ASIAN DEVELOPMENT BANK · asian development bank pcr: ino 28063 project completion report on the eastern islands roads (sector) project ... bms – bridge management system

ASIAN DEVELOPMENT BANK PCR: INO 28063

PROJECT COMPLETION REPORT

ON THE

EASTERN ISLANDS ROADS (SECTOR) PROJECT (Loan 1335-INO)

IN

INDONESIA

April 2002

CURRENCY EQUIVALENTS

Currency Unit – Rupiah (Rp) At Appraisal At Project Completion (October 1994) (March 2001) Rp1.00 = $0.00046 $0.0001020 $1.00 = Rp2,173 Rp9,800

ABBREVIATIONS

BAPPENAS – Badan Perencanaan Pembangunan Nasional

(National Development Planning Agency) BINTEK – Bina Teknik (Engineering Directorate of DGH) BME – benefit monitoring and evaluation BMS – bridge management system DBM – Dinas Bina Marga (highways directorate of provincial public works department) DGH – Directorate General of Highways DGLC – Directorate General of Land Communications DGRI – Directorate General of Regional Infrastructure (formerly DGH) DPUP – Dinas Pekerjaan Umum Propinsi (Provincial Public Works Service) DTUA – Direktorat Tata Usaha Anggaran (Directorate of Budget Administration) EIRR – economic internal rate of return FIRR – financial internal rate of return IRMS – integrated road management system MOC – Ministry of Communications MOF – Ministry of Finance MOHA – Ministry of Home Affairs MPW – Ministry of Public Works MSRI – Ministry of Settlements and Regional Infrastructure NPRMTP – National/Provincial Roads Master Training Plan O&M – operation and maintenance RBO – regional betterment office Repelita – Rencana Pembangunan Lima Tahun (Five-Year Development

Plan) TA – technical assistance

NOTES

(i) Before 2000, the fiscal year of the Government ended on 31 March. Since 2000, the fiscal year has ended on 31 December. FY before a calendar year denotes the year in which the fiscal year ends. For example, FY2000 begins on 1 January 2000 and ends on 31 December 2000.

(ii) In this report, “$” refers to US dollars.

CONTENTS

Page BASIC DATA ii MAP vii I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs and Financing 5 D. Disbursements 6 E. Project Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 11

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Efficacy in Achievement of Purpose 11 C. Efficiency in Achievement of Outputs and Purpose 11 D. Preliminary Assessment of Sustainability 12 E. Environmental, Sociocultural, and Other Impacts 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons Learned 14 C. Recommendations 16

APPENDIXES 1. Chronology of Milestone Events 18 2. Status of Completion of Project Components 19 3. List of Major Civil Works Contracts 20 4. List of Road Sections that Used Lasbutag 23 5. Appraised and Actual Project Costs 24 6. Contract Awards and Disbursement Status 25 7. Project Implementation Schedule 26 8. Project Organization Schedule 27 9. Compliance with Loan Covenants 28 10. Consulting Services and Costs 33 11. Number of Contracts and Mode of Procurement 34 12. Methodology and the Results of Economic Analysis 35 13. List of Roads with Construction Quality Problems 41 14. Project Performance Rating Assessment 42

BASIC DATA

A. Loan Identification 1. Country Indonesia 2. Loan Number 1335-INO 3. Project Title Eastern Islands Roads (Sector) Project 4. Borrower Republic of Indonesia 5. Executing Agencies (i) Directorate General of Highways

(ii) Directorate General of Land– Communications

6. Amount of Loan $180 million (ordinary capital resources) 7. PCR Number PCR: INO B. Loan Data 1. Appraisal - Date Started 1 August 1994 - Date Completed 18 August 1994 2. Loan Negotiations - Date Started 26 October 1994 - Date Completed 27 October 1994 3. Date of Board Approval 29 November 1994 4. Date of Loan Agreement 10 April 1995 5. Date of Loan Effectiveness - In Loan Agreement 20 June 1995 - Actual 20 June 1995 6. Closing Date - In Loan Agreement 31 December 1999 - Actual 31 March 2001 - Number of Extensions Two 7. Terms of Loan - Interest Rate Variable - Maturity 24 years - Grace Period 4 years

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8. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 14 July 1995 15 November 2001 7.5 years Effective Date Original Closing Date Time Interval

20 June 1995 31 December 1999 4.5 years

b. Amount ($ million)

Category

A. Road and Bridge Works

1. Civil Works 123.0 61.0 51.8 9.2 2. Supervision of Civil Works a. Core Team 2.3 2.7 2.2 0.5 b. Field Team 17.5 8.0 6.6 1.4 B. Vehicle Inspection and Testing 1. Civil Works and Equipment 2.8 1.9 1.5 0.4 2. Advisory Services and Training 0.9 0.5 0.3 0.2 C. Institutional Strengthening 1. East Indonesia Road Study 1.3 0.7 0.7 0.0 2. Training 1.2 1.2 0.3 0.9

D. Interest During Construction 31.0 16.3 16.3 0.0 Total 180.0 92.3 79.7 12.6

AmountDisbursed

UndisbursedBalance

OriginalAllocation

RevisedAllocation

9. Local Costs (Financed) - Amount $7.6 million - Percent of Local Costs 39.0 percent - Percent of Total Cost 9.5 percent

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C. Project Data 1. Project Cost ($ million) Item Appraisal Actual Estimate Foreign Exchange Cost 160.6 72.2 Local Currency Cost 172.3 96.4 Total Cost 332.9 168.6

2. Financing Plan ($ million) (i) Implementation Cost

Appraisal Estimate Actual

Source Foreign Local Total Foreign Local Total Borrower-Financed ADB-Financed

0.0

129.6

152.9

19.4

152.9 149.0

0.0

55.9

88.8

7.6

88.8 63.5

Total Cost 129.6 172.3 301.9 55.9 96.4 152.3

(ii) IDC Cost

Appraisal Estimate Actual

Source Foreign Local Total Foreign Local Total Borrower-Financed ADB-Financed

0.031.0

0.0 0.0

0.0

31.0

0.0

16.3

0.0 0.0

0.0

16.3

Total Cost 31.0 0.0 31.0 16.3 0.0 16.3

ADB = Asian Development Bank. IDC = Interest During Construction

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3. Cost Breakdown, by Project Component ($ million) ____________________________________________________________________________

Appraisal Estimate Actual Component Foreign Local Total Foreign Local Total ____________________________________________________________________________ Part A Road and Bridge Works Civil Works 123.0 150.3 273.3 51.9 87.6 139.5 Supervision Consultant 2.5 19.3 21.8 1.6 8.2 9.8

Subtotal 125.3 169.6 294.9 53.5 95.8 149.4 Part B Vehicle Inspection and Testing Civil Works and Equipment 1.9 1.3 3.2 1.5 0.2 1.7 Advisory Services and Training 0.6 0.4 1.0 0.2 0.1 0.3 Subtotal 2.5 1.7 4.2 1.7 0.3 2.0 Part C Institutional Strengthening East Indonesia Road Study 0.6 0.8 1.4 0.5 0.3 0.8 Training 1.2 0.0 1.2 0.3 0.0 0.3 Subtotal 1.8 0.8 2.6 0.8 0.3 1.1 Interest During Construction ADB Loan 31.0 0.0 31.0 16.3 0.0 16.3 Domestic Loan 0.0 0.0 0.0 0.0 0.0 0.0 Total 160.6 172.1 332.9 72.2 96.4 168.6 _____________________________________________________________________________ ADB = Asian Development Bank.

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4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants

31 August 1995

14 June 1996

Completion of Engineering Designs

1 August 1994 15 August 1995

Civil Works Contract Date of Award Completion of Works

30 January 1995 30 January 1999

14 February 1996 31 March 2001

Equipment and Supplies Dates First Procurement Last Procurement Completion of Equipment Installation

30 January 1995 – 30 November 1995

9 May 1997 15 July 1997 5 January 1998

Start of Operations Completion of Tests and Commissioning Beginning of Start-Up

– –

28 February 1998 25 January 1999

D. Data on Asian Development Bank Missions _______________________________________________________________________ No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersa _______________________________________________________________________ Appraisal 1 August 1994 4 64 a, b, f, h, e Inception 27 June 1995 2 20 c, d Review 1 25 January 1996 2 8 a, h Review 2 16 September 1996 2 26 a, h Review 3 6 October 1997 1 12 a Review 4 21 September 1998 1 14 a Review 5 18 July 1999 2 14 a, g Review 6 2 June 2000 2 32 a, g PCRb 20 March 2002 2 42 a, h Total Person-Days 232 _______________________________________________________________________ PCR = Project Completion Review.

a a - engineer/project officer, b - transport development specialist, c - transport economist, d - financial analyst, e - counsel, f - program officer, g - project implementation officer, h - staff consultant. b The Mission comprised Soewartono HS, Sr. Project Officer/Mission Leader and Daud Ahmad, Transport Specialist/Staff Consultant.

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I. PROJECT DESCRIPTION

1. The main objective of the Project was to support the Government’s road sector development program and policies during Repelita VI. In particular, the Project would assist in funding a 3-year time slice (1995/96–1997/98) of the Government’s civil works program for national and provincial roads in the 13 provinces of eastern Indonesia. This would assist the Government in meeting the demands of rapid growth in road traffic by improving road conditions in order to enhance economic and social linkages and facilitate equitable access to the benefits of national development. Another objective of the Project was to improve road safety by upgrading facilities and procedures for vehicle inspection and testing. The Project also aimed to strengthen programming and planning of road network development in eastern Indonesia and to upgrade the professional qualifications of staff at the Directorate General of Highways (DGH) of the Ministry of Public Works.1 2. The subprojects were located in 13 provinces in the eastern islands of Indonesia: West Nusa Tenggara, East Nusa Tenggara, former East Timor, Maluku, all provinces in Sulawesi, all provinces in Kalimantan, Bali, and Irian Jaya. 3. The Project consisted of three main parts:

(i) Part A—Road and Bridge Works, which included (a) civil works for (i) road betterment of about 980 kilometers (km) of selected road sections in deteriorated and congested conditions, (ii) periodic road maintenance of about 1,100 km, (iii) road upgrading of about 440 km, and (iv) bridge replacement, totaling about 3,750 linear meters; and (b) consulting services for supervision of civil works that provided a set of international and domestic consultants to assist and strengthen DGH and Dinas Bina Marga (highways directorates of provincial public works departments or DBMs) who were responsible for project implementation. The main tasks of the consultants were to undertake design reviews and construction supervision. The executing agency for this part was DGH under the Ministry of Public Works (MPW).

(ii) Part B—Vehicle Inspection and Testing, which aimed to enhance vehicle safety

and compliance with environment standards, on a pilot basis, in the province of West Nusa Tenggara. The executing agency for this part was the Directorate General of Land Communications (DGLC) under the Ministry of Communications. This part included civil works for testing stations and offices, supply of equipment, and related consulting services.

(iii) Part C—Institutional Strengthening, which aimed to improve DGH’s road network

planning capacity and to upgrade the professional qualifications of its senior staff through (a) provision of consulting services to undertake a study on the future road network development in the project provinces; and (b) postgraduate training of about 20 DGH staff in highway engineering. The executing agency for this part was also DGH under MPW.

1 In April 2000, under the National Unity Cabinet, DGH was replaced by the Directorate General Regional

Infrastructure (DGRI) of the Ministry of Settlements and Regional Infrastructure (MSRI).

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II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 4. The Project was designed to support the then strategic objectives of the Asian Development Bank (ADB) in Indonesia of supporting economic growth, human resources development, and sustainable utilization of natural resources. The road sector assistance strategy aimed at alleviating capacity constraints and raising the efficiency of existing assets through rehabilitation and upgrading. The Project was designed as a sector loan to finance a 3-year time slice of the Government’s road sector program in selected provinces. The geographic focus of the Project on 13 eastern island provinces supported the Government’s efforts to achieve balanced and equitable development throughout the archipelago. These provinces clearly lagged behind the western islands in infrastructure development, particularly in roads. The project design relied heavily on existing planning and design tools used in DGH and the construction management arrangements of earlier ADB projects. The subprojects were to be selected using integrated road management system (IRMS) and bridge management system (BMS) models. These two systems were designed to analyze the whole road network on a uniform basis to identify priority investments. During project appraisal, staff focus was on agreeing on the subproject selection criteria and methodology, the implementation arrangements, and the terms of reference for consulting services. A detailed government Policy Statement and Action Plan for the Transport Sector (PSAP2) was also agreed. No project preparatory technical assistance (TA) was used for this loan. However, after loan approval, some funds ($0.4 million) were used in 1995 from the ongoing Eleventh Road Sector Project (Loan 1115-INO) for field review of the proposed subprojects prior to their selection. 5. While the fundamental concept of the project design was sound, four aspects on whether (i) the project as designed was in fact a sector loan, (ii) the project as appraised was ready for timely implementation, (iii) the geographic coverage of the project in 13 provinces and 139 locations was overextended, and (iv) the original loan amount of $180 million was not overestimated, need to be revisited. B. Project Outputs 6. Appendix 1 shows a chronology of milestone events of project implementation. A comparison of project components at appraisal and completion is made in Appendix 2. The Project was generally implemented in line with the scope envisaged at appraisal, with some modification resulting mainly from the financial crisis of 1997/98. Due to prevailing budgetary constraints, the third phase of the civil works program (18 subprojects, $24.5 million) was cancelled, although some of its packages were shifted to the second phase of this Project as well as to another ongoing World Bank project. The civil works, equipment, and consulting services targets of the Project were mostly accomplished, and were even exceeded for the main road betterment activity. The significant devaluation of the rupiah against the dollar contributed heavily toward savings in the loan amount; a total $87.9 million, or nearly 50% of the original loan amount, was cancelled at different stages.2

2 The first partial loan cancellation amounting to $53.4 million was made in July 1998 during the portfolio review; the

second partial loan cancellation of $10.0 million was made in September 1999 due to a shortfall in counterpart funds; and the third partial loan cancellation in the amount of $24.5 million was made in December 2000 because of the cancellation of the third phase of implementation.

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1. Part A: Road and Bridge Works 7. The Project’s civil works were planned to be implemented through three phases, covering about 130 contract packages. The first phase package list, agreed by ADB in January 1996, included 67 packages for road works (1,404 km betterment, 615 km periodic maintenance, and 15 km upgrading) and 27 bridge replacement sections (3,077 m) amounting to Rp366.0 billion or 59% of the total civil works cost. The second phase included 18 packages for road works (600 km) and bridge replacement (701 m), amounting to Rp261.0 billion or 41% of the total civil works contracts. The third phase was supposed to consist of 18 packages for road works (818 km) and bridge replacement (1,213 m). During the financial crisis, almost all ongoing project packages suffered from lack of local counterpart funds and rupiah price escalations. The Government and ADB agreed to cancel phase 3 of the Project; two packages from this phase were shifted to the restructured phase 2. In 1998, the Ministry of Public Works, to cope with virtually stagnant progress, offered all contractors of ongoing projects voluntary unconditional termination of contracts, if they were unable to complete their project on the terms of stipulated price escalation. Twelve contractors chose to do so and these works were subsequently re-bid, with some contracts subdivided into smaller packages. The contractors who chose to stay on the job had to essentially absorb the price escalation cost on their remaining works. However, the final costs of all remaining contracts turned out to be significantly higher than the original contract prices. The list of major civil works contracts, original and after cost escalation is in Appendix 3. 8. Delay in Project Start-Up. Project implementation had a slow start in 1995. Selection of phase 1 subprojects, preparation of detailed designs, and selection of supervision consultants were the main activities planned for the first year of implementation. The Government submitted its proposal for phase 1 packages to ADB in July 1995. After various clarifications, this package was approved in January 1996 and the first contract of phase 1 was made in February 1996. However, construction works for road betterment and upgrading could not start immediately after bid awards as the contractors were supposed to undertake some necessary site investigations, on the basis of which the supervision consultants were to review and verify the designs. 9. Construction works started in late 1996. Except for the simpler periodic maintenance and some bridge replacement works, progress on almost all other contracts was stalled in the middle of 1997 due to the financial crisis. A number of contracts had to be retendered, others restructured. The government budget allocation for counterpart funds in FY1998 dropped by nearly 60%, prompting ADB to raise its disbursement percentage to 80% for that year to mitigate the difficult situation. About 60 contract packages (44% of total works) were completed around the end of 1998 and another 43 (31%) were completed by the original loan closing date of 31 December 1999. The remaining 34 contracts, mostly retendered, and subprojects with construction or contractual problems, extended into 2000 and 2001. All contract packages were completed by the revised loan closing date of 31 March 2001 but final payments to contractors were extended to 15 November 2001 pending agreement on price escalations. The final outcomes of the Project are summarized in Table 1 below, which shows that while the physical targets for the road betterment component were exceeded by 66%,3 the accomplishments for the other components were slightly below the original targets. In the case of the upgrading components, which required a feasibility study, the approvals were slow in coming and little upgrading work was included in the first phase.

3 Most of the roads to be periodically maintained were found structurally defective, therefore parts of the periodic

maintenance works were shifted to road betterment.

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Table 1: Planned and Actual Civil Works Component

Component Unit Planned Actual Change (%)

Betterment Periodic Maintenance Upgrading Bridge Replacement

(km) (km) (km) (m)

980 1,100 440 3,750

1,624 875 382 3,929

+66 -21 -7 +5

km = kilometer, m = meter. Source: Project Completion Report, Directorate General of Regional Infrastructure, February 2002.

10. Simplified Design Approach. All contracts were tendered on the basis of a “simplified design,” generally produced by the regional betterment offices (RBOs), based on DGH’s simplified road design program. No site topographical, drainage, or geotechnical survey data were available for doing the designs. The final design and estimate of construction quantities were undertaken during “design reviews,” supposed to be carried out during the first 3 months of the construction contract. Approval for these designs was required from the subproject manager, project manager, core team consultants, RBOs, DGH, and ADB. This was a time-consuming and cumbersome process, and was further complicated by the fact that the core team consultant did not come on board until December 1996, over 2 years after loan approval. 11. Use of Cold-Mixed Lasbutag.4 Several approved phase 1 designs provided for the use of “cold-mixed lasbutag” for wearing as well as binder courses, as part of the government policy for promoting local materials. A total of Rp131 billion, or 20% of the total cost for road improvement, was allocated for using the lasbutag. However, lasbutag turned out to be unsuitable and it failed in most applications even before the final handing over of the works. Part of the improved roads that used lasbutag were reoverlaid with asphalt hot-rolled sheet. The repairs were financed entirely by government funds. The list of road links that used cold-mixed lasbutag is in Appendix 4.

2. Part B: Vehicle Inspection and Testing 12. Construction of the four inspection and testing centers and procurement of fixed vehicle-testing equipment as well as mobile roadside spot-check vehicles took place in four pilot cities in West Nusa Tenggara—Mataram, Selong, Sumbawa, and Bima—and was completed in July 1999. The upgrading of the Regional Training Center in Bali was completed in September 1999. Consultant advisory services for improved vehicle inspection and enforcement of policies were completed in June 1999; the final report was submitted to ADB in July 1999.

3. Part C: Institutional Strengthening 13. The Study for Road Network Development the Eastern Islands was conducted by a group of international consultants during October 1997 to January 1998; the final report was submitted in March 1998. The study area included 13 provinces in five main islands. The study was designed to review the existing road network, review the medium-term future requirements of road network development in the context of the Government’s overall development program for the region, prepare proposals for provincial road master plans, and identify priority

4 Lasbutag is natural asphalt mineral from Buton Island in South-East Sulawesi that consists largely of natural rock

asphalt, aggregate, and modifier.

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investments and conduct prefeasibility analyses on them. The consultants, after undertaking an overview of the road network in the study area, identified four priority provinces for road network investments—West Nusa Tenggara, North Sulawesi, South Sulawesi, and Maluku. Detailed work on Maluku could not be undertaken due to lack of reliable data. The consultants thus only focused on the remaining three provinces to conduct “road viability analysis”, i.e., data collection/analysis, screening/prioritization of road corridors, and recommendations. The main recommendation of this study was in the form of a set of investment proposals for external financing. Under a new ADB loan (Loan 1798–INO: Road Rehabilitation Project, November 2000), only one of the above provinces (North Sulawesi) was included in the new project since the rest had already been financed by other external agencies. 14. Under the Project, 27 DGH staff obtained a Masters Degree (nine from France and 18 from Australia) in Highway Engineering, exceeding the targets at appraisal of 20 staff. The average training cost was about $37,000 per participant. All of them are now involved in the technical and implementation directorates of DGH and provincial highway offices. This component was implemented successfully.

4. Sector Policy Matters 15. As a sector project, the Government and ADB were supposed to have close consultation and to monitor the progress of highway and road traffic and transport policy implementation, in particular further road sector policy reforms beyond the project time frame. The Government was also supposed to keep ADB informed of other significant programs and studies related to road and road transport sector development. During the project period, both ADB and the Government did follow up on policy matters but on occasions either the Government’s response was slow or issue resolution took some time. This is due to the fact that, as policy issues, there was caution in resolving them and decisions were required from higher levels of government. C. Project Costs and Financing 16. The total project cost estimated at appraisal was $332.9 million equivalent. The ADB loan of $180.0 million was to finance all foreign exchange costs ($160.6 million), including interest during construction and $19.4 million of local costs, and the Government was intended to provide $152.9 million as counterpart funds. The total actual project cost amounted to $168.6 million equivalent for which the ADB loan financed $79.8 million and the Government provided $88.8 million equivalent. Appendix 5 shows a detailed comparison of planned and actual project costs and financing arrangements. A summary of the appraisal and actual project costs is in Table 2 below.

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Table 2: Project Financing ($ million)

Appraisal Estimate Actual Change Item

Foreign Exchange

Local Currency

Total Cost

Foreign Exchange

Local Currency

Total Cost

Foreign Exchange

Local Currency

Total Cost

Borrower- – 152.9 152.9 – 88.8 88.8 – (64.1) (64.1) Financed

% change (42.0) (42.0)

ADB- 160.6 19.4 180.0 72.2 7.6 79.8 (88.4) (11.8) (100.2)Financed

% change (55.0) (60.8) (55.7)

Total 160.6 172.3 332.9 72.2 96.4 168.6 (88.4) (75.9) (164.3)% change

(55.0) (44.1) (49.4)

ADB = Asian Development Bank. Source: Staff estimates. 17. While the overall project targets were largely met, the final dollar-based project costs were much lower than the appraisal estimate due to a fourfold devaluation of the rupiah. As most of the project contracts involved local costs, a comparison in rupiah costs is in order. Overall, the initial signed contracts amount for about 120 contracts was Rp605.3 billion, while the final completion cost for these packages was Rp651.3 billion, an increase of 8%. Most of the local cost increases were encountered on nearly half of the betterment contracts implemented during FY1997 and after. Twenty-six betterment contracts totaling Rp137.3 billion were completed in the first year with only 4.5% of total increases in price (both physical and price escalations). Twelve contracts were terminated, of which 10 were retendered. Another 14 contracts, which were implemented during the financial crisis, registered a 77% price hike on their total value. Overall, the price escalation for the betterment component amounted to 6%. For periodic maintenance, road upgrading, and bridge replacement components, the price escalations were 11%, 6%, and 12%, respectively. The ADB appraisal cost estimates for civil works turned out to be conservative. It is estimated that, if the crisis had not occurred, the loan amount would still have registered a saving of about $30.0 million. Given the spiraling price increases in construction, the overall cost performance of the Project is rated satisfactory. D. Disbursements 18. Total ADB disbursements amounted to $79.8 million, or 87% of the revised loan amount of $92.1 million after cancellation of $53.4 million in July 1998, $10.0 million in September 1999, and $24.5 million in December 2000. Appendix 6 shows actual contract amounts and the disbursement status as of 31 March 2002. A special account was established to facilitate the timely release of loan proceeds. In general, payments to contractors, suppliers, and consultants were made on time and in accordance with government and ADB procedures, except for those payments to 11 contractors that needed extended time for clearance from the Government for the calculation of price escalation. However, the submission of withdrawal applications from the Direktorat Tata Usaha Anggaran (Directorate of Budget Administration) to ADB was substantially delayed. 19. As a result of the delay in implementation during the first 2 years, the accumulative disbursement made in 1995 was only $5.0 million against a target of $21.0 million, and $10.8

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million against a target of $81.0 million in 1996. In 1998, ADB agreed to increase its financing ratio to 80% for 1 year to cope with the counterpart funding shortages. This resulted in an “extra” disbursement of about $1.75 million. E. Project Schedule 20. The overall project implementation schedule as appraised and implemented is shown in Appendix 7. The Project was approved on 29 November 1994 and became effective on 20 June 1995. The loan closing date (31 December 1999) was extended twice due to delays in completion of the civil works resulting from a slow start-up and the impact of the 1997 crisis, which stalled most of the contracts for some time. The loan was closed on 31 March 2001, about 15 months after the original closing date. It should be noted that the first 18 months of project implementation were mainly devoted to project preparation activities. In view of the difficult circumstances faced by the Project, such as weak preparation, a slow start, and the financial crisis, overall implementation was satisfactory. The physical targets were largely achieved, albeit behind schedule. The related institutional development components were also implemented within a reasonable time frame after the Project got under way. F. Implementation Arrangements 21. At appraisal, it was agreed that DGH would be the executing agency for the Road and Bridge Works (Part A) as well as Institutional Strengthening (Part C), while DGLC would be responsible for Vehicle Testing and Inspection (Part B). In April 2000, the Government ministries were reorganized: the public works functions were transferred to the Ministry of Settlements and Regional Infrastructure (MSRI). Most of the DGH staff and functions were shifted to the Director General Regional Infrastructure (DGRI), responsible for inter-urban roads, and water and sanitation infrastructure. This change did not have any material effect on project implementation as staff continuity was maintained. Appendix 8 shows the broad implementation arrangements for the Project. The Directorate of Planning in DGH was responsible for overall coordination and approval for planning, programming, funding, design, and supervision. The design and supervision functions were delegated to the RBOs and, in the case of national roads, to the National Roads Planning and Programming Office (P3TNAS), which recruited consultants for support. All civil works for roads and bridges were coordinated by the provincial governments’ DBMs (and sub-DBMs) through their respective appointed project and subproject managers. All design changes produced by RBOs or P3TNAS were subjected to approval by DGH’s Directorate of Engineering (Bintek). DGLC, responsible for the vehicle testing and inspection component, appointed its Subdirectorate of Road Transport Technical Standards as the executing agency. G. Conditions and Covenants 22. The Loan Agreement included a total of 33 covenants, of which 23 were project specific. While, overall, a large number of the covenants were complied with, a number of conditions were not fully complied with, including: (i) there was no timely provision of adequate counterpart funds; (ii) a number of employed contractors turned out to be incompetent; (iii) subprojects were designed using DGH design standards (the “simple design criteria” themselves turned out to be inadequate and had to be modified during implementation); (iv) DGH did not carry out a regular field-monitoring program to ensure environmental measures; and (v) ADB was not regularly informed of the progress of PSAP2 (annual status reports were not submitted). Appendix 9 summarizes the loan covenants and compliance.

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H. Related Technical Assistance 23. No accompanying TA related to the Project was provided. I. Consultant Recruitment and Procurement 24. The major consultancy contract under the Project was for supervision services, which required expatriate consultants as the core team and seven groups of domestic consultants as field teams. The core team consultants were selected through international competition in which six short-listed firms participated. The evaluation of the submitted proposals was completed in January 1996, but contract approval and award were delayed to December 1996. The mobilization of the core team was on the critical path of the civil works construction, as the consultants had to review the designs prior to start of construction on betterment and upgrading subprojects. Most of the civil works contracts for the phase 1 packages were awarded in March/ April 1996; the field teams were also selected at about the same time. However, the process of selecting the expatriate consultants turned out to be rather slow. The core team was finally mobilized in around December 1996, nearly 12 months later than planned. This turned out to be a major contributing factor toward implementation delays. In retrospect, it would have been better if critical steps such as advance recruitment action of consultants had been completed prior to, say, loan negotiations. The consultants for the vehicle testing program and road sector study were involved only minor delays. In the end, the international consultant inputs totaled 189 person–months against 187 planned, and those of the domestic consultants were 4,150 person–months against 4,265 planned. Summary of the consulting services is given in Appendix 10. 25. There were a total of 155 contracts under the project: 139 for civil works, 8 for supervision consulting services, and 8 for the rest of the components. Procurement of civil works was undertaken mostly through local competitive bidding; 10 civil works contracts were procured through international competitive bidding along with all expatriate consultants and equipment. The seven domestic consultants for field supervision teams were selected through local competition. Further details are given in Appendix 11. J. Performance of Consultants, Contractors, and Suppliers 26. Consulting Services Arrangements. The Project used the formula that was adopted for earlier ADB projects and was deemed successful, in which a centrally based team of coordinating consultants provides advisory services to DGH and the RBOs, and directs the activities of teams of field-based consultants organized by the respective RBOs. The terms of reference and other arrangements for the supervision consultants were to be similar to the ones used in earlier projects. One of the crucial tasks of the supervision consultants was to review the subproject designs, prepared by RBO staff, before the start of construction. Given the dispersed location of project components, it was decided to have four core teams, one located in Jakarta, and three regional teams based in Surabaya, Banjarmasin, and Makasar. Seven groups of field-based supervision teams were located in 11 provinces, working under the guidance of the core teams, but reporting to the relevant local RBOs. Each team included a site engineer, a chief inspector, a quantity surveyor, inspectors, and technicians. The recruitment of supervision consultants faced delays until January 1997 when the four core teams were mobilized. The field teams were fielded in August 1996. The original contract period for the consultants was 3 years, ending December 1999. As construction works were extended into 2000, a number of adjustments in the staffing of expatriate consultants were made during implementation to extend the time period, but with a reduction of staff inputs to manage costs. The contract for three of

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the core teams was thus extended by 1 year to December 2000. At the time of the demobilization of the core teams, 11 contract packages were ongoing. The key functions of the supervision teams can be summarized as follows:

(i) the lead core team, based in Jakarta, was responsible for overall project monitoring and coordination, and provided support to the central DBM;

(ii) three core teams, based in Surabaya, Banjarmasin, and Makasar, assisted RBO

chiefs in design reviews and DBM project managers in construction supervision, coordinated the work of field teams, and served as advisors to project managers; and

(iii) the seven field supervision teams, hired by RBOs under separate contracts, were responsible for site inspection and contract management.

27. Performance of Consultants. The performance of the core team supervision consultants was generally satisfactory. However, the performance of field teams was less than satisfactory, as these teams were not always staffed adequately and the field team staff were not located with the project managers. The district offices responsible for project implementation did not have the capacity to undertake the required construction management. The core team consultants provided overall coordination and support to DGH, field teams, and the local project offices. The field teams were carrying out the day-to-day construction supervision and field management. These were elaborate and complicated arrangements, which have been used on other ADB projects as well. The overall cost of construction supervision under this project was 7% of the total civil works cost, compared to 8% in the original estimate. While the overall results and costs of these arrangements were satisfactory, one obvious weakness of this set-up is that the consultants seem to undertake the supervision activities on their own, rather than working in a supporting role to the clients. For example, the consultants issued all project progress reports independently with little contribution from the government agencies. There is not much evidence of capacity building as a result of these services at the local level. It is recommended that the supervision consultant services should be structured to support the local implementation agencies rather than work instead of them. 28. Performance of Contractors. All civil works contractors involved in the Project were domestic contractors. There were 139 contracts for civil works involving about 80 domestic contractors. A number of contractors could not mobilize their staff and equipment on time, thus causing delays in the overall project implementation. Poor construction quality was found in some visited road sections5 in Central and East Kalimantan, and road settlements and land sliding6 in South-East Sulawesi and East Nusa Tenggara. However, the performance of a large number of these contractors was generally satisfactory. 29. Performance of Suppliers. Two suppliers were involved in the Project: (i) supplier for the training center in Denpasar, Bali; and (ii) supplier for vehicles inspection and testing for Mataram, Selong, Sumbawa, and Bima. In general, performance of both suppliers was satisfactory without any notable delay in delivering the equipment. However, the supply contract did not have sufficient provision for spare parts as required by the Project.

5 The mission found total road damage under contract BF 4 in Pulang Pisau KM35 in Central Kalimantan and

Bontang–Sangata in Kutai in East Kalimantan. 6 Land slides and subgrade resettlement were found under packages of BE7: Kefamanu–Maubesi and Lepo–Lepo–

Ambesia in South-East Sulawesi.

10

K. Performance of the Borrower and the Executing Agencies 30. Overall, the performance of the borrower and its executing agencies is rated satisfactory. DGH has been the executing agency for a number of ADB projects; this was the 13th road sector loan in Indonesia. The past performance of DGH has generally been rated satisfactory. In this project, the overall planning and coordination was with the central Government and the actual project implementation was delegated to the provincial offices. The Government generally lacked the staffing and skills to manage this large project on its own; it had to rely heavily on consultant support for design and supervision. DGLC as the executing agency of part B has implemented its component without delay. However, the operation and maintenance of the facilities were still limited as a result of limited operational incomes because of only commercial vehicles have to undergo testing. The performance of the executing agencies as well as the Government could have been improved by the following possible measures:

(i) DGH should have undertaken more project preparation activities, such as selection of subprojects, field investigations, and designs for the first-year program, prior to loan approval. Selection of supervision consultants should have been expedited;

(ii) more efforts toward timely provisions of counterpart funds in the government

budget should have been made; (iii) there should have been less reliance on consultants for project support.

Consultants should have been hired with a specific objective of gradual capacity building and should work closely with the implementing agencies; and

(iv) Ministry of Finance should have adopted a more proactive approach toward

cancellation of the loan savings and submitting withdrawal applications in a timely manner.

L. Performance of the Asian Development Bank 31. Although the Project was inadequately prepared for timely implementation since the first 12 to 18 months after loan approval were essentially devoted to project preparation activities, the performance of ADB during implementation is rated satisfactory, as the ADB staff managed to identify and address various implementation problems. The loan administration responsibility for this Project was transferred to the Indonesia Resident Mission in January 1997, a move that the government side welcomed. Interaction between ADB and the executing agencies became more frequent and easier. The following possible actions could have further enhanced ADB interventions in the Project:

(i) Advancement in the project cycle of key project actions, such as selection of phase 1 subprojects, design reviews/approvals, and consultant selections should have been prerequisites for loan negotiation. ADB has to convince the Government that implementation of advance procurement action provided for in the Loan Agreement is the key for implementing the project on schedule. Although it implies a risk to the Government, since the project should start before signing the loan, it would benefit the executing agency to implement the project as early as possible.

11

(ii) A more balanced focus is needed between physical components and road sector

policy issues and developments. The Project was designed as a sector loan to support the Government’s road sector investments and policies. ADB tended to act as though it was a project loan without providing adequate follow-up actions for the Government’s other road investments and policies.

III. EVALUATION OF PERFORMANCE

A. Relevance 32. The project design—a sector loan to support the Government’s road sector development programs and policies under the sixth Five-Year Development Plan (Repelita VI) in the eastern islands—was sound and relevant. The Project was in line with the focal points of ADB’s recently developed country strategy and programs of (i) targeting less developed islands, (ii) generating direct impact to economic growth in cities that are linked by improved and upgraded roads, (iii) supporting the development of the eastern islands economic integrated zone (KAPET)7 that is intended to alleviate poverty by generating job opportunities in the community, and (iv) human resources development through the provision of support for institutional development and capacity building. The main changes made during implementation related to improvements in design criteria and an increase in the ADB financing share for 1 year to cope with the Government’s tight budgetary constraints. B. Efficacy in Achievement of Purpose 33. The Project achieved its stated physical objectives of improving road sections and bridges, despite delays and difficulties during implementation, at acceptable cost and within a satisfactory time frame. Some minor adjustments in project scope were made following the financial crisis. Had these difficulties not occurred, the Project would have achieved much higher physical implementation targets within the approved loan amount. On the policy front, the Project aimed to support implementation of PSAP2. The Project included a covenant to annually review progress in implementation of PSAP2 and to hold consultations for further road policy measures. Overall, implementation of PSAP2 was slower than planned, but the main accomplishments were the issuance of a number of pending decrees or implementation regulations relating to the 1992 Road Law and the undertaking of a study to further reform the road user charges system. PSAP2 was updated in 1996 to become PSAP3, covering implementation of sector policies for the period 1996–1999. However, implementation of PSAP3 was suspended during the crisis. Its revival is now proceeding under the new Roads Rehabilitation Project (1798-INO). The institutional development objectives relating to road safety and environment have been partly achieved, since only the provision of a training center and equipment in Denpasar and vehicle inspection and testing in Mataram are fully operational. C. Efficiency in Achievement of Outputs and Purpose 34. Financial analysis is not applicable for this Project as no cash generation is involved. Economic analysis was undertaken using well-established integrated road management system

7 Most of the roads selected for improvement are located in the KAPET area (South Kalimantan and South

Sulawesi).

12

and bridge management system models.8 The main benefits anticipated from the Project were in time and in vehicle operating costs resulting from improved road conditions. The subproject selection criteria stipulated that only projects with an economic internal rate of return (EIRR) higher than 15% (and 12% for upgrading components) could be included. DGH has a national program of collecting annual traffic and road condition data for all national and provincial roads. Although these data are supposed to be collected four times a year, they are only collected once a year due to budget constraints. The main problem with this analysis is reliability of the available data. Using the actual traffic and road condition data available at the DGRI, and the actual construction costs, the economic analysis was done for all major links in the project using the same methodology. Appendix 12 provides a comparison of the estimated EIRR at appraisal and those based on the current actual data. The traffic growth in a number of areas was sluggish, mainly due to the difficult economic situation in the country since 1997. Of the reevaluated sections, 51% show EIRRs less than 15%. In terms of the objectives of the overseas Masters programs, these have been achieved efficiently with an average cost of $37,000 per participant, lower than the cost at appraisal of about $60,000 per participant. D. Preliminary Assessment of Sustainability 35. Part A—Road and Bridge Works. Sustainability of the road and bridge components will largely depend on the quality of completed works and subsequent required routine and periodic maintenance by the Government. The latter requires the Government to commit funds and resources to operation and maintenance (O&M). The allocated routine maintenance budget by the provincial government of about Rp10.0 million to Rp15.0 million per kilometer per year was adequate only for the maintenance of road surface layers and shoulders. Consequently, other supporting facilities such as side ditches and road drainage have not been properly maintained. Although sustainability of the project benefits may be hampered by the lack of a routine maintenance budget, the risks are minimized by the fact that the Government also provides another program called “road periodic maintenance” for those subproject components that have reached their 5 years of economic life, in the form of hot-mixed asphalt overlay and rehabilitation of supporting facilities on a selected basis. The final report of the core team consultants as well as selected field visits by the Project Completion Review Mission confirm that the quality of completed subprojects was generally satisfactory. It was found that 16 road links have been identified with construction deficiencies, which DGRI needs to address. In 2002, the Government started rehabilitating part9 of these roads. The list of roads with construction deficiencies is in Appendix 13. 36. Part B—Vehicle Inspection and Testing. While the construction of the testing facilities, procurement of equipment, and training of local staff by consultants proceeded satisfactorily, the actual operation of these facilities has not been without problems:

(i) as part of the Government’s deregulation program of 1998, the operational responsibility for these facilities has been shifted to the district government level (kabupaten). Due to the limited operational incomes from the facilities, the district governments remain subsidized for O&M costs;

(ii) the present regulations (PP-44) require only commercial vehicles to undergo

testing, which limits the coverage available for these facilities; and

8 These systems prioritize and plan work programs for maintaining and improving roads and bridges. They are the

main tools for evaluating and justifying new project proposals. 9 Road sections at Kefamanu–Maubesi in West Timor and Pulang Pisau in Central Kalimantan.

13

(iii) the spare parts of the facilities were not available in a timely manner.

37. Currently, only one facility in Mataram is operating satisfactorily; the other three are only marginally operational. DGLC is reviewing the current regulations with the possibility of expanding the scope of vehicles to undergo testing, which will not be limited to commercial vehicles.10 At this stage, only the facility in Mataram is likely to be sustainable. 38. The training center in Denpasar, Bali is supposed to provide training facilities for provincial and district land communications staff in the eastern islands. The training center was put into operation in September 1999 to provide four training courses a year, each of three months duration. The training participants have substantially gained from the training provided by the Project. In late 2000, the training center was moved from the provincial land communications office to land owned by the training division of DGLC. Since the new training center is still being completed, four training courses scheduled in FY2002 will have to be moved to Jakarta. The new training center is scheduled for completion in October 2002. From observations during the Project Completion Review Mission, the training facilities appear to be sustainable. E. Environmental, Sociocultural, and Other Impacts 39. Road betterment, periodic maintenance, and bridge replacement works were not expected to have any major environmental and social impact as these works were intended to improve the existing infrastructure. Similarly, the right-of-way requirements were estimated to be minimal as the existing alignments were to be used. The project selection criteria stipulated that all subprojects to be funded by the Project have to be subjected to “appropriate” environment and social impact screening criteria. It was also agreed that a mechanism would be established to strengthen the institutional capacity of DGH and DBMs to screen subprojects and monitor mitigating measures. Except for two road links (BF 53 and BD 29), most of the completed subprojects did not have much of an environmental or social impact, although compliance with these “agreements” was marginal. There is little evidence that the required environment and social impact analysis was done prior to subproject selection. ADB review missions repeatedly requested DGH to put in place monitoring and mitigating measures, but DGH was unable to comply since it was of the view that the Project is based on existing roads rather than developing new ones. 40. Two road links were identified as having serious potential for negative environmental impacts—BF 53 (Bontang–Sangata in East Kalimantan), a 55.8 km road passing through a national park preservation area, and BD 29 (Lususua–Lapai II, in South-East Sulawesi), a 41.0 km section passing through a conservation forest. The BF 53 road link was completed without information on the environmental issue by DGRI. The issue was noted by ADB during review mission visits. This road link also suffers from very poor construction quality; many land slides and pavement structural failures have already occurred. At the request of ADB, DGH asked the core team consultant to prepare environmental monitoring and management reports for these two road sections. These reports recommended a series of monitoring and mitigating measures. Due to delay in the submission of an environmental mitigation assessment report by DGRI, BD 29 in South-East Sulawesi was finally taken out of the program.

10 Law No. 14 (UU No. 14, 1992) requires that all types of motorized vehicles have to undergo testing. The law has

been gradually implemented taking into account users’ affordability. PP-44, which requires only commercial vehicles to be tested, is now being reviewed.

14

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 41. Overall, the project is rated successful, as the major components were implemented largely as planned, despite start-up delays and subsequent complications caused by the financial crisis. Barring about 16 road links (about 10% of the total road improvement under the Project) with construction quality problems (the Government has already started rehabilitating these roads), other subprojects were completed at acceptable quality and cost. A couple of road sections (one was subsequently dropped from the Project) are likely to present negative environmental impacts, unless the Government undertakes the required mitigating measures. The vehicle inspection and testing program has partly achieved the desired results. To maintain sustainability of the constructed facilities, the Government should increase the O&M budget allocations. A detailed overall rating assessment is given in Appendix 14. B. Lessons Learned 42. This was the 13th road sector loan to Indonesia. The last project completion report was prepared for Loan 1232-INO: Third Local Road Project in August 2000, which listed the following lessons learned. These are largely valid for this project as well:

(i) In the investment program, more emphasis should be given to routine and periodic maintenance instead of rehabilitation-asset preservation vs. capacity expansion.

(ii) The simplified final engineering design model used by DGH did not prove

satisfactory. This should only be used in conjunction with adequate field investigations. More thorough economic analysis should be done, particularly traffic counts and projections.

(iii) The practice of omitting roadway drainage in order to save funds for additional

rehabilitation works should be avoided.

(iv) There is too much reliance on international consultants. This input should be gradually cut back through local capacity building.

(v) ADB cost estimates are too conservative, resulting in substantial amounts of loan

savings.

(vi) Too many loan covenants to be complied with will dilute their importance. Also, the loan covenants should be underpinned with adequate arrangements and resources for their implementation. A covenant on its own is like an “unfounded mandate.”

43. The following additional lessons have been learned from this Project:

(i) Project readiness for immediate implementation after loan approval is critical. In 2001 at a joint ADB/World Bank Country Portfolio Performance Review, Project Implementation Readiness Criteria were agreed, which list various actions that should be completed prior to loan negotiation and effectiveness. A retroactive

15

application of these criteria would show that this Project was far from ready for implementation at the time of loan approval.

(ii) The Project was designed as a sector loan, but was implemented more as a

project operation in which the main focus was on implementation of the project subcomponents. Due attention was not paid to the broader sector issues, such as review of annual investment programs and status of the Policy Statement and Action Plan for the Road Sector. PSAP2 should have been updated within the period of project implementation and has taken longer to be developed than expected. These data are important for future project formulation.

(iii) The project coverage in 13 provinces for betterment, periodic maintenance,

upgrading, and bridge replacement was overextended geographically. This resulted in small subprojects scattered over remote areas, which could not be easily monitored. While a case can be made for broader coverage on equity grounds for less developed areas, this approach has diluted the possible impact of the Project on network or corridor improvements and capacity building. Also, the three main funding agencies (ADB, World Bank, and Japan Bank for International Cooperation) are all currently working on similar activities in the project provinces, stretching the limited counterpart staff capacity.

(iv) Given the status of project preparation at appraisal, ADB should have devoted

more resources toward an implementation review in the first year, to get the project “off the ground.”

(v) In terms of environmental damage, other than upgrading components, most road

works involved improvements to the existing alignment within the right of way. No environmental assessment was deemed necessary for these projects during preparation. However, during implementation two road betterment works were found to be passing through sensitive preservation areas. ADB requested DGH to undertake environmental studies to mitigate the potential damage caused by the increased traffic, land slides, encroachment, etc. These studies were done only at the end of the project implementation period. One road section in East Kalimantan was therefore completed before the environmental studies were carried out. The reports recommended some actions to be taken to mitigate predicted environmental damage. It was found, however, that the necessary funding arrangements to monitor and manage the environmental plans for these roads were not in place.

(vi) The Study for Road Network Development in the Eastern Islands should not be

classified as institutional strengthening. Such a study that (i) reviews the medium-term future requirements of road network development, (ii) prepares proposals for provincial road master plans, (iii) identifies priority investments, and (iv) conducts prefeasibility studies for future investments—is preparatory in nature.

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C. Recommendations 1. Project-Related 44. DGRI (formerly DGH) should take immediate measures to get whole sections of roads identified as having heavy damage under this Project repaired as soon as possible. 45. DGRI should, by September 2002, follow up on the environmental monitoring and mitigation recommendations for the two road links in South-East Sulawesi and East Kalimantan identified with environmental problems. Although the road link with environmental impact in Sulawesi was dropped from the program it is likely that the Government may upgrade this road section using its own funds; the environmental monitoring and mitigation recommendation included in the environmental impact assessment for this link should still be actioned. 46. The Government has to ensure that adequate funding for routine and periodic maintenance of the road sections improved under this Project is made available to protect these assets. The current budget allocation for routine maintenance of about Rp5.0 million to Rp15.0 million per kilometer road per year is adequate only for maintaining road surface layers and shoulders. DGRI should, by November 2002, prioritize the maintenance of drainage and side ditch facilities. 47. DGLC should work with the concerned local governments of Mataram, Selong, Sumbawa, and Bima to make the vehicle inspection and testing stations, set up under this project, operational and sustainable through ensuring adequate budget allocation for O&M and spare parts. DGLC is urged to expedite the review of the prevailing regulations as well as specific operations of the facilities under Part B to ensure that the local governments are able to provide the necessary support, including funding for spare parts, to successfully operate these facilities. By December 2002, DGLC should also complete the outstanding works of the new training center at Denpasar, which is being constructed by Training Division of DGLC. 48. ADB should undertake a project performance audit report no later than April 2004 to further evaluate benefits generated by the increase in traffic volumes resulting from improved roads against the actual routine maintenance budget. As pilot installations, the facilities installed under Part B and its prevailing regulations have to be further elaborated.

2. General

49. There is no substitute for upstream project preparation to ensure timely implementation. The recently agreed criteria for project readiness, if applied, would address this problem. If satisfactory arrangements for undertaking proper environmental and social impact assessment and economic analysis are not put in place during appraisal, the chances of these activities taking place later on are reduced. It is recommended that readiness criteria should be applied strictly prior to entering a loan negotiation. 50. The use of a simplified design approach in this project resulted in serious delays as well as substantial cost changes. The engineering designs should be based on site surveys and investigations. The practice of seeking bids on the basis of a simplified design followed by design reviews and quantity estimation should not be allowed. DGRI and ADB have to apply full and comprehensive designs for future road projects.

17

51. A proper monitoring system, such as the establishment of a central project management office (CPMO) within DGRI, will enhance effectiveness in communicating problems encountered in the project sites immediately. The Project, covering 13 provinces in the eastern islands, was clearly overextended and had no proper monitoring system. For future projects, DGRI should ensure that a CPMO within DGRI be established for a better project monitoring system.

Appendix 1 18

CHRONOLOGY OF MILESTONE EVENTS Project Preparation 1994 August – Loan appraisal 1994 August – Loan negotiation 1994 November – Loan approval 1995 April – Loan signing 1995 June – Loan effectiveness Recruitment of Consultants 1996 November – Fielding of Core Team Consultants 1997 January – Fielding of Field Team Consultants 1997 November – Fielding of Consultants for Eastern Islands Roads Study 1998 July – Fielding of Consultants for Vehicle Inspection Civil Works and Supply of Equipment Contracts 1996 October – First civil works contract was awarded 1997 January – First contract for supply of equipment was awarded 1997 August – Last contract for supply of equipment 1999 October – Last civil works contract was awarded Asian Development Bank Inception and Review Missions 1995 June – Inception mission 1996 January – Review mission 1 1996 September – Review mission 2 1997 October – Review mission 3 1998 September – Review mission 4 1999 July – Review mission 5 2000 June – Review mission 6 Loan Disbursement and Cancellations 1995 June – First disbursement 1998 July – First partial loan cancellation ($53.4 million) 1999 September – Second partial loan cancellation ($10.0 million) 2000 December – Third partial loan cancellation ($24.5 million) 2001 November – Final Disbursement Loan Closing Date 1999 31 December – Original loan closing date 2000 31 December – First loan extension 2001 15 March – Second loan extension Activities Carried Out After Loan Closing Date

2002 April – Project completion review by Asian Development Bank 2002 April – Final cancellation of loan savings of $12.4 million 2002 April – Closing of loan account

Appendix 2 19

(A) (B) A. Road and Bridge Works

1. Civil Works a. Road Betterment km 980 1,624 166 b. Periodic Maintenance km 1,100 875 80 c. Road Upgrading and Improvement km 440 382 87 d. Bridge Replacement m 3,750 3,929 1052. Consulting Services for Supervision a. International PMs 140 141 101 b. Domestic PMs 4,200 4,080 97

B. Vehicle Inspection and Testing1. New Test Centers unit 4 4 1002. Equipment unit 4 4 1003. Training Center Equipment unit 1 1 1004. Consulting Services a. International PMs 21 21 100 b. Domestic PMs 21 21 100

C. Institutional Strengthening1. Consulting Servises a. International PMs 26 27 104 b. Domestic PMs 44 49 1112. Post Graduate Training (Masters Degree) person 17 17 100

km = kilometer, m = meter, PMs = person-months

(B/A)

RRP = Report and Recommendation of the President

STATUS OF COMPLETION OF PROJECT COMPONENTS(in 13 provinces)

Items UnitPercentage

At RRP Actual Achieved

Contract Amount (Rp million) % ofProvince / Date of Length Physical Price Final toPackage Road Link Contract (km) r Original Changes Escalation Final Original

West Nusa Tenggara 112.0 16,699.6 6,177.5 8,054.7 30,931.8 185.2BD-9 Lembar - Sekotong-Pelangan 12-Feb-96 33.4 5,292.3 990.5 190.8 6,473.6 122.3BD-10 Lenangguar - Lunyuk 07-Mar-97 56.0 7,465.2 5,187.0 7,863.9 20,516.1 274.8 BD-11 Dompu - Hu'u 05-Jun-96 14.6 2,352.0 0.0 0.0 2,352.0 100.0 BK-1 Lembar - Sekotong-Pelangan 21-Jul-97 8.0 1,590.2 0.0 0.0 1,590.2 100.0

East Nusa Tenggara 161.4 15,755.7 2,922.0 2,649.0 21,326.8 135.4BD-12 Bts Sumba Timur - Waikabub 28-Jan-97 60.4 5,941.0 1,257.5 2,553.7 9,752.2 164.2BD-13 Baa - Batu Tua 20-Mar-96 28.0 3,582.5 156.1 0.0 3,738.6 104.4BD-16 Km 35 - Bts Sumba T 29-Apr-96 37.0 3,376.1 561.4 0.0 3,937.5 116.6 .BD-17 Waikabubak-Waitabula 01-May-96 36.0 2,856.1 947.0 95.4 3,898.5 136.5

East Timor 21.0 3,676.6 792.9 0.0 4,469.5 121.6BD-15 Aituto - Same 22-Feb-96 11.0 2,186.2 620.4 0.0 2,806.5 128.4BD-42 Mailana - Batu Gede 23-Feb-96 10.0 1,490.5 172.5 0.0 1,663.0 111.6

West Kalimantan 73.9 21,227.6 1,264.4 0.0 19,856.8 93.5BD-1 Sanggau - Sekadau 15-May-96 0.0 2,986.5 1,264.4 0.0 4,251.0 142.3BD-1A Sanggau - Sekadau 02-Jul-99 27.4 8,453.2 0.0 0.0 8,453.2 100.0BD-2 Sei Duri - Singkawang 01-Feb-97 46.5 9,787.8 -2,635.2 0.0 7,152.6 73.1

East Kalimantan 196.2 67,860.1 -4,623.4 9,153.5 68,940.3 101.6BD-3 Kademan - Kuaro 01-Mar-96 23.0 3,219.8 0.0 0.0 3,219.8 100.0BF-53 Bontang - Sangata 14-Mar-97 41.2 7,351.3 682.6 9,153.5 17,187.4 233.8BF-53A Bontang - Sangata (II) 09-Mar-99 14.5 5,586.0 0.0 0.0 5,586.0 100.0BD-6 Kuaro - Batu Aji 14-Mar-97 0.0 10,181.4 -7,368.8 0.0 2,812.6 27.6BD-6A Kuaro - Batu Aji (I) 08-Mar-99 44.0 9,484.4 940.0 0.0 10,424.4 109.9BD-6B Kuaro - Batu Aji (II) 08-Mar-99 30.0 9,474.0 600.0 0.0 10,074.0 106.3BF-55 Kt Bangun - Damai 24-Feb-97 0.0 4,550.5 0.0 0.0 1,100.6 24.2BF-55A Kt Bangun - Damai (I) 09-Mar-99 17.1 6,675.8 522.7 0.0 7,198.5 107.8BF-55B Kt Bangun - Damai (II) 09-Mar-99 13.2 4,858.1 0.0 0.0 4,858.1 100.0BF-55C Kt Bangun - Damai (III) 09-Mar-99 13.2 6,479.0 0.0 0.0 6,479.0 100.0km = kilometerSource: IRM Records

LIST OF MAJOR CIVIL WORKS CONTRACTS20 Appendix 3


Central Kalimantan 35.0 18,138.9 -5,598.3 0.0 12,540.6 69.1BD-4 Km 49 - Puruk Cahu 28-Feb-97 0.0 8,148.2 -5,598.3 0.0 2,549.8 31.3BD-4A Km 49 - Puruk Cahu 17-Mar-99 35.0 9,990.7 0.0 0.0 9,990.7 100.0

South Kalimantan 79.4 12,747.1 2,047.8 0.0 14,795.0 116.1BD-7 Lampihong-Mantimin 28-Feb-96 10.4 1,487.8 0.0 0.0 1,487.8 100.0BD-8 Kintab - Sebamban 12-Mar-97 69.0 11,259.3 2,047.8 0.0 13,307.2 118.2

North Sulawesi 23.3 4,092.4 0.0 0.0 4,092.4 100.0BD-41 Tahuna - Tomako 15-Mar-96 23.3 4,092.4 0.0 0.0 4,092.4 100.0

Central Sulawesi 233.2 82,634.2 78,963.7 95.6BD-18 Siboang - Ogoamas 02-Jun-97 53.7 7,261.9 -133.2 3,764.9 10,893.6 150.0BD-19 Taweli-Toboli 23-Dec-96 0.0 5,229.1 -1,215.3 0.0 4,013.8 76.8BD-19A Taweli - Kebon Kopi 05-Jun-99 26.0 11,777.6 0.0 0.0 11,777.6 100.0BD-19B Kebon Kopi - Toboli 05-Jun-99 22.0 12,142.0 0.0 0.0 12,142.0 100.0BD-20 Kasiguncu - Sanginora 07-Jun-96 13.9 2,886.9 0.0 0.0 2,886.9 100.0BD-34 Toli Toli - Sp Santigi 06-Jan-97 0.0 6,131.8 -4,572.4 72.3 1,631.7 26.6BD-34A Toli Toli - Sp Santigi 05-Jun-99 38.0 12,997.5 0.0 0.0 12,997.5 100.0BD-39 Taman Ria - Donggala 06-Jan-97 0.0 4,986.3 -3,872.8 89.8 1,203.3 24.1BD-39A Taman Ria - Donggala 05-Jun-99 29.6 11,499.8 0.0 0.0 11,499.8 100.0BD-40 Tambu - Sabang 15-Mar-96 20.0 3,190.0 744.0 0.0 3,934.0 123.3 BK-2 Tambu - Kasimbar 29-Jun-98 30.0 4,531.5 452.1 1,000.0 5,983.6 132.0

South Sulawesi 132.5 33,391.9 343.1 1,048.6 34,783.5 104.2BD-21 Km 60 - Cabdin Binjai 04-Nov-96 33.4 4,474.6 833.5 1,048.6 6,356.7 142.1 BD-22 Solondro-Pompanua 21-Nov-96 22.3 4,399.6 0.0 0.0 4,399.6 100.0BD-23 Polewali - Tabone 16-Sep-96 0.0 3,008.3 -805.3 0.0 2,203.0 73.2BD-23A Polewali - Tabone 01-Apr-99 15.0 2,658.3 0.0 0.0 2,658.3 100.0BD-24 Sungguminasa - Km60 14-Nov-96 0.0 2,326.1 -773.9 0.0 1,552.2 66.7BD-24A Sungguminasa - Km60 01-Apr-99 15.2 2,069.3 0.0 0.0 2,069.3 100.0BD-25 Mamuju - Kaluku 22-Jul-96 13.5 2,136.7 0.0 0.0 2,136.7 100.0BK-3 Watampone-Pompanua 16-Mar-99 33.0 12,319.1 1,088.8 0.0 13,407.9 108.8

km = kilometerSource: IRM Records

Appendix 3 21


South-East Sulawesi 313.5 72,870.8 2,363.0 22,586.3 97,820.1 134.2BD-26 Bambaea - Kasipute 18-Mar-97 43.7 9,864.7 2,122.3 4,723.7 16,710.7 169.4BD-27 Wolo - Lasusua I 26-Sep-96 26.0 5,036.5 1,556.4 2,044.6 8,637.5 171.5BD-28 Lasusua - Lapai (I) 25-Apr-97 0.0 7,233.2 -5,123.3 427.1 2,537.0 35.1BD-28A Lasusua - Lapai (IA) 22-May-99 41.0 9,604.2 0.0 0.0 9,604.2 100.0BD-29 Lasusua - Lapai (II) 12-May-96 41.0 7,558.7 0.0 3,928.1 11,486.8 152.0BD-35 Wolo - Lasusua II 26-Sep-96 26.0 4,963.8 1,041.3 2,980.1 8,985.2 181.0BD-36 Wolo - Lasusua III 26-Sep-96 26.0 5,115.9 511.6 2,832.4 8,459.9 165.4BD-37 Lapai - Porehu I 13-Sep-96 38.0 5,469.1 838.8 3,375.0 9,682.9 177.0BD-38 Porehu - Bts Sulsel 24-Sep-96 21.0 5,462.7 159.7 2,275.4 7,897.8 144.6BK-4 Rate Rate - Kolaka 25-Jan-99 50.9 12,562.0 1,256.2 0.0 13,818.2 110.0

Maluku 127.9 24,617.8 -15,109.4 333.0 9,841.5 40.0BD-30A Sidangoli - Dodinga 11-Jun-96 18.0 2,638.7 1,660.8 333.0 4,632.5 175.6BD-30B Durian Patah - Hitu 09-Feb-96 11.8 1,497.9 217.1 0.0 1,715.0 114.5BK-5 Dodinga - Ekor 22-Mar-99 45.1 8,502.3 -6,975.3 0.0 1,527.0 18.0BK-6 Ekor - Subaim 01-Mar-99 53.0 11,979.0 -10,012.0 0.0 1,967.0 16.4

Irian Jaya 115.0 33,679.4 0.0 188.9 33,868.3 100.6BD-32 Biak Junction - Korem 09-Feb-96 23.0 4,447.9 0.0 0.0 4,447.9 100.0BD-33 Wamena - Tengon 24-Jan-96 17.0 3,513.7 0.0 0.0 3,513.7 100.0BD-43 Sorong - Teget 22-Jan-96 33.0 6,196.5 0.0 0.0 6,196.5 100.0BK-7 Nabire - Kimibay 24-Feb-99 21.8 10,755.5 0.0 188.9 10,944.4 101.8BK-8 Serui - Menawi 04-Dec-98 20.3 8,765.8 0.0 0.0 8,765.8 100.0

km = kilometer

Source: IRM Records

22 Appendix 3

Appendix 4 23

Package Road Links

Central SulawesiBE-13 Kalubula Kalawara, Central Sulawesi 19.5 3,206 BD-16 Siboang-Ogoamas 53.7 10,893 BD-20 Kasiguncu -Sanginora 13.9 2,886 BD-34A Tambu - Sabang 20.0 3,933 BD-39A Tambu - Kasimbar 30.0 5,983

South SulawesiBD-21 Cabdin Sinjai 33.0 6,356 BD-22 Salonro-Pompanua 22.3 4,319 BD-23A Polewali-Tabone 15.2 2,658 BD-25 Mamuju-Kaluku 13.5 2,136

South-East SulawesiBD-26 Boepinang-Kasipute 43.7 16,710 BD-35 Wolo-Lasusa II 26.0 8,637 BD-36 Wolo-Lasusa III 28.0 8,459 BD-37 Lapai-Poreu I 38.0 9,685 BD-38 Lapai-Poreu II 21.0 7,897 BJ-06 Lakapera-Wara 34.8 6,447

Irian JayaBE-31 Hamadi 2.9 298 BD-32 Biak-Junction 23.0 4,470 BD-43 Sorong-Seget 33.0 6,196 BK-07 Nabire-Kimbay 21.8 10,944 BK-08 Serui-Menawi 20.3 8,765

Total Cost 513.5 130,878

Lasbutag is a natural asphalt from a quarry in Buton Island.Source: Report of Core Team Consultant.

LIST OF ROAD SECTIONS THAT USED LASBUTAG

Contract Amount(Rp million)

Length(km)

APPRAISED AND ACTUAL PROJECT COST (in US$ '000)

Appraised

Government Government Local Foreign Subtotal Local

Exchange ADB CostA. Road & Bridge Works

1. Civil Works 123,000 0 123,000 150,300 273,300 51,855 0 51,855 87,575 139,430 2. Supervision of Civil Works

a. Core Team 2,300 0 2,300 200 2,500 1,620 604 2,224 247 2,471b. Field Teams 0 17,530 17,530 1,770 19,300 0 6,597 6,597 733 7,330

Subtotal (A) 125,300 17,530 142,830 152,270 295,100 53,475 7,201 60,676 88,555 149,231

B. Vehicle Inspection and Testing1. Civil Works and Equipment 1,900 910 2,810 390 3,200 1,486 46 1,532 170 1,7022. Advisory Services and Training 600 260 860 140 1,000 168 104 272 30 302

Subtotal (B) 2,500 1,170 3,670 530 4,200 1,654 150 1,804 200 2,004

C. Institutional Strengthening1. East Indonesia Road Study 600 710 1,310 90 1,400 486 216 702 78 7802. Training 1,200 0 1,200 0 1,200 334 0 334 34 368

Subtotal (C) 1,800 710 2,510 90 2,600 820 216 1,036 112 1,148

D. Interest During Construction 30,990 0 30,990 0 30,990 16,250 0 16,250 0 16,250

Total 160,590 19,410 180,000 152,890 332,890 72,199 7,567 79,766 88,868 168,634

Percentage 48% 6% 54% 46% 100% 43% 4% 47% 53% 100%

Source: Indonesia Resident Mission's Records.

24 Appendix 5

ADB Cost

ActualADBLocalCostItem Total

ADBForeign

ExchangeLocalCost

SubtotalTotal

Revised ActualDescription Allocation 1 Disbursement

Civil Works - Part A 123,000 72,644 61,000 57,519 51,855 9,145

Consulting Services - Part A 19,900 17,190 10,700 10,309 8,821 1,879

Civil Works and Equipment - Part B 2,800 2,810 1,891 1,881 1,532 359

Consulting Services - Part B 800 860 500 508 272 228

Consulting Services - Part C 1,300 900 733 723 702 31

Training - Part C 1,200 1,200 1,050 1,015 334 716

Interest During Construction 31,000 20,990 16,250 − 16,250 −

TOTAL 180,000 126.600 116,594 92,124 70,940 79,766 12,358

Notes: Revised allocation 1 is net of first partial cancellation of $53.4 million due to "spring cleaning" in July 1998. Revised allocation 2 is net of second partial cancellation of $10.0 million in September 1999 due to the shortfall of counterpart budget, while the revised allocation 3 is net third partial cancellation of $24.5 in December 2000 because of cancellation of the third phase of implementation.

Source: Indonesia Resident Mission's Records

Undisbursed Balance

(as of 31 December 2001, $'000)

Appendix 6 25

ACTUAL CONTRACT AMOUNTS AND DISBURSEMENT STATUS

OriginalAllocation

RevisedAllocation 2

RevisedAllocation 3 Contracts

1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7 8 9 # # # 1 2 3 4 5 6 7

A. Road and Bridge Works

1. Civil Works a. Road Betterment

b. Periodic Maintenance

c. Road Upgrading and Improvement

d. Bridge Replacement

2. Consulting Services for Supervision

B. Vehicle Inspection and Testing1. New Test Centers

2. Equipment

3. Consulting Services

C. Institutional Strengthening1. Consulting Services

2. Postgraduate Training

Items

PROJECT IMPLEMENTATION SCHEDULE

1996 1997 1998 1999

1995

Actual

2000 2001

Planned

26 Appendix 7

Appendix 8 27

Part B

Line of Command Line of Coordination

DBM=Provincial Highway OfficeKakanwil PU = Provincial Public Works OfficeRBO=Roads Betterment Office

PROJECT ORGANIZATION STRUCTURE

Part A and C

Ministry of

Public Works

GovernorsDirectorate General

of Highways

Directorate General of

Land Communications

Directorof

Implementation

Directorof

Planning

KakanwilPU

DBMs

Project Manager forConsulting Service

RBO

Project Managers(Civil Works)

Core TeamTeam I

Based in Jakarta

Core TeamTeam II,III,IV

Field SupervisionTeams

Contractors

Ministry ofCommunications

COMPLIANCE WITH LOAN COVENANTS

Reference in Status of Loan Covenants Loan Agreement Compliance

1. The Project shall be carried out with due diligence and efficiency and in conformity with sound administrative, financial, environmental, and road and bridge engineering practices.

Section 4.01.(a) Partly complied with. The Directorate General of Highways (DGH) did not carry out a regular monitoring program to ensure that environmental measures were carried out.

2. The Borrower shall make available, promptly

as needed, the funds, facilities, services, land, and other resources which are required, in addition to the proceeds of the loan.

Section 4.02. Partly complied with. Counterpart funds for fiscal year 1998/99 were insufficient.

3. Competent and qualified consultants and

contractors, acceptable to the Borrower and the Asian Development Bank (ADB), shall be employed to an extent and upon terms and conditions satisfactory to the Borrower and ADB.

Section 4.03.(a) Partly complied with. Several contractors were found to be incompetent.

4. The Project shall be carried out in accordance

with plans, design standards, specifications, work schedules, and construction method acceptable to the Borrower and ADB.

Section 4.03.(b) Complied with.

5. The activities of the Government’s departments

and agencies shall be conducted and coordinated in accordance with sound administrative policies and procedures.

Section 4.04. Complied with.

6. The Borrower shall maintain, or cause to be

maintained, records and accounts adequate to identify the goods, services, and other items of expenditure financed out of the proceeds of the loan.

Section 4.06.(a) Complied with.

7. The Borrower shall furnish to ADB, as soon as

available but in any event not later than nine (9) months after the end of each related fiscal year, certified copies of the audited accounts and financial statements and the report of the auditors relating thereto, all in the English language.

Section 4.06.(b) Complied with late. Auditor’s reports and audited accounts and financial statements for 1995/96, 1996/97, 1997/98, and 1998/99 under Part A were received in January 1997, December 1997, May 1999, and January 2000, respectively. Those under Part B for 1996/97 1997/98, 1998/99, and 1999/2000 were received in April 2000. The Auditor’s reports for FY2000 for Part A and B were received in November 2001.

28 Appendix 9


8. The Borrower shall furnish, or cause to be

furnished, to ADB all such reports and information, concerning (i) the loan and expenditure of the proceeds; (ii) the goods, services, and other items of expenditures financed by the loan; (iii) the Project and each subproject; (iv) the administration, operations, and financial conditions of DGH and the Directorate General of Land Communications (DGLC); financial and economic conditions in the territory of the Borrower, and (v) any other matters relating to the purposes of the loan. The Borrower shall furnish to ADB monthly reports on the carrying out of the Project and on the operation and management of the project facilities.

Section 4.07 (a) Section 4.07.(b)

Complied with. Partly complied with. The monthly reports and quarterly reports submitted were not prepared by the executing agency, but by the consultants.

9. The Borrower shall ensure that the project

facilities are operated, maintained, and repaired in accordance with sound administrative, financial, engineering, environmental and road maintenance and operational practices.

Section 4.09. Partly complied with.

10. DGH shall be the project executing agency for

Parts A and C of the Project and shall carry out such responsibilities in accordance with implementation arrangements to be agreed upon between the Borrower and ADB.

Schedule 5, para 1. Complied with.

11. The Directorate of Planning of DGH shall have

overall responsibility for coordination of project activities under Parts A and C of the Project and shall carry out the necessary correspondences with ADB in regards to the project implementation.


12. Prior to the signing of any road works or bridge

replacement contract, DGH shall appoint an experienced engineer as Project Manager to be in charge of such contract.


13. DGLC shall be the project executing agency for

Part B of the Project, and shall have overall responsibility for implementation of such Part, including the recruitment and supervision of consultants engaged under Part B(3) of the Project.

Schedule 5, para 4.(a)

Complied with.

Appendix 9 29


14.

The Subdirectorate of Road Transport Technical Standards of DGLC shall have the responsibility for implementation of Part B(1) and (2) of the Project and shall appoint a Project Manager for such purposes.

Schedule 5, para 4.(b)

Complied with.

15. Each subproject to be included in the Project

shall be approved by ADB. The subproject shall be reviewed, prior to submission for ADB’s approval, by a DGH review team that shall verify and update the information on prominent terrain features, local drainage systems, soil types, pavement condition, and traffic patterns.

Schedule 5, para 5.(a)

Partially complied with. The information, except for traffic volume, was not updated and not properly verified in the field. This caused big discrepancies between the actual field condition and the design, causing large cost increases in contracts.

16. In order to obtain ADB approval of a

subproject, DGH shall furnish ADB the following documentation and information, prepared in accordance with sound financial, engineering, environmental and road maintenance practices: (i) scope of the subproject indicating the road

link or bridge location, length, present condition, and improvements proposed;

(ii) details of compliance of the subproject with the selection criteria

(iii) cost estimates; (iv) details of proposed contract packages for

procurement of civil works; and (v) proposed implementation schedule.

Schedule 5, para 5.(b)

Complied with.

17. No subproject shall receive financing from any

other multilateral or bilateral financing institution or agency or shall have been previously submitted for approval to any such institution or agency; provided, however, that the Borrower shall make available and DGH shall use steel trusses and girders provided under other external assistance for bridge replacement subprojects if the bridge super structure exceeds 40 meters in length.

Schedule 5, para 5.(c)

Complied with.

18. For road upgrading subprojects DGH shall

furnish as soon as feasible to ADB for review and approval feasibility studies including Initial Environmental Examinations (IEEs) and, if required by ADB, Environmental Impact assessments (EIAs), together with recommendations arising therefrom.

Schedule 5, para 5.(d)

Complied with.

30 Appendix 9


19.

The subprojects for the betterment and periodic maintenance of the project roads shall have been identified and evaluated under the Integrated Road Management System (IRMS) and been subject to a field review, and have an economic internal rate of return (EIRR) of at least 15%.

Schedule 5, para 6.

Complied with.

20. The subprojects for road upgrading and

improvement shall have been evaluated through appropriate feasibility analysis and field review, and shall have an EIRR of at least 12%

Schedule 5, para. 7 Complied with.

21. The subprojects for bridge replacement shall

have been screened and evaluated under Bridge Management System (BMS) and been subject to field review, and shall have an EIRR of at least 15%.

Schedule 5, para. 8 Complied with.

22. All subprojects shall have been designed in

accordance with the DGH design standards. Schedule 5, para. 9(a)

Complied with. However, the requirement to use cold-mix natural Buton asphalt for pavement, proved to be uneconomic and technically not very good.

23. Detailed engineering design review shall be

carried out after the contractors for civil works have been recruited and the consultants have been fielded and before such civil works commenced.

Schedule 5, para. 9(b)

Complied with. The design review process took an unusually long time to be approved by DGH (3 to 4 months). This caused delay in implementation in many subprojects. Many design reviews resulted in huge cost increases.

24. In the design of subprojects, the Borrower shall

comply with its environmental laws and regulations, including DGH’s environmental guidelines and procedures, with respect to the preparation of IEEs and EIAs, and shall also adhere to ADB’s Environmental Guidelines for Infrastructure Projects (Roads and Highways) and Guidelines for Incorporation of Social Dimension in Bank Operations.

Schedule 5, para. 10

Partly complied with. IEEs and EIAs were prepared only to subprojects that seem to have potential environmental hazards. Some recommendations made in the IEEs were not followed up due to budgetary constraints

25. During construction, DGH shall institute a

regular field monitoring program to ensure that proposed environmental mitigation measures are implemented as planned.

Schedule 5, para. 11

Partially complied with. DGH field monitoring did not always take note of the environmental aspects.

31 Appendix 9


26.

For selected road links, field information such as road condition surveys, traffic volume, etc., shall be collected prior to construction, and 1 year and 4 years after completion of construction. The survey shall cover a sample of about 10% of the road links in number and shall include roads in each of the project provinces.

Schedule 5, para 12

Partially complied with. Information prior to construction was collected. For completed subprojects, such information has not been collected regularly.

27. DGH shall be responsible for the administration

of the training program. DGH shall prepare the selection criteria, conduct selection, consult with ADB, and make arrangements for carrying out the training programs. All of training abroad shall be carried out in a member country or countries of ADB acceptable to ADB. The Borrower shall require persons who receive such training to serve the Borrower for a period of time thereafter adequate to sustain institutional development of the Borrower. DGH shall consult with ADB with respect to candidates for such training, prior to award of overseas training.

Schedule 5 para 13 (a) and (b) Schedule 5 para 13 (c) and (d)

Complied with. Complied with. All steps taken by the Borrower have been approved by ADB prior to award of overseas training. All training participants are now supporting Directorate General of Regional Infrastructure (DGRI) as technical as well as managerial staff.

28. Ministry of Communications (MOC) shall

ensure that land acquisition, detailed engineering, selection of consultants, and recruitment of contractors for erection of vehicle inspection and testing stations are completed in accordance with the schedule.

Schedule 5 para 15 Complied with.

29. DGH shall ensure that recruitment of

consultants for the study on future road network development in the project provinces shall be undertaken in accordance with the agreed terms of reference.

Schedule 5 para 16 Complied with.

30. The Borrower shall (i) keep ADB informed of

progress in the implementation of the Borrower’s Statement of Policies on Road Infrastructure and Road Traffic and Transport (PSAP2); and (ii) provide ADB annually copies of the status reports on such progress.

Schedule 5 para 17 Partially complied with. ADB was not regularly informed on the progress of PSAP2. Partial information was provided for DGH component only in Bahasa Indonesia.

31. The Borrower shall also consult with ADB on

further road sector policy measures beyond the present time frame of the PSAP2.

Schedule 5 para 18 Complied with. ADB was consulted with on policy aspects during programming mission

32 Appendix 9

Recruitment

Agency Local Total Int'l Local Total Int'l Local Total Int'l Local TotalCurrency Cost Currency Cost

A. Supervision of Road & Bridge Works DGH 140 4,200 4,340 2,300 17,530 19,830 141 4,080 4,221 1,620 8,181 9,801

1. Core Team 141 178 319 1,620 851 2,471 2. Field Team Group - 3,902 3,902 - 7,330 7,330

B. Advisory Services for DGLC 21 21 42 570 290 860 21 21 42 168 134 302 Vehicle Inspection and testing

C. Study on The Road Networks in DGH 26 44 70 650 660 1,310 27 49 76 216 780 996 Eastern Indonesia

Total 187 4,265 4,452 3,520 18,480 22,000 189 4,150 4,339 2,004 9,095 11,099

DGH = Directorate Geneal of HighwaysDGLC = Directorate General of Land CommunicationsSource: Indonesia Resident Mission's Records

SUMMARY OF CONSULTING SERVICES

Items

Person-Months Cost (in $'000)RRP Actual

Person-Months Cost (in $'000)

Appendix 10 33

Int'l

International Local International DirectCompetitive Bidding Competitive Bidding Shopping Purchase Others Total

Part A: Roads and Bridges Construction01 Civil Works 10 129 − − − 13902 Supervision Consultants 1 7 − − − 8

Part B: Vehicles Inspection and Test −03 Equipment and Civil Works 2 − − − − 204 Consulting Services 1 − − − − 1

Part C: Institutional Support05 Consulting Services 1 − − − 106 Training 4 − − − 4

Total 19 136 − − − 155

Source: Indonesia Residence Mission's Records

Number of Contracts and Mode of Procurement

Items

34 Appendix 11

ECONOMIC INTERNAL RATE OF RETURN (EIRR) REEVALUATION OF ROADS COMPONENT (PART A)

A. General Assumption and Methodology 1. The reevaluation of selected road sections was undertaken based on the Government’s project completion report (PCR) data and supplemented by field visits and interviews with Dinas Kimpraswil in the visited provinces and consultants. 2. The Report and Recommendation of the President (RRP) does not specify the methodology used during the appraisal. However, the Report Recommendation of the President (RRP) targeted EIRRs of 15% for road betterment and 12% for road upgrading. At the time of subproject preparation, DGH validated traffic data at selected links through short observation at the project location. From the obtained data, a traffic projection was then developed for each road link. Other data validated was International Roughness Index (IRI). This data indicates the rate of driving comfort. The higher IRI the lower the driving comfort. Based on the resume, Directorate General of Highways (DGH) then targeted EIRRs for the respective road sections and used RRP targets as reference. The general assumptions and methodology used for the reevaluation were the same as used in the EIRR estimation during the project preparation.

3. The basic data used in reevaluatiing EIRRs comprise annual average daily traffic (AADT), vehicle types, vehicle speeds, IRI, and road maintenance costs. Benefits estimated as a result of vehicle operating cost (VOC) savings and savings from expenditure for road maintenance are expressed as EIRRs. Passenger Travel Time Savings (PTTS) and other indirect benefits, such as benefits gained from macroeconomic development as result of the improved roads were not taken into account, since no reliable data were available. 4. For the purpose of traffic counts, DGH classified vehicles into the following eight vehicle types: motorcycles, cars, utility vehicles 1, utility vehicle 2, bus, two-axle trucks, three-axle trucks, and non-motorized vehicles. Each vehicle type directly affects vehicle speeds and traffic volumes, while primary benefit attributable to the road maintenance was the decrease in VOC led to the improvement of road roughness that is measured in term of IRI. Therefore, the most essential components in VOC savings are IRI, along with vehicle speed. 5. Net benefits are obtained by accumulating savings from maintenance expenditures and VOC from “with” and “without Project” for a period of 10 years from the start of road maintenance or betterment. The formula used for computing benefits is presented below:

VOC Benefits = (IRI2–IRI1) X L X AADT X (VOC2–VOC1) where: IRI1 = IRI without Project IRI2 = IRI with Project at reviewed period L = Road Length AADT = Annual Average Daily Traffic at reviewed period VOC1 = Vehicle Operating Cost without Project VOC2 = Vehicle Operating Cost with Project at reviewed period

Appendix 12 35

B. Observations 6. Most traffic data provided by Directorate General of Regional Infrastructure (DGRI) office were from 1999/2000 data with only a few data of traffic volume from 2001; there were no IRI data available at DGRI after 1999. Reevaluation of the economic analysis was therefore based on the latest data provided by DGRI as well as by the province. Most of the road conditions visited during the PCR were generally in good order with a roughness index lower than 4, indicating that driving comfort was still relatively high at a vehicle speed beyond 50 km per hour. However, there were about 16 road sections in poor condition as a result of (i) surface layer deterioration caused by continued floods in the area,1 (ii) land creeping;2 and (ii) subgrade resettlements in some spots.3 These 16 road sections need immediate improvement.

7. Economic analysis reevaluation was not carried out for subprojects in East Timor since this is no longer within Indonesian territory (since 1998), and no data are available from DGRI. Two road betterment schemes (BD15: Aitoto–Besame; and BD 42: Mailala–Batugede) in the amount of Rp4.5 billion; and two road periodic maintenance schemes (BE32: Maubara–Atabe; and BJ3: Same–Setara) in the amount of Rp5.2 billion have been completed in this area. However, the current state of these road sections, since the unrest that occurred in former East Timor, is unknown. 8. The result of the economic reevaluation was that, out of 60 road sections evaluated, 39 road sections had EIRRs of less than 15%, 13 road sections had EIRRs from 15% to 30%, and only 8 sections had EIRRs above 30%. Table A12.1 shows the summary of the 60 road sections evaluated, and the breakdown evaluation of the EIRR is in Table A.12.2.

1 Road section in Pulang Pisau km 35, Central Kalimantan. 2 Most of the road links in East Nusa Tenggara. 3 Parts of the road links of Lepo 2–Ambosia in South-East Sulawesi.

36 Appendix 12

Table A12.1: Summary of EIRR Analysis in 60 Road Sections Road SectionsProvince Evaluated < 15 % 15%-30% >30%West Nusa Tenggara 4 3 0 1East Nusa Tenggara 4 4 0 0East Timor 0 − − −West Kalimantan 1 − − 1Central Kalimantan 2 1 1 −East Kalimantan 9 8 1 −South Kalimantan 2 − 1 1Central Sulawesi 11 8 1 2South Sulawesi 7 1 3 3South East Sulawesi 10 9 1 −North Sulawesi 1 1 − −Maluku 4 2 2 −Irian Jaya 5 2 3 −Total 60 39 13 8

EIRR

Appendix 12 37

Cost EIRR Total AADT IRI EIRR AvrgLink Name 1996 1997 1998 1999 2000 1999-2000 1999-2000 % %West Nusa Tenggara (NTB)Lembar-Sekotong-Pelangan 6,474 3,237 3,237 344 4.4 6.7Lenangguar-Lunyuk 20,516 6,839 6,839 6,839 184 4.6 -15Dampu-Hu'u 2,352 1,176 1,176 1644 5.2 51Lembar-Sekotong-Pelangan 1,590 1,590 344 4.4 9 12.9

East Nusa Tenggara (NTT)Bts. Sumba Timur-Waikabubak 9,752 3,251 3,251 3,251 730 4.9 11Baa - Batutua 3,739 935 935 935 935 952 5.3 5Km. 35 - Bts. Sumba 3,938 1,969 1,969 510 5.3 12Waikabubak-Waitabula 3,898 1,949 1,949 750 5 14 10.5

East Timora

Aituto - Same 2,807 − −Maliana - Batugade 1,663 − −

West KalimantanSanggau - Sekadau 4,251 2,125 2,125 7144 2.9 42Sanggau - Sekadau 8,453 2,818 2,818 2,818 7144 2.9 32Pontianak - Tayan Ib 5,600 2,800 2,800 Pontianak - Tayan II 12,350 6,175 6,175 24.7

Central Kalimantan

Km.50 - Purukcahu 2,550 1,275 1,275 1217 4.1 34Km. 50 - Purukcahu 9,990 4,995 4,995 1217 4.1 17Sampit ( km. 49 - km. 65 ) 4,960 2,480 2,480 2443 5.3 31P. Raya - Km. 35 - Pulang Pisau 6,574 3,287 3,287 2120 5.4 27P. Raya - Km. 35 - Pulang Pisau 4,567 2,284 2,284 2120 5.4 35 28.8

a.Traffic data of East Timor was not available, since this area is no longer part of Indonesia since 1998b. Third phase not completed yet; AADT=Annual Average Daily Traffic; IRI=International Roughness Index. c. AADT and IRI of 2000/2001 is being updated by DGRI

Table A12.2: Breakdown Evaluation of Economic Internal Rate of Return (EIRR)

Year(Rp. Million)

Cost EIRR Total AADT IRI EIRR AvrgLink Name 1996 1997 1998 1999 2000 1999-2000 1999-2000 % %East Kalimantan

Kadaman - Kuaro 3,220 1,610 1,610 886 3.3 11Kuaro - Batuaji 2,813 703 703 703 703 583 4.3 -4Kuaro - Batuaji 10,424 10,424 583 4.3 -8Bontang-Sangata 17,187 5,729 5,729 5,729 208 3.2 7Bontang-Sangata 5,586 1,862 1,862 1,862 208 3.2 8Kota Bangun-Damai-Bts. Kalsel 1,101 550 550 248 7.4 22Kota Bangun-Damai-Bts. Kalsel 7,198 3,599 3,599 248 7.4 8Kota Bangun-Damai-Bts. Kalsel 4,858 2,429 2,429 248 7.4 13Kota Bangun-Damai-Bts. Kalsel 6,479 3,240 3,240 248 7.4 3 6.7

South Kalimantan

Lampihong-Mantimin 1,488 744 744 2170 4.2 34Kintab - Sebamban 13,307 4,436 4,436 4,436 1960 3.3 29 31.5

North SulawesiTahuna - Tomako 4,092 2,046 2,046 540 3.6 13 13.0

Central SulawesiSiboang-Ogoamas 10,894 3,631 3,631 3,631 298 3.1 6Taweli - Toboli 4,014 1,338 1,338 1,338 2064 2.8 22Taweli - Kebun Kopi 11,778 5,889 5,889 2064 2.8 5Kebun Kopi - Toboli 12,142 6,071 6,071 2064 2.8 4.5Kasiguncu - Sanginora 2,887 1,443 1,443 600 5.8 14Tolitoli - Sp. Santigi 1,632 816 816 1741 3.1 32Tolitoli - Sp. Santigi 12,997 6,499 6,499 1741 3.1 11Taman Ria - Donggala 1,203 602 602 3395 3.1 34Taman Ria - Donggala 8,331 4,166 4,166 3395 3.1 13Tambu - Sabang 4,112 2,056 2,056 630 3.3 20Tambu - Kasimbar 2,193 1,096 1,096 242 6.7 10 15.6AADT=Annual Average Daily Traffic; EIRR=Economic Internal Rate of Return; IRI=International Roughness Index

Year(Rp. Million)

Cost EIRR Total AADT IRI EIRR AvrgLink Name 1996 1997 1998 1999 2000 1999-2000 1999-2000 % %South SulawesiKm. 60 - Bts. Cabdin Sinjai 6,357 3,178 3,178 714 3.7 29Solondro - Pampanus 4,400 2,200 2,200 1790 5.9 33Polewali - Tabone 2,203 1,101 1,101 − −Solondro - Pampanus 2,658 1,329 1,329 714 3.7 28Sungguminasa - Km. 60 1,552 776 776 1453 2.8 39Sungguminasa - Km. 60 2,069 1,035 1,035 1453 31Mamuju - Kaluku 2,137 1,068 1,068 362 3.8 11Watampone - Pompanua 13,408 6,704 6,704 1671 2.6 21 27.4

South East SulawesiBoepinang-Kasipute 16,711 8,355 8,355 624 6.8 9Wolo - Lasusua 8,638 4,319 4,319 321 3.7 7.4Lasusua - Lapai 2,537 1,268 1,268 204 9.1 14Lasusua - Lapai 9,604 4,802 4,802 204 9.1 8.7Porehu - Bts. Sulsel 7,898 2,633 2,633 2,633 321 3.9 8Wolo - Lasusua II 8,986 4,493 4,493 321 3.9 7.6Wolo - Lasusua III 8,460 2,820 2,820 2,820 321 3.9 7.9S. Lapai - Porehu I 9,683 3,228 3,228 3,228 370 3.5 15Lapai - Porehu II 5,239 1,746 1,746 1,746 281 3.5 10.6Rate-Rate - Kolaka 13,818 6,909 6,909 556 3.4 11.9 10.0

MalukuSidangoli - Boso - Dodinga 4,633 2,316 2,316 942 5.3 6Durian Patah -Hitu 1,715 857 857 1127 5 15Dodinga - Ekor 1,527 764 764 121 8.3 24Ekor - Subaim 1,967 984 984 60 3.7 12 14.3

PapuaBiak - Junction - Korem 4,448 2,224 2,224 588 2.4 22Wamena - Tengan 3,514 1,757 1,757 1087 5.8 34Sorong - Seget 6,197 3,098 3,098 2348 8 43Nabire - Kinibay 10,944 5,472 5,472 5778 7.4 11Serui - Menawi 8,766 4,383 4,383 1628 5.4 13 24.6

AADT=Annual Average Daily Traffic; EIRR=Economic Internal Rate of Return; IRI=International Roughness Index

Year(Rp. Million)

Link No. Link Name Length Pavement Width Locations Current Conditions(km) (m)

East Nusa Tenggara ProvinceBE7 Kefamanu - Maubesi 16.5 4.5 West Timor PoorBD12 Batas Sumba Timur - Waikabukak 60.4 4.5 Sumba PoorBD13 Baa-Batutua 28.1 4.5 Sabu Island PoorBE6 Ruteng - Malwatar 36.0 4.5 Flores PoorBJ2 Labuhan Bajo-Malwatar 65.0 4.5 Flores Poor

East KalimantanBF53 Bontang - Sangata 41.2 4.5 Bontang Very Poor

Central KalimantanBF4 KM35 - Pulang Pisau 27.4 4.5 Boundary of Very Poor

Central - SouthKalimantan

West KalimantanBD2 Sei-Duri Singkawang 30.0 4.5 Sei Duri Very Poor

The contract was terminatedBF17 Pontianak - Tayan 20.0 4.5 Tayan The road has not connected

the two cities yet.

North SulawesiBE36 Maelang - Biontang 49.4 4.5 Maelang Subgrade Settlements

South East SulawesiBE24 Lepo -Lepo - Ambesia 42.4 4.5 Kendari Subgrade SettlementsBD-37 Lapai-Poreu I 38.0 4.5 Lapai PoorBJ-06 Lapai-Poreu II 21.0 4.5 Poreu Poor

South SulawesiBD - 25 Mamuju - Kaluku 13.5 4.5 Mamuju Poor

Irian JayaBK-08 Serui - Menawi 20.3 4.5 Serui PoorBE-31 Hamadi 23.0 4.5 Biak Poor

Appendix 13 41List of Roads with Construction Quality Problems

Appendix 14 42

PROJECT PERFORMANCE RATING ASSESSMENT (Rating values: 0 = low; 3 = maximum)

Criterion Weight

(%) Remarks on Assessment Rating

Description Rating Value

A. Project Outcome Assessment

1. Relevance 20 The implementation of Project was in line with the original scope. The Project is also in line with the focal points of the Asian Development Bank’s recently developed country strategy.

Relevant/ Good

2.0

2. Efficacy 25 The physical target was generally met. Based on the rudimentary available data, the recalculated EIRRs are generally lower than original forecasts due to slower growth. Under Part B, achievement of objectives was only partly met.

Moderate 1.5

3. Efficiency 20 The start of the Project was delayed due to inadequate preparation. Some packages of civil works were retendered due to high local cost escalations and shortage of counterpart funds in 1997/98. The loan was extended twice. Nearly 55% of the loan amount was not used. The overseas Masters degree programs achieved their objectives with costs lower than estimated at appraisal.

Partly efficient

1.5

B. Sustainability 20 The sustainability of the Project (part A) will largely depend on government ability to provide necessary maintenance funds (currently budgeted around Rp10 million/ km/year is still below the O&M cost standard). However, DGRI committed to increase the O&M cost for the constructed facilities under the Project gradually. The training facilities provided by the Project appear to be sustainable. Sustainability of the vehicle inspection programs in West Nusa Tenggara will partly depend on the Government’s review to the current traffic regulations (PP–44).

Likely 2.0

C. Institutional Development

20 The overseas Master degree programs were successfully implemented. However the impact of the study on the road network of eastern islands is marginal.

Marginal 1.0

Overall Rating Successful 1.7

Documents

ASIAN DEVELOPMENT BANK · asian development bank pcr: ino 28063 project completion report on the eastern islands roads (sector) project ... bms – bridge management system