Liberia - Road Project

RESTRICTED Report No. TO-488 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION SUPPLEMENTARY APPRAISAL OF A ROAD PROJECT LIBERIA July 30, 1965 Projects Department  CURRENCY EQUIVALENT The Currency of Liberia is the US $.  LIBERIA SUPPLEMENTARY APPRAISAT, OF A ROAD PROJECT Table of Contents Page Summary I. T1HE ROAD LOAN - 368-LBR 1 A. Project Description 1 B. Cost Estimates 1 C. The Increase in Construction Cost 2 D. Supervision of the Field Work by Consultants 3 II. EXECUTION OF THE PROJECT h III. ECONOIIC JUSTIFICATION 4 IV. CONCLUSIONS ANID RECOMIENDATIONS 4  LIBERIA SUPPLENTARY APPRATSAL OF A ROAD PROJECT Summary The Government of Liberia has asked the Banlc for assistance in finan- cing the additional cost of two roads, Kle-Pujehun and Junction-Schiefelin- Robertsfield, in the project for which Loan 368-LBR was made, and to include an amount for the cost of the supervision of construction, for which no pro- vision was made in that Loan. ii. The original Loan (368-LBR) of $3.25 million was signed on January 8, 1964, and became effective on March 11, 1964. It covered the foreign currency component (65%) of the estimated construction cost, the total cost of imported maintenance equipment, and interest during the construction period. It did not include the cost of supervision of construction, because the Liberian Govern- ment and the local USAID offices in Monrovia indicated early in 1963 that the consulting firm of J. G. White & Co., which was already advising the Department of Public Works and Utilities on operations under a contract financed by USAID, would be retained as supervisors of the two roads by extension of their existing contract. However, after the Loan was signed, the contract wfith J. G. White & Co. was extended to cover supervision, but the Liberian Government became liable for the cost of this service. iii. The checking of the final design of the two roads by consultants revealed the need to increase drainage structures on the Kle-Pujehun road and to strengthen the base and sub-base of the section of the Junction-Schiefelin- Robertsfield road for which only pavement had been planned. This has led to an increase in the construction cost of $940,000 above the original estimated cost (including contingencies). iv. The tight financial situation in Liberia has severely limited the Government's ability to finance development projects from its own resources, and compelled the Government to seek foreign aid to the greatest possible extenr v. This explains the Government's request to obtain additional funds to cover the foreign cost of the supervision of the two roads and the shortfall in the Bank's participation to the construction cost of the two roads. vi. The increase in construction cost does not materially affect the economic justification of the two roads. The estimated return on the investment. originally high, will still be satisfactory, and the project remains sound. Therefore, an increase in the original Loan amount of $1.0 million is proposed to cover the increased cost of this project and thus to alleviate the immediate financial burden to the strained economy of Liberia.  LIBERIA: SUPPLEMENTARY APPRAISAL OF A ROAD PROJECT I. THE ROAD LOAN - 368-LBR A. Project Description 1. The project under the Loan 368-LBR consists of: a) The construction of 48 miles of penetration road from Kle to Pujehun in the extreme west of Liberia. b) The construction of the last 14-mile section (Schiefelin- Robertsfield) of a short-cut road from Monrovia to the international airport at Robertsfield, including the construction of a bridge and the asphalting by double-surface treatment of the 13-mile adJacent section Junction-Schf.efelin, which exists already as a gravel road. c) The procurement of maintenance equipment, spare parts and repair shop facilities. 2. The appraisal (Report No. TO-375b) was based on final survey and design made by the Department of Public Works and Util.ities (DPUU). The plans and specifications were to be reviewed by the USAID consultants, in preparation for the invitation to contract tenders, and as a result, changes had to be made which affected the costs. B. Cost Estimates 3. Table 1 below summarizes both the original and revised cost estimates of the project. Table 1 Original and revised cost estimates Original Revised Estimate Bankts parti- Revised est. Bank's par- including cipation (about (contractor's ticipation contingencies 65f construction construction (65,/ constr. Roads I0O% equipment) cost) 100% equip.) in Millions $ Kle-Pujehun $ 1.70 $ 1.10 $ 1.95 $ 1.28 Junction-Robertsfield 1.30 0.90 l1.99 1.32 $ 3.00 $ 2.00 $ T94 $ Z 70 Equipment $ 1.00 $ 1.00 $ 0.85 $ 0.85 Total $ 4.00 $ 3.00 .$ .779 $ T3.4 Supervision $ 0.30 $ - $ 0.30 $ 0.20 Contingencies for c nstruction - o.46 0.30 Interest during con- struction and other charges 0.25 0.25 0.30 0.30 $ 4.55 $ 3.25 $ 5.85 $ 4.25  - 2 - 4. As will be seen from the Table, the estimated construction cost of the two roads, including contingencies, was originally $3.CO million, as com- pared with $3.94 nmllion, total of the recently awarded contracts. Work on both roads hias been in progress since Hay 1965. These contracts show an increase in construction cost of the Kle-Pujehun road (from $1.70 million to $1.95 million), and a substantial increase in the cost for the Junction- Robertsfield road (from $1.30 million to $1.99 million). The overall increase on both is $0.94 million, of which the foreign exchange component is about $0.60 million. The revised construction cost of $3.94 million is based on actual contract unit prices; in addition, a physical contingency of $460,000 (about 12%) has been included to safeguard against possible variations in quantities over the period of construction. 5. It will also be noted from the Tab'le that, in the original Loan, 368-LBR, the Bank was not participating in the cost of supervision of construc- tion, estimated at $300,000, for reasons explained later. The foreign cost fcr this supervision is estimated at about 65% of total cost, or $200,000. 6. Regarding the purchase of equipment, orders for all the priority maintenance equipment and spare parts have already been placed, and amount to $850,000, out of the orlginal $1,000,000 for purchase of equipment. 7. Because of the increased cost of the project, interest during con- struction, which under the first Loan was estimated at $250,000 has, under the revised estimate, been raised to $300,000. 8. On the basis of the above estimates, the amount of Bank's financing would require a loan of $4.25 million, or $1.0 million higher than the previous Loan of $3.25 million. The additional amount of $1.0 million now asked for by the Liberian Government can be summarized as follows: 1. Shortfall between contractors' price offer and original estimate = $ 600,0o0 2.- Participation in cost of supervision - 200,000 3. Contingency for variations in quantities 300,000 4. Interest during construction and other charges =50,000 $1,150,000 5. Less saving on equipment - 150,000 Total $1.000,000 C. The Increase in Construction Cost 9. The appraisal of the project (Loan 368-LBR) was made in January 1963. It was based on final engineering and cost estimates prepared by the Department of Public Works and Uti'lities (DPWU). It was agreed, however, that the plans and specifications should further be reviewed by an outside consulting firm before being released for bidding.  - 3 - 10. The firm of J. G. White Co. was at that time employed under a con- tract financed by USAID as consultants to the DRFU, to help improve the Department's operations, and an understanding was reached that the review of the final drawings and designs of the two roads would be made by J. G. White Co. 11. Because of delays in consolidating Liberia's external debt, which was a condition for the road loan, negotiations did not start before December 1963. The Loan was signed on January 8, 1964, and becamie effective on Narch 11, 1964. 12. For the Kle-Pujehun road, the review of final designs and engineerfrlgr by the consultants after signature of the Loan showed that the drainage problermi required additional attention, and the consultants recommended a substantial increase in the number of culverts and minor bridges. This resulted in a cost increase for this section. 13. On the "Junction Schiefelin-RobertsfIeld" road, the section "Junctioll- Schiefelin" had been constructed as an improved gravel road under a contractor- financed contract in 1962. In January 1963, the road was still in a reasonably good condition, and needed only a double-surface treatment, to match the adjacent section, Schiefelin-Robertsfield, to be constructed as a new road. However, when the final designs were revised in mid-196h, the traffic had revealed several weaknesses in the base and sub-base of this section, which required strengthening before a surface treatment could be applied. The drainage also needed some improvements. These additional works resulted in a cost increase for this road. D. Supervision of the rield Work by Consultants 14. In order to expedite and simplify the procedure for employment of consultants, the firm of J. G. W4hite, already employed as advisers to the DPJUJ was retained also for the supervision of the construction of the two roads. During the appraisal of the project in January 1963, the Mission was informed by the Liberian Government that J. G. White would be engaged for the supervision and that USAID would be approached for an extension of the J. G. White contract to include the supervision of the two roads. The local repre- sentatives of USAID were in agreement with such an arrangement, and the Government felt no need to include the cost of supervision in the Bank Loan for the project. 15. In October 1963, this matter was again discussed during a visit to the Bank of the Secretary of the Treasury, Nr. Sherman, who promised to pursue it with USAID. During the loan negotiations in December 1964, the Liberian negotiators were confident that USAID would take care of the contract extension, and therefore, no request was presented for including the amount for supervisio-. in the Loan. 16. Late in January 1965, after the Loan had been signed, the Bank was informed that USAID was not in the position to extend J. G. WJhite's contract to include also supervision of the two roads, and that the cost of $300,000 would have to be carried by the Liberian Government. A final contract for supervision was then negotiated and signed between J. G. White and the Government.  - 4 - II. EXECUTION OF TIE PROJECT 17. After long delays and numerous difficulties, the contracts for the two roads have now been awarded to the lowest bidders, on the basis of inter- national competitive bidding. The two contractors are: for the Kle-Pujehun road a joint venture of Vianini (Italian) and Sentab (Sweden), both firms with experience in Liberia; for the Junction-Schiefelin-Robertsfield road, a joint venture of M4ensah (Liberian) and Salini (Italian). 18. Both groups are experienced contractors; they should be able to complete the work satisfactorily, and within the contractual time of 24 monthls, under the supervision of J. G. White as consultants. III. ECONOMIC JUSTIFICATION 19. The Kle-Pujehun road's economic justification is based primarily on its use as an access route from Monrovia to a logging and sawmill area already in operation, in the region producing timber and board. In Appraisal Report TO-375b, the justification for constructing the Kle-Pujehun is studied in detail, showing that the benefits from converting the unused timber into useful lumber could readily represent an economic return of 20-25/5 on the investment, even disregarding the great potentialities of the road for further agricultural development. The increase of the cost of the road will have only a minor influence, and the road can be regarded as economically justified despite this cost increase. 20. The Junction-Schiefelin-Robertsfield road represents a short-cut between Monrovia and Robertsfield, and its economic justification was based on road-users savings. On the original cost estimate of $1.30 million the econom ( return was estimated at 40%. The increase in cost would lower the yearly retur. to about 30%, which is still obviously satisfactory. IV. CONCLUSIONS AND RECCMMENDATIONS 21. The project remains sound and economically justified, and the Government's participation amounting to 35% of construction cost, and supervision cost, would not impose a too heavy strain on the budget. It is therefore recommended that the amount of Loan 368-LBR be increased from $3.2' million to $4.25 million without further amendments to the conditions thereof. July 30, 1965