Lessons

India: Uttarakhand State-Road Investment Program (Project 3 and Multitranche Financing Facility)

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Lessons

Project-specific design and monitoring frameworks (DMFs) are essential to monitoring and evaluating the performance of each project/tranche in a multitranche financing facility (MFF) or investment program.

Some of the performance targets and indicators for projects 1 and 2 seem to be direct extracts of the DMF of the overall investment program. A project-specific DMF should be distinct, specific, and directly attributable to the respective tranche so that the project’s achievement against the project-specific indicators and targets can be suitably evaluated. Based on the experience of projects 1 and 2, a project specific DMF was prepared for project 3. During the processing of project 3, the outcome indicators for the MFF were reviewed and updated in its DMF, based on progress that had been made.

Project Cycle Stage: 
Preparation
Implementation
Completion and Evaluation

Withholding parts of the retention money and performance bank guarantee until the end of the maintenance period promotes better contractor performance during post-construction maintenance.

Based on the poor performance of contractors in post-construction maintenance in projects 1 and 2, modifications in the bidding documents were made to withhold parts of the retention money and performance security until the end of the maintenance period. In addition, a provision was included in the project 3 contract for a separate work order for emergency restoration works. Since these provisions have worked well, this practice should be continued for future projects in Uttarakhand.

Project Cycle Stage: 
Implementation

Incorporation in the qualifications criteria of project-specific experience will improve the evaluation of bidders’ technical capacity.

The experience of the bidder in executing civil works in a topographical location like that of the project was not specifically mentioned in the standard bidding document, thus affecting the evaluation of bidders’ technical capacity. For execution of work in hilly terrain, the requirement of experience in hilly terrain could be incorporated in the bid document. This would also encourage local contractor participation.

Project Cycle Stage: 
Implementation

Civil works contract packaging and contract completion periods need to be formulated carefully, taking into consideration the terrain, available working seasons, accessibility of the sites, and capacity of the contractors.

International competitive bidding procedures were used for 4 larger contracts under project 3, with the expectation of better work efficiency and the participation of bigger and more experienced contractors. However, the performance of the contractor on the 2 largest contracts was poor and resulted in the termination of those contracts. The remaining works under the terminated contracts were subsequently repackaged into smaller contracts and were completed successfully within a short completion period. Therefore, small to medium-sized contract packages are more appropriate for roads in scattered and remote locations in hilly and mountainous terrain. In all 3 tranches, the execution of civil works contracts was substantially delayed, except for a few contracts under project 2. During project 2 implementation, the executing agency (EA) was advised that a construction period of 15-18 months in hilly terrain is not realistic, because of the increased difficulties of road construction and the limited construction season; the construction period should be at least 24-30 months. The construction period in project 3 was increased to 30 months, but only for the large contracts, with the remaining contracts still with15-18 months completion periods. The completion period for civil works contracts and contract packaging should be formulated carefully, taking into consideration the terrain, available working season, site accessibility, and the capacity of contractors.

Project Cycle Stage: 
Implementation

Third party quality monitoring and audit helps ensure better quality of works.

Based on the experience of projects 1 and 2, the project performance auditor was engaged under project 3 to undertake third party quality monitoring and audit. This arrangement was quite effective in ensuring better quality of works and should be adopted wherever quality control systems need to be strengthened.

Project Cycle Stage: 
Preparation
Implementation
Completion and Evaluation

It is good practice to build on existing mechanisms to address transport issues, rather than establish new ones.

New mechanisms established under ADB-financed projects are welcome, however, in some cases, such mechanisms are redundant or duplicate existing systems.  For example, the Road Board set up under project 2 to enhance the operational transparency and governance of the EA, the Public Works Department (PWD) met only twice, and the state government was not particularly enthusiastic about pursuing it because other mechanisms have already been serving similar purposes. In a long-standing practice, the PWD, other government authorities, and community representatives have held consultations every three months at village, block, and district levels. In addition, a state-level meeting of the Transport Authority Committee discusses transport issues between highway authorities and transport operators. These mechanisms have been effective in absorbing the views of road users and transport operators. With these long-standing, frequently used mechanisms in place, there was little need to introduce another one.

Project Cycle Stage: 
Implementation
Background

More than 90% of the terrain of Uttarakhand in the northern part of India is hilly and minimally connected through rail and air links. Roads are therefore a lifeline for the state.  To improve the state’s 16,800-kilometer (km) road network to national standards and maintain them in good condition, the government of Uttarakhand prepared a road development plan (RDP), which it proposed for financing by international development agencies such as the Asian Development Bank (ADB). 

At the government of India’s request, ADB approved a multitranche financing facility (MFF) of $550 million in December 2006 to finance significant parts of the RDP over 10 years.  The main outputs of the MFF investment program were: (i) improvement of 10,800 km of state roads, covering almost two-thirds of the Public Works Department (PWD) road network, and their maintenance for 3 years under performance-based contracts; and (ii) enhancement of PWD’s accountability and capacity to manage road infrastructure.  Project 1 was approved in January 2007 for a loan of $50 million, project 2 in October 2008 for a loan of $140 million, and project 3 in October 2013 for a loan of $150 million.  The processing of further tranches was disrupted by a major natural disaster in Uttarakhand in June 2013.  Both project 3 and the MFF, the focus of this report, closed in December 2017.

At appraisal, project 3 consisted of resurfacing, upgrading, and rehabilitation of 1,036 km of 89 roads; but at completion, only 83 roads, totaling 976.4 km had been improved.  Reduction in the scope of the road works was prompted by a mix of reasons: 4 had to be dropped to keep the cost of 1 contract package from exceeding the amount awarded, which proved inadequate because of the need for major rehabilitation of all the roads originally included in the contract; 1 in another package had to be dropped also to avoid a cost overrun; and still another was not improved because of a delay in forest clearance.

Roads were widened and reinforced, road safety features were installed, and culverts and bridges were strengthened. The civil works contracts further included post-construction maintenance for 3 years, using a performance-based approach. Overall, the performance of post-construction maintenance under project 3 improved, compared with projects 1 and 2.

Training programs of projects 1 and 2 were continued, covering business process outsourcing, planning, design review, performance monitoring, quality assurance, financial management, contract administration, road safety, and management information and project management system. Workshops on bidding for the performance-based contracts (PBCs), quality control for construction and equipment, labor management, and compliance with environmental and social safeguards were also undertaken.

A road database, including the road inventory, condition survey, road user satisfaction survey, identification of black spots, and a prioritized list of roads for improvement were prepared. The Uttarakhand Road Maintenance Policy 2015 and the subsequent assistance provided by the project management consultant far exceed the project 3 intended output of putting in place a management information and project management system-based budgeting, accounting, planning, and asset management procedure.

The completion of project 3 brought the total length of roads improved under the 3 tranches to 2,403.5 km. Exceeding the balance from the 10,800 km of roads originally targeted to be improved under the 7 MFF tranches initially envisaged, the state government improved an additional 9,498 km of roads under various programs. Furthermore, although the major natural disaster in Uttarakhand in June 2013 was a contributing factor for not taking up further tranches, about 1,840 km of state roads were rehabilitated through the resultant Uttarakhand Emergency Assistance Program funded by ADB and another 1,571 km through emergency assistance from the World Bank from 2013 to 2017. Thus, overall, 15,312 km of state roads were improved during the 2007–2017 MFF period. 

Staff training in all 3 tranche projects also far exceeded the MFF targets.  Assistance provided to PWD in policy, planning, organizational restructuring, human resource development, training and capacity building, project preparation and design, modern technology, and many more functional areas catalyzed PWD’s adoption of institutional changes, including the formulation of a road policy solely dedicated to maintenance.  PWD served as the executing agency for all the projects and the entire MFF. The same project management unit took charge of the day-to-day implementation of all 3 projects.

 

Project Information
Project Name: 
Uttarakhand State-Road Investment Program (Project 3 and Multitranche Financing Facility)
Report Date: 
June, 2020
Main Sector: 
Transport
Country: 
India
Project Number: 
38255-043
Report Type: 
PCR
Project/Modality: 
MFF
Themes: 
Inclusive Economic Growth
Governance and Capacity Development
SDG: 
Goal 9: Industry, Innovation, and Infrastructure
Goal 8: Decent Work and Economic Growth
Sub Sector: 
Road transport (non-urban)
Loan Number: 
L3040, MFF0010
Source of Funding: 
OCR
Date Approved: 
L3040: 9 October 2013, MFF: 18 December 2006
Report Rating: 
Successful

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