Liberia - Monrovia Water Supply Project

Document of The World Bank FOR OFFICIAL USE ONLY Repeit No. 5754 PROJECT COMPLETION REPORT REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CREDIT 859-LBR) June 26, 1985 Western Africa Regional Office Projects Department Water Supply Division Th doement has a restricted dbnri *m d my be mud by reipients oly in the perfoemunce of their officl dbei Ia toens n . otber-Ise be disioud withou Weod Bank xthaiorion.  CURRENCY EQUIVALENTS The official monetary unit is the Liberia Dollar with par value equal to the US Dollar (US$). The US Dollar is legal tender in Liberia. MEASURES AND BQUIVALENTS 1 millimeter (mm) = 0.04 inches (in.) 1 meter (m) = 39.4 inches (in.) = 3.28 feet (ft) 1 kilometer (km) = 0.625 miles (mi) 1 square kilometer (km2) = 0.386 square miles (sq. mi) 1 cubic meter (m3) = 35.3 cubic feet (cu. ft) 1 liter (1) = 0.264 US gallon (gal) 1 cubic meter per second (m3/sec) = 22.8 million US gallons per day (mgd) 1 cubic meter per day (m3/day) = 264 US gallons per day (gpd) liters per capita per day (lcd) = 0.264 US gallons per capita per day (ged) 1 hectare (ha) = 2.47 acres (ac) ABBREVIATIONS AND ACRONYMS AfDB African Development Bank CDC Commonwealth Development Corporation (United Kingdom) GOF Government of Finland GOL Government of Liberia GTZ Gesellschaft fUr Technische Zusammenarbeit (German Tecnnical Assistance Agency) IDA International Development Association IMF International Monetary Fund KfW Kreditanstalt fur Wiederaufbau (German Reconstruction Bank) LEC Liberia Electricity Corporation LWSC Liberia Water and Sewer Corporation OAU Organization of African Unity PPF Project Preparation Facility of the World Bank PUA Public Utilities Authority US United States USAID United States Agency for International Development FISCAL YEAR - GOL and LWSC January 1 - December 31, prior to FY81 January 1, 1980 - June 30, 1981, for FY81 July 1 - June 30, subsequent to FY81  FOR OMCIAL USE ONLY REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CR. 859-LBR) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No. Preface .................................................................. i. Basic Data Sheet .................... ................. ......f.................. ii Highlights ................................................................. iv I. INTRODUCTION ................................................................ 1 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL A. Origin .................................................... . . . . 2 B. Project Objectives .......3 C. Project Description ....... 4 D. Project Financing ........ 5 E. Covenants ............................................... ..... . 5 F. Condition of Effectiveness ....... 5 III. PROJECT IMPLEMENTATION, OPERATION AND COST A. Introduction ........................... .. 6 B. Construction .....................................................6 1. AfDB Financed Components .... . 6 2. IDA Financed Components . . . 7 C. Operations ................................................... 8 1. AfDB Financed Components . .. 8 2. IDA Financed Components .................................. 9 D. Project Cost . ................................................. 10 E. Project Design and Supervision of Construction . . 11 F. Contractor Performance ... . ........................1, 11 G. Management Improvement, Technical Assistance and Training 11 1. Management Improvement Program . . 12 2. Technical Assistance. .. 12 3. Training ......13 H. Sector Study.. 13 I. Procurement.... 13 IV. OPERATING PERFORMANCE A. Water Produced and Sold . . .14 B. Unaccounted-for Waterar.. ... 14 C. Maintenance of Vehicles, Plant and Equipment .15 This document has a restriced 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.  Table of Contents (Cont'd) Page No. APPENDIXES A Comments from the Executing Agency, LWSC ..... .................... 48 B Comments from the Borrower, Ministry of Finance . . . 49 C Comments from the Co-financier, AFDB ............................ 50 D Comments from the Co-financier, CDC ................... ........... 51 MAP IBRD No. 18271  Table of Contents (Cont'd) Page No. V. FINANCIAL PERFORMANCE A. Introduction ............ ...................... .................. 15 B. Rate of Return ....................... .................. ........ 16 C. Tariffs ............ .....*............ ....... . ....... 16 D. Billing, Collection and Liquidity ...................... 17 E. Operating Costs ....................................... .0 ................ 18 F. Debt Coverage ................................... o ......................, 1B G. Internal Cash Generation .......................... ..... .................... . 18 H. Accounts and Audit .............................. .. ........ 20 VI. INSTITUTIONAL PERFORMANCE A. Organization . . . ...... ........ 20 B. Staffing ........... ................. *.................. **. . . . 20 C. Training and Technical Assistance....................... ...... 21 D. Proposals for Improvement ........ ....... ............ 21 VII. PROJECT JUSTIFICATION A. Background . . . ...... ............ 22 B. Project Benefits . .................... ................ 22 C. Average Incremental Costs ....... . . 23 D. Internal Rate of Return ................................. . . .. 24 E. Affordability.o . . .. . .... .. ........ 24 VIII. BANK PERFORMANCE ...... 24 IX. CONCLUSION .......................................................... 26 ANNEXES 2-1 Summary of Covenants - Project Agreement ..--.... ....28 2-2 Summary of Covenants - Credit Agreement .......... .. .............. 31 3-1 Financing and Summary of Total Project Cost ......... .. ............ 32 3-2 Schedule of Disbursements ................ . ......................... 33 5-1 Income Statements and Performance Indicators (1978-83) ............. 34 5-2 Balance Sheets (1978-83) .,,,,,,,,,,,,,,,,, ........ 35 5-3 Sources and Applications of Funds (1978-83) ....o ................... 36 6 Organizational Chart L.W.S.C . ..................................... 37 7 Assumptions for the Cost/Benefit Analysis ......................... o 38  REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CR. 859-LBR) PROJECT COMPLETION REPORT PREFACE This report represents the results of a performance review of the Monrovia Water Supply Project for which Credit 859-LBR of US$8.0 million to the Government of Liberia (GOL) was approved in December 1978. The Credit was fully disbursed and closed in October 1983. The report consists of Highlights and a Project Completion Report (PCR) prepared by the West Africa Regional Office. A review of Bank files and a PCR prepared by the Liberia Water and Sewer Corporation (LWSC) form the basis of this report. The Region also took into account the findings of a project completion mission carried out in November 1983. The draft report was discussed with GOL and LWSC in May 1984, and this final report reflects their comments and suggestions. In accordance with the revised procedures for project performance audit reporting, this PCR was read by the Operations Evaluation Department (OED) but the project was not audited by OED staff. Following standard procedures, OED sent copies of the draft report to the Borrower, the Executing Agency and the Co-financiers for their comments. Comments received from them have been reproduced as Appendices A, B, C and D to the report.  - ii - REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CR. 859-LBR) L PROJECT COMPLETION REPORT BASIC DATA SHEET KEY PROJECT DATA Appraisal Item Estimate Actual (11/10/78) Total Project Cost (US$ million) 14.8 a/ 18.4 Cost Overruns (%) 24.3 a/ Credit Amount (US$ million) 8.0 8.0 Disbursed 8.0 8.0 Date Physical Components Completed 6/82 1/83 Proportion Completed by Above Date (%) 100 95 Economic Rate of Return (%) 9.0 negative Financial Performance (Rate of Return)(%) 6.9 negative-El Institutional Performance d/ I (scale of 3) d/ 3 Co-finance (US$ million): / AfDB 2.9 2.6 -/ CDC 2.0 1.9 i OTHER PROJECT DATA Item Planned Actual First Mention in Files or Timetable 02/13/73 Government's Application 05/06/76 Negotiations Completed 06/08/78 Board Approval 12/05/78 Credit Agreement Date 01/08/79 Effective Date 4/09/79 04/02/79 Closing Date 6/30/82 06/30/83 if Borrower Republic of Liberia Executing Agency Liberia Water and Sewer Corporation Fiscal Year of Borrower Jan. 1 - Dec. 31, prior to FY81 Jan. 1, 1980 - June 30, 1981, for FY81 Jul. 1 - June 30 subsequent to FY81 Follow-on Project Technical Assistance/Rehabilitation Project Amount (US$ million) 5.0 Credit Agreement Date Not yet signed (Board approval March 19, 1985) a/ After deletion of the estimated cost of the distrihution system extensions which were deleted. b/ A schedule of cumulative disbursements is presented in Annex 3-2. c/ Negative rate of return since FY79. d/ A rating of 1 indicates no significant problems; 3 indicates major problems. e/ Variance from appraisal estimate is due to changes in exchange rates. f/ The final disbursement was made and the account closed in October 1983.  - iii - MISSION DATA Month/ Jo. of No. of Man- Date of Item Sent by* Year Weeks Persons Weeks Report Identification VAPPB 03/76 1 1 1 04/12/76 Preparation WAPEWT 01/77 1 2 2 03/16/77 Preappraisal WAPEWT 05/77 1.5 2 3 07/05/77 WA1DB 2 1 2 07/14/77 Appraisal VAPEWT 10/77 3 3 9 10/30/77 EDC 01/78 1 1 1 03/06/78 Post-Appraisal WAPEWT 10/78 0.5 1 0.5 12/04/78 WAPEWT 12/78 1 1 1 12/18/78 Supervision 1 WAPEWT 05/79 1.5 1 1.5 05/24/79 Supervision 2 WAPEW 09/79 1 1 1 10/17/79 Supervision 3 VAPEW 02/80 1.5 3 4.5 04/07/80 TWTW 1 1 1 03/06/80 EDC 0.5 1 0.5 03/18/80 URBOR 0.5 1 0.5 10/15/80 Supervision 4 VAPWS 11/80 1.5 2 3 01/06/81 Supervision 5 WAPWS 05/81 1 1 1 05/29/81 Supervision o VAPNS 08/81 1.5 2 3 09/25/81 Supervision 7 VAPWS 11/81 1 1 1 01/21/82 Supervision 8 VAPNS 02/82 1 2 2 03/03/82 Supervision 9 WAPWS 04/82 1 1 1 05/25/82 Supervision 10 WAPWS 09/82 2 2 4 10/15/82 Supervision 11 WAPWS 05/83 1 1 1 06/06/83 Completion 1 VAPWS 11/83 1.5 2 3 12/19/83 Completion 2 WAPWS 05/84 0.5 2 1 05/22/84 Total = 20 missions = 48.5 man-weeks * WAPEWT and WAPEW were precursors to WAPNS.  - ivs REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CR. 859-LBR) PROJECT COMPLETION REPORT HIGHLIGHTS 1. The project (except for the raw water pipeline) was designed as a short-term program to ensure adequate water supply for Monrovia while LWSC was strengthening its management capability and developing a rational long-term development program. The IDA Credit of US$8.0 million was used to finance expansion of the White Plains treatment plant, construction of a major transmission main, construction of a booster pumping station, installation of standpipes (public fountains), consulting services for a water sector study, engineering design and supervision, technical assistance, execution of a Management Improvement Program, and development of administrative and technical training programs. Joint financing was provided by the Commonwealth Development Corporation (CDC). In addition, the African Development Bank (AfDB) financed a raw water transmission main and the Organization of African Unity (OAU) conference complex distribution system. 2. Aside from one project component to expand the distribution system which was-not implemented due to local funding constraints, all of the physical objectives of the project have been met (para 7.02). The raw water pipeline from the Mt. Coffee hydroelectric dam, completed in 1982, provides a saline-free source of raw water (para 3.11); expansion of the White Plains treatment plant, completed in 1983, has doubled LWSC's treatment plant capacity; and installation of some 140 standpipes makes piped water available to a substantial segment of Monrovia's urban poor who previously had limited or no access to a safe water supply (para 7.04). 3. The total cost of the project as implemented was US$18.4 million, about 14% higher than the appraisal estimate of US$16.1 million .1/, due primarily to underestimating the cost of the technical assistance and water treatment plant expansion components of the project at appraisal (para 3.18). The cost overrun was limited by excluding planned improvements and extensions to the distribution system (estimated to cost US$1.3 million) (para 8.02). 4. LWSC's rate of return on net fixed assets is currently negative. Poor financial performance is attributed to tariffs which are too low (para 5.03) and management which has allowed some operating costs to skyrocket (para 5.06) while revenues have diminished. In addition, the country-wide shortage of liquidity and general economic malaise have certainly had an adverse impact on LWSC's financial performance. As a result, the major financial covenants of the Credit and Project Agreements have not been met. 5. LWSC has been plagued by an extremely high rate of turnover in certain top management positions. During project execution, there were several changes of both Managing Director and Controller. At the same time, the Corporation has chronically suffered from maintaining an excessive number of unskilled employees on its payroll (para 6.02). 1/ OED Note: The appraisal estimate without the deleted distribution system extension totaled about US$14.8 million. On this basis, the cost overrun was about 24%.  6. The internal rate of return of the project is at this point difficult to measure: questions as to the impact of LWSC's deteriorated management performance (e.g., in terms of accuracy of financial statements) as they affect the incremental cost/benefit analysis have not yet found an answer. The physical components have been completed (except for extension to the distribution system), and incremental water sales have taken place; but the extent to which these incremental water sales (the accuracy of the recording of which is dubious) reflect--as a proxy for beneficiaries' willingness to pay--in the case of this project, the real economic benefits remains a questiAE mark. tThe estimated high number of illegal connections is one example - one surely cannot argue that, as people do not pay for water consumption, therefore the economic benefits are equal to zero. The unaccounted-for water proportion simply points to LWSC's poor performance.) With all these questions in mind, the recalculation of the internal rate of return has tentatively yielded approximately -1% as compared with the Staff Appraisal Report (SAR) estimate of 9%, not surprising as the operating efficiency has deteriorated and expected tariff levels never materialized (para. 7.09).  REPUBLIC OF LIBERIA MONROVIA WATER SUPPLY PROJECT (CR. 859-LBR) PROJECT COMPLEION REPORT I. INTRODUCTION 1.01 This report reviews the Monrovia Water Supply Project (CR. 859-LER), for which an IDA Credit of US$8.0 million was approved on December 5, 1978 and signed on January 8, 1979. The Borrower was the Government of Liberia (GOL) with relending to the Liberia Water and Sewer Corporation (LWSC). Parallel financing was provided by the African Development Bank (AfDB), and Joint financing by the Commonwealth Development Corporation (CDC) - . The objectives of the project were to eliminate the problem of saline water intrusion into Monrovia's raw water supply; to increase the capacity of the White Plains water treatment plant serving Monrovia; to improve the distribution system; to improve water supply services to the urban poor of Monrovia; to improve and strengthen the technical, financial and administrative capabilities of LWSC; and to establish a plan for developing urban and rural water supplies throughout Liberia. The project was completed in January 1983 about six months later than originally planned, due primarily to delays in mobilizing one contractor because of the uncertainty of obtaining local counterpart funding (para 3.06). 1.02 Until 1973, national responsibility for the overall planning, development and operation of public water supply and sewerage systems in Liberia was assigned to a division of the Liberia Public Utilities Authority (PUA), which also had responsibility for electricity, telecommunications and broadcasting. LWSC, which was created in 1973 and became an autonomous public enterprise in 1976, is empowered by law to establish and operate water supply and sewerage facilities throughout Liberia. The Ministry of Public Health also assumes a limited role in the sector, primarily in water quality surveillance. 1.03 LWSC's policies are determined by a five-member Board of Directors appointed by the Govern.ment. The Managing Director is LWSC's chief executive. Until the late 1970's, LWSC operated only in Monrovia and two other towns. Since that time, seven additional towns (so-called outstations) have been equipped with piped systems financed by the Government of the Federal Republic of Germany through Kreditanstalt fur Wiederaufbau (Kf?). Responsibility for the development and maintenance of rural water supplies resides with the Ministry of Rural Development. 1/ In addition, the Government of Finland (GOP) provided a loan equivalent to US$2.0 million to GOL, the proceeds of which were transferred as equity funding for the project.  -2- 1.04 The first Monrovia water supply system was constructed in 1953 and augmented in 1960. Except for the transmission main, these works were abandoned and replaced by a treatment plant constructed at White Plains in 1969. The original waterworks were financed by GOL and transferred as equity to the Water Division of the PUA. The White Plains treatment plant, which was expanded under this project, was financed primarily by a loan in the amount of US$7.0 million from United States Agency for International Development (USAID). In 1973 the AfDB granted a US$2.2 million equivalent loan to LWSC for improvements to the then existing system and for the design of further expansions. 1.05 A proposed second IDA water supply project, which emphasizes technical assistance, institutional development and rehabilitation, is currently under appraisal. Its approval is contingent upon, among other factors, LWSC's performance in the near term (para 6.05), the availability of IDA resources and the interest of other agencies in participating in co- financing. 1.06 LWSC is also responsible for the sewerage system in Monrovia, while drainage and refuse collection are under the jurisdiction of local authorities. Monrovia has the only public sewage disposal system in Liberia. Commissioned in 1969, it was constructed at a total cost of US$8-5 million, of which US$7.2 million was funded by USAID. The sewerage system was renovated in 1983 at a cost of US$3.5 million funded by a KfW loan to GOL. 1.07 Under the terms of the Project Agreement, LWSC was obligated to - prepare a completion report within six months of the closing date. LWSC's completion report, received in December 1983, mission reports and correspondence form the basis of this PCR. A review of the draft PCR was held with the borrower in May 1984. II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL A. Origin 2.01 During the period from 1962 to 1974, Monrovia's population grew at an average rate of 8%. By mid-1973, the existing water supply facilities in Monrovia began to experience serious operational difficulties due to saline water iitrusion at the raw water intake on the St. Paul River during the dry season, insufficient transmission capacity, and deterioration of plant, equipment and certain pipelines. Late in 1973 the AfDB agreed to lend LWSC the equivalent of US$1.2 million (supplemented by an additional loan equivalent to US$1.0 million in 1975) to finance the engineering design and construction of certain emergency improvements to the Monrovia system as well as the design only of extensions of the facilities to meet Monrovia's future water requirements. The contract for designing both the emergency improvements and the long-term expansion of the Monrovia water supply  -3- facilities wa. awarded to a firm of consulting engineers. Since the AfDB was Lunable to provide financing far the long-term extensions, financial assistance was requested from the World Bank. 2.02 The consulting engineers' report, completed in 1975, proposed major expansions to the Monrovia system which would have met anticipated demand through 1985-2000. Because the proposals were not supported by adequate preparatory work and certain improvements could not be postponed until another study was completed, this project was prepared as a short-term measure (with the exception of the raw water pipeline) to ensure an adequate water supply for Monrovia through 1984. 2.03 The major emphasis in the short-term was to eliminate the problem of saline water intrusion into the raw water supply, to increase the productive capacity of the water treatment plant, and to improve water supplies to the most needy of the urban poor. 2.04 Limiting the magnitude of investments at the time was further supported by the analysis of LWSC's financial and managerial competence, which clearly indicated a shortage of qualified and experienced personnel and the need for i-nstitutional strengthening before a major expansion of the water supply facilities could be undertaken. Thus, a technical assistance and training component was also included in the project. 2.05 While the engineering study (para 2.02) proposed the construction of a permanent river barrage to prevent saline water intrusion into the raw water supply, the Bank recommended that other possible alternatives be analyzed. A three mile (4.8 km) long gravity pipeline from the Mt. Coffee hydroelectric reservoir to the White Plains treatment plant was eventually determined to be the least-cost solution to the problem. 2.06 The intake point for the raw water pipeline remained an issue even after appraisal. Although directly tapping the penstocks at the hydroelectric generating plant was identified as the least-cost solution, co-ordination with the Liberia Electricity Corporation (LEC) was problematic. Although the - conflicts with LEC were eventually resolved, they resulted in delays in the completion of the raw water pipeline (para 3.02). B. Project Objectives 2.07 The objectives of the project were as follows: (i) to fulfill the urgent need for a permanent solution (as opposed to the annual construction of temporary barrages) for the prevention of saline water intrusion into the raw water supply; (ii) to provide additional treatment capacity at White Plains since the previously existing facilities were constantly operated well above the design capacity of 8 mgd (30,000 m3/day) and, in fact, frequently reached their hydraulic maximum capacity of 12 mgd (45,000 m3/day);  -4- (iii) to improve the performance of the trunk distribution system in critical areas such as the high elevation Namba Point and the Nesurado river crossings; (iv) to substantially improve the water supply services to the urban poor of Monrovia who had limited or no access to piped water (estimated at 70,000 people) either because of financial constraints (high connection charges) or because the service did not fully cover the densely populated slum areas of the city; (v) to improve and strengthen the technical, financial and administrative capabilities of LWSC, not only to better equip it to cater for the ever expanding needs of Monrovia, but also to prepare it for meeting its obligations of providing water supply and sanitation services in the rest of Liberia; and (vi) to prepare the ground through appropriate studies for (a) the systematic long-term development of Monrovia's water supply, and (b) the development of other urban and rural water supplies for the whole of Liberia. C. Project Description 2.08 The project as appraised in October 1977 was projected to cost about USS16.1 million, with an off-shore component of US$11.3 million. The principal components of the approved project were essentially as appraised: (a) Physical (i) 15,000 ft (4.6 km) raw water pipeline; (ii) 8 mgd (30,000 m3/day) extension to White Plains treatment plant; (iii) 1.5 mg (5,700 m3) treated water storage facility; (iv) 27,000 ft (18.2 km) trunk distribution main; (v) booster pumping station; (vi) Kenny Town primary and secondary distribution system extension and rehabilitation; (vii) 100 public standpipes; (viii) distribution system for the Organization of African Unity (OAU) conference complex; and (ix) design and supervision of construction.  -5- (b) Engineering, Technical Assistance and Training (i) Management Improvement Program; (ii) technical assistance equivalent to 10-11 man-years; (iii) design and implementation of training program; (iv) water supply sector study; (v) water demand and distribution study; and (vi) study for water supply to Careysburg and Bentol City. (c) Financial (i) tariff study; and (ii) block-mapping survey. D. Project Financing 2.09 IDA and CDC co-financed all of the project components with the exception of the raw water pipeline and the distribution system for the OAU conference complex which were parallel financed by AfDB. A loan from the Government of Finland (GOF) also provided some of the funding for the expansion of tne White Plains treatment plant (Finnish procurement). E. Covenants 2.10 Because the appraisal identified glaring weaknesses in the technical, financial and administrative capabilities of LWSC, the Project Agreement included a number of covenants designed to ensure improvements in institutional and financial performance. In general, LWSC failed to comply with many of the special covenants set forth in the Project Agreement. A summary of these covenants and the extent of LWSC's compliance is presented in Annex 2-1. 2.11 The Credit Agreement executed by GOL provided that the proceeds of the Credit be onlent to LWSC under a subsidiary loan agreement. The Credit Agreement also included covenants designed to ensure GOL's financial and institutional support of LUSC. GOL also failed to comply with the majority of these covenants. A summary of the Credit Agreement covenants and the extent of GOL's compliance is presented in Annex 2-2. F. Condition of Effectiveness 2.12 The Credit Agreement stipulated ds a condition of effectiveness that GOL would pay equity contributions and operating subsidies for 1978 and 1979 amounting to US$2.0 million to LYSC. Upon being informed that this amount was deposited by GOL into LWSC's bank account, the Bank declared the Credit effective in April 1979. It was subsequently learned, however, that shortly after Credit effectiveness, LWSC returned these funds to the Government on instructions of the Ministry of Finance. The Bank was not notified of this  -6- action by either LWSC or the Ministry of Finance. This incident was later (1981) the subject of a GOL special commission investigation. The commission's report indicated that GOL recalled the funds because they were not being used immediately by LWSC and concluded that GOL was not in a position at the time of the investigation to replenish the funds. GOL eventually transferred the US$2.0 million equivalent proceeds of a loan from GOF to LWSC as equity. III. PROJECT IMPLEMENTATION, OPERATION AND COST A. Introduction 3.01 With the exception of the contracts for the expansion of the water treatment works and the treated water pumping station, the contracts were bid and awarded without delay. Three major contractors, designated as Contractors I, II, and III in this report, were involved in the construction of the physical works. Design and supervision of construction were done mainly by two foreign firms which, in this report, are designated as Consulting Engineers I and II. B. Construction 1. AfDB Financed Components 3.02 Raw Water Pipeline. The contract was awarded to Contractor I on July 24, 1980 for a sum of US$2,245,913. With construction on schedule and only about 800 ft (250 m) of pipeline remaining to be laid, LEC demanded to be guaranteed compensation for the potential loss of energy that might result from the use of the penstocks at the Mt. Coffee Dam as an inlet for raw water for the Monrovia water supply system. Although analysis by consultants showed that LWSC's withdrawals were less than 2% of reservoir inflow, an impasse developed between LEC and LWSC and construction came to a halt. An understanding was subsequently reached between LWSC and LEC allowing the former to use the penstock for raw water intake. The dispute delayed completion of this component by 10 months to May 1982, and resulted in additional cost of US$1 1 ,748. In terms of construction costs, the delay was insignificant. However, savings of up to US$40,000 per month in energy costs which could have been realized by LWSC from the use of a completed gravity raw water line were lost. 3.03 OAU Distribution Extension. This is the only component of the project that was constructed through a joint venture between a foreign and a local firm. The contract was awarded to Contractor II in January 1979 and was completed and final testing done in late May 1979. There were no problems during tendering and construction. The completed cost of this undertaking was US$301,000, less than half the SAR estimate of US$697,000.  7 2. IDA Financed Components 3.04 Water Treatment Plant Expansion. The largest of the IDA financed components was the expansion of the White Plains treatment plant. Bids were opened on February 29, 1980. There were three tenders for general civil works (Contract K) and only one tender each for supply of treatment plant equipment (Contract L) and supply and installation of pumping plant and rehabilitation of existing pumps (Contract 0). The civil works tenders ranged from a low of US$2.7 million to a high of US$5.17 million. The lone bidder for Contracts L and 0 also bid on Contract K at US$4.1 million, but with the conditionality that if he did not succeed in winning Contract K, he would not accept either of Contracts L and 0 if awarded to him. The consultant's tender evaluation report recommended that Contracts K, L and 0 be awarded together to this tenderer. 3.05 Following review of the bid evaluation report, it became apparent that, provided reasonably responsive bids could be obtained for Contracts L and 0, it would be in LWSC's interest to award Contract K to the lowest bidder. The Bank suggested to LWSC that it consider requesting the two lowest bidders on Contract K which included the only bidder for Contracts L and 0, to extend their bid validity period for Contract K while simultaneously re- opening Contracts L and 0 to Limited International Tendering by inviting only contractors who had originally received bidding documents, and who were therefore familiar with the project, to rebid on Contracts L and 0 within six weeks. 3.06 At bid opening in August 1980, only two bids had been received, that is, one bid at US$5.74 million in addition to the previous single bidder who submitted the same bid (US$3.41 million) and with the same conditionality (not accepting Contracts L and 0 without Contract K) as before. Considering the very limited response to the invitation to rebid on Contracts L and 0 and given the political and business climate in Liberia at that time (a coup d'etat had taken place in April 1980), it appeared that further attempts to obtain a more acceptable tender for Contract K would not be productive and could, in fact, be counter-productive in that if the bid validity period expired, additional charges on the contract might be incurred. Consequently, the Bank did not object to Contracts K, L and 0 being awarded as a package in October 1980 to the single bidder, Contractor I, who submitted bids on all three contracts. The contract sum was US$7.84 million. Arrangements for funds to finance the local counterpart requirement of the project delayed the start of construction to March 1981 and resulted in cost escalation of US$491,000. Construction was completed in January 1983, about 21 months behind the April 1981 date of completion scheduled for this contract at appraisal. 3.07 Namba Point Booster Pumping Station. The need for the booster station was identified by pressure surveys and distribution system analysis. Its primary purpose was to improve performance of the trunk distribution system in the high elevation Namba Point area. Design and construction supervision was done by Consulting Engineer I. LWSC's construction supervisor worked with this consultant on supervision. Four bids were received and  -8- opened in January 1980. The contract was signed with Contractor I on July 24, 1980 for a sum of US$747,439. Construction was started in mid August 1980 and completed by the target date of January 1982 for thii component. The cost difference between the appraisal estimate and the completed project cost was inconsequential (2%). 3.08 Freeway/Clay St. Main. Six bids for supply and two for installation were received. The contract was signed on July 24, 1980 with Contractor III for the supply and installation of about 27,000 ft (8 km) of 16 in. (400 mm) diameter cement-lined ductile iron pipe and 1,500 ft (0.5 km) of 8 in. (200 mm) diameter and smaller pipes of the same material for a sum of US$1,637,027. The design was done by Consulting Engineer II. Construction started in December 1980 with supervision by LYSC and was substantially completed by January 1982. LWSC contends that the contractors did not fully complete the construction and were not available to remedy construction defects during the 12-month maintenance period as stipulated by the terms of the contract necessitating LWSC to undertake to repair the defects and complete the job. As a result, LWSC is accusing the contractors of breach of contract and has frozen the unpaid balance of over US$200,000 due to the contractor for work performed. The Bank has suggested that both parties attempt to resolve the impasse either by arbitration or by other legal avenues available to them. 3.09 Urban Poor Water Supply. Because the cost turned out to be considerably less expensive than the appraisal estimate, 140 public standpipes instead of 100 were actually installed together with associated distribution pipeworks in the high density slum areas of the city to improve the water supply services to the urban poor of Monrovia who had limited or no access to piped water. Tendering was by competitive bidding through local advertising in order to encourage participation by local construction firms. There was no prequalification of bidders. Design and construction supervision was done by Consulting Engineer I. 3.10 Three bids were received at bid opening. The contract was awarded to Contractor I on July 24, 1980 and construction was completed ahead of schedule in January 1981 at a cost of US$752,000 compared with the appraisal estimate of US$1.3 million. C. Operations 1. AfDB Financed Components 3.11 Raw Water Line. The gravity feed line is easy to operate, requires little maintenance, and serves to reduce energy-related operating costs. It is estimated that the full use of this gravity system could save LWSC up to US$40,000 per month in energy costs. However, the full savings may not be realized, as LEC from time to time and unilaterally closes the valves to this line forcing LWSC to resort to the use of the low lift pumps to supply raw water to the treatment plant. The Bank has been trying with limited success to get the two institutions to come to a formal agreement on this matter in order to prevent future water service interruptions by LEC.  - 9 - 3.12 OAU Distribution System. The system was constructed to provide water supply to the Hotel Africa and residences used for the 1979 OAU Conference in Monrovia. The system continues to provide satisfactory service. 2. IDA Financed Components 3.13 -ater Treatment Plant Expansion. This component was under the maintenance period until January 1984 and has only recently been turned over to LWSC. It is, therefore, too early to comment on it although there were no unusual problems during the 12-month period of maintenance. Given the substantial investment involved, it is imperative that LWSC develop a preventative maintenance program (para 4.03) to protect the investment in this facility. 3.14 Mamba Point Booster Pumping Station. Although distribution to critical high elevation areas has improved substantially, the booster pumping station is not operating entirely as expected. Lower than estimated system pressures in downtown Monrovia caused the pressure reducing valves separating the Mamba Point high elevation zone from the rest of Monrovia to open frequently and water to flow from the high elevation area to downtown Monrovia. This resulted in considerably more pumping (12 hours actual versus 5 hours projected per day) and higher energy costs. Operation of the station during the day caused inadequate pressures in the business district of Monrovia. Recently the pressure reducing valves have been closed in order to better isolate the high elevation zone from the rest of the system, and operation of the booster station is limited to night hours only to service the high elevation zone. Future studies of the distribution system should investigate how to improve operation of the booster station or alternatives to it in order to provide a solution to the pressure deficiencies of the distribution system. 3-15 Freeway/Clay St. Main. Because LWSC has not yet completed certain distribution extensions, the full benefits of the Freeway Main are not being realized. The Clay St. Main has not significantly improved the quality of service in its service areas due to operational problems. 3.16 Urban Poor Water Supply. A major operatioual problem has been the frequent breakdown of the standpipe faucets due to insufficiently durable hardware and misuse by consumers. It is estimated that barely two years after completion, less than 70% of the standpipes are still operational. Broken faucets are not being replaced because LYSC management feels that the ready availability of "free" water (standpipe usage is theoretically to be paid for by GOL), encourages consumers to disregard bills because disconnection is no longer as meaningful a payment enforcement measure as it had been previously; consumers also turn to standpipes for water in order to lover their water bills. Ponding around many of the standpipes due to improper drainage has also been a problem and is exacerbated by the broken faucets. Because of the problems encountered with the standpipes program, LWSC is at present exploring the possibility of licensing private vendors to operate and maintain the standpipe stations. If successful, such an arrangement would not only relieve - SC of the cost and responsibility of maintaining these facilities, but could also generate revenues through licensing fees and user charges.  - 10 - D. Project Cost 3.17 The cost of the project as implemented is presented in Annex 3-1 and summarized below. Annex 3-2 compares actual disbursements with the appraisal forecast. Extensions to the Monrovia distribution system which were included in the project at appraisal were not implemented due to insufficient local funding. Summary of Project Cost Cost Appraisal Component Estimate Actual ___- (Us$ 0oooT White Plains Treatment Plant Expansion 4720 8327 Raw Water Pipeline 1893 2246 Management Improvement Program, Technical Assistance and Training, and Sector Studies 1230 2632 Freeway/Clay St. Main 944 1673 Mamba Point Booster Station 779 762 Urban Poor - Standpipes 1300 752 OAU Transmission Main 697 301 .Miscellaneous Equipment (incl. meters, vehicles) 220 243 Design and Supervision 804 1455 Distribution System Expansion 1279 - Contingencies 2213 - Total 16079 18391 3.18 The above total cost for the implemented project was about US$2.3 million (14%) above the appraisal estimate of US$16.1 million. Giving effect to the component for extensions to the distribution system which was not constructed, the overrun was US$3.6 million (24%). Cost overruns were incurred primarily in the Technical Assistance and White Plains expansion components. The SAR estimates for Technical Assistance had been based on the use of individual consultants for its implementation. However, the search for such individuals was not successful, so the idea was abandoned in favor of contracting for these services from a consulting firm which was more expensive than the planned alternative. Most of the difference in cost for the White Plains expansion was in the civil works where the lowest bid was US$2.7 million compared to an appraisal forecast of about US$1.5 million and a contract price of US$4.1 million. As previously mentioned (paras 3.04 to 3.06), attempts to effect a cost reduction in this component did not materialize. In addition, delays in the award of the contract for the treatment plant while GOL was arranging for funds to finance the local counterpart requirements (para 3.06) resulted in claims against LWSC of about US$0.5 million, further aggravating the cost overrun.  - 11 - E. Project Design and Sapervision of Construction 3.19 LWSC was generally satisfied with the performance of both consulting engineers. Consulting Engineer II had been responsible for the design of the previously existing water suppl; and sewerage facilities in Monrovia. This consultant does not maintain an office in Liberia and has no other overseas operations. Perhaps because of this limited exposure to international work, the first set of tender documents prepared by this consultant had to be redone to fit International Competitive Bidding (ICB) guidelines. Also, in the case of the raw water supply this consultant had to be specifically directed to consider various alternatives to the erection of a permanent barrage on the St. Paul River. 3.20 The consulting engineers also undertook supervision of construction except for the laying of the Freeway/Clay St. Main which was supervised by LWSC. LWSC wanted to undertake more supervision responsibility, but given the shortage of trained staff with the requisite experience, an arrangement in which LWSC staff worked with and understudied the consulting engineers' resident engineers, was used for most of the supervision. The treatment plant construction was supervised by the same resident engineer who had supervised the construction of the existing works. F. Contractor Performance 3.21 About 90% or more of the construction was carried out by Contractor I, whose performance was highly regarded by LWSC. Despite some delays in contract awards and woeful financial constraints, Contractor I performed very well and made up a great deal of lost time. It is to this contractor's credit and that of the consulting engineers that the physical works are regarded as the most successful component of the project. 3.22 Although a certificate of substantial completion was issued, according to LWSC the Freeway/Clay St. Main was never fully completed. Contractor III's attitude both during construction and the maintenance period (para 3.08) was considered unsatisfactory by LWSC. Contractor II performed adequately. G. Management Improvement, Technical Assistance and Training 3.23 Provision was made in the project for a Nanagement Improvement Program, technical assistance and training totalling 10 to 11 man-years to improve and strengthen the technical, financial and administrative capabilities of LWSC. Consultants were hired for the positions of project manager, operations manager, commercial manager, distribution engineer, information systems manager, administrative trainer and technical trainer to: (i) review LWSC's organizational structure, operations and accounting systems, make recommendations for improvement, and assist in the implementation of these recommendations; (ii) prepare a staffing profile which identified training needs; and  - 12 - (iii) assist LWSC in designing and implementing a training program to meet its long-term manpower needs. 1. Management Improvement Program 3.24 Responding to their terms of reference, in early 1980 the consultants produced for LWSC's review a number of reports with recommendations and an implementation plan. LWSC was still reviewing the documents when the change of government occurred in April 1980. Your changes of Managing Director since 1980 and severe financial constraints have resulted in minimal implementation of the consultants' recommendations. 2. Technical Assistance 3.25 Expatriate technical assistance experts were recruited through a consulting firm rather than individually as had been envisioned during project preparation (para 3.18). This resulted in higher than estimated costs because of the consulting firm's higher overhead and operating costs (appraisal estimate about US$0.5 million compared with over US$1.9 million). Following the recruitment of these experts, LWSC assigned suitable Liberian counterparts to work with and understudy them. Unfortunately, only two of five counterparts completed the program. One left the program when he was promoted to Managing Director; two left the corporation and the country after the 1980 coup; and the fifth counterpart was unable to finish the program when the information systems manager was taken ill and had to be repatriated. 3.26 The Managing Director in 1979/80 did not accept the need for technical assistance and construed the technical assistance component as an unnecessary imposition on LWSC by the Bank. This view pre-ailed throughout LWSC, and reception of the team was initially cool and coo,)eration lacking. With time the relationship improved. The higher than anticipated costs for the experts caused the allocation for this component to be used up much sooner than planned, and the project funding for contingencies was largely used to make up the shortfall, leaving no reserve for other contingencies. In addition, appreciating the need for a continuation of the program, the Federal Republic of Germany through Gesellschaft fur Technische Zusammenarbeit (GTZ) contributed financing, about US$0.5 million equivalent, to sustain the program for an additional six months. 3.27 Technical assistance in the areas of project management and water supply operations was the most successful. Several changes in counterpart project manager during implementation, however, limited the success achieved. The best results of the Drogram appear to have been produced in the operations department, where one counterpart who was motivated and was able to take advantage of the opportunity to learn, participated for the entire duration. Although the commercial manager made good progress on the block- mapping program, this was never translated into increased revenues for LWSC. On the whole, there was no noticeable improvement in LWSC's Commercial Department operations throughout the life of the project. The failure to convert improvements in the billing base into increased collections (para 4.02) can be attributed at least in part to the fact that the position of  - 13 - information systems manager was never effectively filled (para 3.25). In summary, although the technical assistance component of the project clearly contributed to the success of the physical components, it accomplished only minimal long-term improvements in LWSC's institutional framework. 3. Training 3.28 This was the least successful component of the project as most of the objectives remain unfulfilled (para 6.03). Training of the administrative staff actually started only in the second half of the administrative trainer's one year assignment, as the first half was used to develop training materials and to provide general assistance to the then Managing Director. When administrative training finally started, it consisted of a series of general seminars and courses which, the Bank felt, were of little relevance to LWSC's training needs. The Bank had suggested that in the time left, the trainer's time would have been better used in developing training modules which responded to the training requirements identified for specific LWSC tasks or jobs. Technical training was even less successful. The technical trainer voluntarily terminated his contract after only about three months in Liberia and was not replaced for the rest of the project because of time and financial constraints. H. Sector Study 3.29 A comprehensive water supply sector study was completed in c"3o. The study was conducted in two parts--Greater Monrovia and Liberia excluding Monrovia--and provides a sound basis for sector development in the intermediate term. The study recommended rehabilitation of the Monrovia system in parallel with a phased program for development of outstations. I. Procurement 3.30 All the major contracts were procured, as stipulated, by ICB. While responsiveness to the invitations to bid was good, the limited response to the larger contracts caused some concern as to whether the documents had been inadvertently restrictive or anomalous. 3.31 Each invitation to bid generated at least three tenderers except for Contracts L (Supplyr of Water Treatment Plant Equipment) and 0 (Rehabilitation and Expansion of the Treated Water Pumping Station) which evoked only one tenderer. Inquiries into possible reasons for this low response indicated that on Contract L, there were at least eight bids. Most bidders, however, did not bid directly to LWSC but rather to general contractors who would, if successful, eventually purchase the equipment from these bidders for installation. 3.32 On Contract 0 the requirement for installation necessitated some suppliers bidding to a general contractor as in Contract L. The major detraction on this contract was the requirement to repair and rehabilitate the existing pumping equipment. Some potential European bidders were reluctant to bid for fear that unfamiliarity with the existing equipment coupled with the  - 14 - possible difficulty of obtaining parts readily in Europe could make rehabilitation unnecessarily expensive. They thought a longer lasting and more satisfactory end product might be guaranteed by building a new pumping station having the combined capacity of the existing plant and proposed addition, rather than by rehabilitating the existing system and then expanding it. The parceling of the contracts, in retrospect, did restrict bidding. The Bank, however, was satisfied that rehabilitation of the then existing pumps represented the least cost solution. IV. OPERATING PERFORMUNCE A. Water Produced and Sold 4.01 The following table indicates that production has increased on average about 5% per year in comparison with the 6% forecast at appraisal. Water billed, however, increased only 6% on average, versus 11% forecast, as certain improvements in metering and billing anticipated in the SAR did not materialize. IWSC Water Production 1978-83 Water Pnodxed (mYW Water Biled (mg) % Unaommted-for Water .ear