Mexico - Highway Maintenance Project

 Highway maintenance project Report No: ; Type: Report/Evaluation Memorandum ; Country: Mexico; Region: Latin America And Caribbean; Sector: Highways; Major Sector: Transportation; ProjectID: P007642 Mexico: Highway Maintenance Project (Loan 2875-ME) The Implementation Completion Report (ICR) on the Mexico Highway Maintenance Project (Loan 2875-ME, approved in FY88) was prepared by the Latin American and Caribbean, Regional Office, with Appendix B contributed by the Borrower. The loan, in the amount of US$135 million, was approved on October 6, 1987, and closed on June 30, 1995, one year behind schedule. The loan was fully disbursed. After ten Bank loans for highway construction and reconstruction in Mexico, this was the first operation to deal with highway maintenance. The project's objectives were to: (a) assist the Secretariat for Communications and Transport (SCT) in improving maintenance operations on the federal road network; (b) enhance the cost-effectiveness of road maintenance; and (c) promote adequate cost recovery, especially from heavy freight vehicles. The project comprised civil works, purchase of maintenance equipment, training, and consulting services. The project's institutional development objective was substantially achieved. Three studies covering reorganization of maintenance management, pavement management, and bridge management, were carried out and implementation of recommendations was started; implementation now continues under the ongoing Highway Rehabilitation and Maintenance project. About 8,000 staff from the SCTs Maintenance Directorate were trained. While initial resistance to move away from works by force account caused implementation delays, the project was successful in launching highway maintenance by private contractors; at the same time, the highway maintenance organization was restructured to make it better suited to the sector's decentralization strategy. On the minus side, little progress was achieved in improving cost recovery. The project's physical objective was only partially achieved, as only 6,100 km of rehabilitation and maintenance were achieved, compared with a combined 16,000 km (for periodic maintenance and surface treatment) envisaged at appraisal; targets were scaled down during implementation. Despite the reduction in scope, which was due mainly to a shortfall in counterpart funds and to higher than expected unit prices, the project had a cost overrun of 11 percent. The reestimated economic rate of return is satisfactory (based on a sample of 15 percent of all the roads covered by the project, each had an acceptable return, and exceeded 100 percent in about half the cases). By comparison, the appraisal report had estimated the return to be over 40 percent. OED concurs with the ICR in rating the project's outcome as satisfactory, its sustainability as likely, and its institutional development as substantial. In spite of its poor assessment at appraisal of the Borrower's implementation capacity and of counterpart funding (which the Borrower attributes to inadequate staffing, notably the lack of highway specialists), the Bank performed quite well during subsequent project supervision and its performance is thus rated as satisfactory overall. The main lesson is that for a project to bring about important changes in the way of conducting business, such as the introduction of maintenance by contract, it is advisable to include activities which, early in project implementation, can demonstrate the benefits and feasibility of these changes, and to involve stakeholders beyond the agency itself. The ICR is satisfactory and covers most areas well. However, it could have been more explicit about the factors which hampered progress in meeting the cost recovery objective. The project may be audited.