supply and Sewerage Project Year of Approval 1973 Purpose : This project was the first stage of a major long-range program to correct a desperate water supply and sanitation situation in Bombay. The project was to provide for complete treatment of water from all sources used by Bombay, and to provide for treated water storage and distribution works. Sewerage facilities were to include construction or reconstruction of pumping stations, improvements to sewage treatment facilities, and new trunk and branch sewers. The project also was to enhance development of all aspects of water supply and sewerage management. Status : The credit was closed in 1981. The project succeeded in improving Bombay's water supply, but major sewerage works had to be deferred because of project cost overruns. Credit/Loan No. Cr.1750-IN/Ln.2769-IN Title : Third Bombay Water Supply and Sewerage Project Year of Approval 1986 Purpose : The project is to provide for major expansion of water supply distribution systems, with an additional 455-mld treatment plant and storage reservoirs. Limited sewerage system expansion also is to be provided. It is expected that the project will reduce Bombay's water shortage from a present 36% to 18% of demand. Status : Early project activities are proceeding well. Recently, some sewage pumping and treatment works not completed under the second project have been included in this project. Implementation of the project will extend into 1994. 45 2. Project Timetable Planned Revised Actual Preparation Mission Aug. 4, 1977 Aug. 4, 1977 Appraisal Mission Jan. 4, 1978 Jan 4, 1978 Credit Negotiations June 12, 1978 June 12, 1978 Board Approval July 25, 1978 July 25, 1978 Credit Signing Nov. 13, 1978 Nov 13, 1978 Credit Effectiveness June 12, 1979 June 12, 1979 Credit Closing March 31, 1985 March 31, 1988 March 31, 1988 Credit Completion Sep. 30, 1985 Sep. 30, 1988 Sep. 30, 1988 46 3. Credit Disbursements --------------(US$ million)*----------------- IDA FY Quarter Ending SAR Estimate Actual Actual as I of Estimate 1979 June 1979 1.0 0.0 0 1980 September 1979 4.2 0.0 0 December 1979 8.8 1.2 14 March 1980 10.0 2.6 26 June 1980 17.0 3.0 18 1981 September 1980 27.4 3.9 14 December 1980 35.8 6.7 19 March 1981 37.9 12.4 33 June 1981 50.6 12.9 25 1982 September 1981 69.5 13.9 20 December 1981 80.5 14.2 18 March 1982 83.1 14.8 18 June 1982 99.6 17.2 17 1983 September 1982 124.4 21.3 17 December 1982 133.8 22.4 17 March 1983 136.2 25.8 19 June 1983 150.2 27.8 19 1984 September 1983 171.3 39.8 23 December 1983 177.0 40.7 23 March 1984 178.4 48.0 27 June 1984 187.0 51.8 28 1985 September 1984 196.0 54.9 28 December 1984 196.0 59.6 30 March 1985 196.0 77.0 39 June 1985 196.0 87.8 45 1986 September 1985 196.0 93.6 48 December 1985 196.0 105.2 54 March 1986 196.0 111.1 57 June 1986 196.0 121.1 62 1987 September 1986 196.0 133.1 68 Decembei 1986 196.0 147.0 75 March 1987 196.0 159.3 81 June 1987 196.0 168.9 86 1988 September 1987 196.0 175.7 90 December 1987 196.0 177.8 91 March 1988 196.0 185.7 95 June 1988 196.0 192.1 98 September 1988 196.0 196.0 100 47 4. Project Costs and Financing A. Proiect Costs (US$ million) Items Appraisal Estimated 1/ Estimate Actual Water Supply 240.6 300.0 Sewerage 171.0 25.0 Total 311.6 625.0 B. Project Financing (US$ million) Expenditure Categories Planned Actual Equipment and Materials - ICB 73,000.0 62,600.0 Equipment and Materials - LCB 24,500.0 21,200.0 Equipment and Materials - Other 500.0 13.0 Civil Works 80,000.0 95,800.0 Consultants Services 11,800.0 16,100.0 Training 200.0 235.0 Unallocated 6,000.0 0.0 Total 196,000.0 196,000.0 'Major works remain to be completed over the next two to three years, with a major work being subject to redesign. Hence, the estimated actual costs are very uncertain at this time. 48 5. Status of Covenants Agreement Subject Compliance Status GOM 2.01(b) GOM to cause BMC to provide funds, facilities OK services and Other resources t the implementation of the project. 2.02(1) G0M to provide Rs. equivalent of $196.0 About $140 (LL)(iLi) million loan at 6.75% repayable over million eqivalent 25 years with 4 years of grace. provided as of 6/30188. 2.04 COM shall ensure the construction of OK Bhatsai Dam. 2.05 GOM shall take or cause to be taken OK actions necessary to acquire land required for purposes of the project. BMC 2.01 BMC to carry out the project as described OK in Schedule 2 of the DCA. 2.02 BMC to employ consultants satisfactory to OK IDA to assist BMC in carrying out parts of the project mutually agreed btveen the Association and BMC. 2.04(a) BMC to carry insurance coverage satisfactory OK to IDA. 2.05(b) BMC to maintain records and procedures OK adequate to record and monitor both physical and financial progress of the project. 2.07 BMC shall cause WSSD to improve the detection OK and repair of system losses in accordance with a program satisfactory to IDA. 2.08 BMC shall cause USSD to adopt metering OK procedures in accordance with a program satisfactory to IDA. 2.09 BMC shall take all actions necessary to OK acquire or initiate action for GOM to acquire Lands and rights for purposes of the project. 3.01 BMC shall maintain existence of USSD and OK employ competent and qualified staff to satiafaction of IDA. 3.03 EMC shall inform the Association and take O account of association's views prior to making any material modifications to structure. organization, financial and technical responsibilities of WSSD. 3.04(b) BMC to cause the existing fire/accident o and third party funds to be separated between WSSD and other departments and services of BMC. 3.04(c) BMC shall jcause USSD to establish a o firelaccident insurance fund and third party insurance fund and make annual contributions to those funds to satisfaction of IDA. 49 Status of Covenants .. (conzinued) 4.02 BMC to have its accounts and financial OK statements audited and submit such audit reports to IDA within six months of fiscal year end. 4.03 BMC shall set and maintain tariffs for OI water supply and sewerage services to ensure that operating revenues are sufficient to meet all of USSDIs operating expenses and debt service and provide at least 401 of annual capital expenditure to satisfaction of IDA. 4.05 BMC to transfer to WSSD sufficient cash OK to meet WSSD's obligations and shall invest and pay interest to WSSD on any balance remaining with BMC until required by WSSD. 4.06 BMC shall transfer to WSSD Rs.56.6 million OK in two installments not later than March 31, 1979 and March 31, 1980 respectively. 4.07 BMC to cause WSSD to reduce level of its OR receivables to not more than 20X of billings. 4.08 BMC to review tariff structure for water OK supply and sewerage services to satisfaction of IDA. OK a Covenant complied with. GOM - Government of Maharashtra BMC - Bombay Municipal Corporation 5. Status of Covenants 50 6. Use of Bank Resources A. Staff and Consultant Inputs Actual No. of Stafveeks Stage of Project Cycle (Field and HQ Combined) Through Appraisal ........................................... 17.4 Appraisal through Board Approval ............... .......... 11.1 Board Approval through Effectiveness ....................... .5 Supervision ................................................ 131.4 Total ....................................................... 160.4 B. Missions No. of Days Specialization Performance Rating Types of Month/Year Persons in Field Represented 1/ Status 2I Problems 31 Through Aporaisal: December 1976 1 7 EGR May 1977 1 7 EGR August 1977 1 15 EGR Appraisal through Board Approval: January 1978 2 28 EGR,FNA Supervision: December 1979 2 7 EGR. FNA 2 PIK May 1980 2 5 EGR, FNA 2 0 March 1981 2 7 EGR, FNA 2 M,T January 1982 2 7 ECR, FNA 2 F,T July 1982 2 7 EGR, FNA 2 F,T February 1983 2 10 EGR, FNA 2 F,T February 1984 4 28 EGR, FNA 2 0 October 1984 2 13 EGR. FNA 2 F.T,P March 1985 4 13 EGR, FNA 2 .00 February 1986 1 4 EGR 2 T.0 May 1986 1 10 EGR 2 T,M,P November 1986 3 20 EGR, FNA 2 May 1987 2 12 EGR, FNA 1 July 1988 2 5 FNA, CON 1 1/ FNA - Financial Analysts EGR - Engineers CON - Consultant 21 1 - Problem-fre- or minor problemas 2 - Moderate problems; 3 - Major Prob!ems 1/ F - Financials M * Managements T - Technicals P - Political& 0 = Other