Document of The World Bank Report No: 71699 - IN RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PUNJAB STATE ROAD SECTOR PROJECT LOAN 4843 – IN (BOARD APPROVAL - DECEMBER 5, 2006) TO THE REPUBLIC OF INDIA August 30, 2012 Sustainable Development Department India Country Management Unit South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Document of
The World Bank
Report No: 71699 - IN
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING
OF
PUNJAB STATE ROAD SECTOR PROJECT
LOAN 4843 – IN
(BOARD APPROVAL - DECEMBER 5, 2006)
TO THE
REPUBLIC OF INDIA
August 30, 2012
Sustainable Development Department
India Country Management Unit
South Asia Regional Office
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without
World Bank authorization
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CURRENCY EQUIVALENTS
(Exchange Rate Effective - August 23, 2012)
Currency Unit = Indian Rupees
US$ 1.0 = 55.48
Crore = 10 million
ABBREVIATIONS AND ACRONYMS
AC Asphalt Concrete
BoQ Bill of Quantities
CoI Corridor of Impact
DBMOT Design, Build, Maintain, Operate and Transfer
DEA Department of Economic Affairs
DOF Department of Finance
ERR Economic Rate of Return
FIRs First Information Reports
FMRs Financial Monitoring Reports
FWP Forward Works Program
GOI Government of India
GOP Government of Punjab
HDM Highway Design Manual
HLMC High Level Monitoring Committee
IBRD International Bank of Reconstruction and Development
IDA International Development Association
IRI International Roughness Indicator
KPM Key Performance Measures
MDR Major District Roads
MTR Mid-Term Review
NPV Net Present Value
ODR Other District Roads
OPRC Operating and Performance Based Road Contracts
PDO Project Development Objectives
PRBDB Punjab Roads and Bridges Development Board
PPP Public-Private Partnerships
PWD Public Works Department
RAP Resettlement Action Plan
RoW Right of Way
RMF Road Maintenance Fund
RP Restructuring Paper
SH State Highways
VOC Vehicle Operating Costs
Regional Vice President: Isabel M. Guerrero
Country Director: N. Roberto Zagha/Onno Ruhl
Acting Sector Manager / Director: Simon David Ellis/John H. Stein
Task Team Leader: Ben L.J. Eijbergen/Rajesh Rohatgi
INDIA: PUNJAB STATE ROAD SECTOR PROJECT
RESTRUCTURING PAPER
P090585
TABLE OF CONTENTS
Page
A. SUMMARY ........................................................................................................................... 3
B. PROJECT STATUS .............................................................................................................. 4
C. PROPOSED CHANGES ...................................................................................................... 5
D. APPRAISAL SUMMARY ................................................................................................. 10
v. Vegetation control, rubbish and litter removal (except those sections where
already some department / agency has the responsibility to do so, mostly in built
up sections under the jurisdiction of local bodies (such as Municipal Corporation,
Municipal Council, Nagar Panchayat, Gram Panchayat etc.),accident damage
reporting and emergency works as required.
vi. Providing appropriate resources to respond to all unplanned incidents which can
cause obstruction to the normal flow of traffic on the road (e.g. Road accident,
flooding, oil spillages, etc.).
vii. Structural repairs to bridges and large culverts required to maintain or re-store
overall structural integrity of its major components are excluded from scope.
The scope of Services under OPRC includes:
i. Maintaining the Contract Area.
ii. Delivering the Contractor’s obligations under the Contract.
iii. Proactive compliance of conformance measurement and performance systems,
and achieving the Performance requirements.
iv. Contractor‘s self-monitoring and reporting the contract conformance requirements
and performance.
v. Assisting the Employer and Project Manager with the development and
implementation of a Ten Year Forward Works Program (10 year FWP), and
associated maintenance management strategy for the contract‘s roads.
Environment
45. The restructuring of the project has no incremental or additional adverse
environmental impacts. The use of Output and Performance Based Road Contracting
system (OPRC) requires the Contracting Entity to undertake screening, conduct impact
assessment, formulate the environmental management plan and subsequently undertake
its implementation. The preparation of an Environmental Management Plan (EMP) has to
be adequate and commensurate to the scale of civil works proposed during various stages
of the contract. On the other hand, the Employer (PRBDB) through a monitoring
consultant would enforce the contract by verifying compliance with the agreed service
levels, including the conformity to all applicable environmental legislation and
regulations.
14
46. To ensure a sustained environmental performance for OPRC contracts, an
Environment and Social Management Framework (ESMF), including a set of codes of
practice has been prepared and integrated into the bidding document. These define a
minimum level of environmental process, mitigation and performance standards that the
contracting entity requires to meet under the project.
Social Safeguards
47. No additional safeguard policy is expected to be triggered due to the proposed
restructuring and there are no changes in the implementation arrangements. It is
anticipated that the majority of the required interventions under the OPRC will not
require land acquisition. However, land acquisition may be required where there is a need
for geometric improvement. The policy may be invoked when any road is required to be
cleared of any encumbrance including private land acquisition before being considered
for up-gradation, rehabilitation and maintenance under the OPRC contract. The
Contractor will prepare a Resettlement Action Plan (RAP), adequate and commensurate
to the scale of resettlement and rehabilitation involved in the project. PRBDB will be
responsible for implementation of RAP to provide the Corridor of Impact (CoI) required
for actual construction, free of all encumbrances to the Contractor. RAP will be
implemented only after approval of the Bank and PRBDB/PWD. In case of new
encroachment or re-encroachment of cleared Right of Way (RoW) that takes place post
contract award, the Employer will pay the compensation and/or resettlement assistance as
per the agreed R&R policy framework of Punjab State Road Sector Project. The
responsibility of monitoring and reporting re-encroachment shall be the responsibility of
the Contractor. The overall supervision and monitoring will be undertaken by
PRBDB/PWD.
48. Affected persons will be consulted and provided opportunities to participate in
planning and implementing resettlement programs during the course of the contract. The
Contractor will display and provide complete information to the local community on (i)
plans and range of proposed activities; (ii) measures adopted to reduce the inconvenience
including traffic management; and (iii) proposed intervention for emergency works at
least three (3) days in advance of the work commencing. The contractor will give
sufficient time to allow individuals to relocate. An external agency will be engaged to
monitor and evaluate implementation of RAP.
49. The proposed by-pass of 2.8 km of 45 meters Right of Way at Dehlon will require
approximately 38 acres of irrigated land (125 plots), two houses and two boring wells to
be acquired for which Resettlement action plan will be prepared in accordance with the
Bank’s Operational Policy on Involuntary Resettlement.
Risk
50. Contractual Mechanisms and agreed Compliance Framework are made available
in the OPRC contract to manage the risk of the client with respect to non-completion of
work and non-compliance by the contractor with the required Road User Service and
15
Comfort and Key Performance Measures2. Even minor breaches in KPM will usually
attract an agreed level of payment reduction and is aligned with the reduction in road user
comfort and/or safety that has resulted.
2 KPMs are measurable asset condition parameters that will be used to define the required service level
targets required to be achieved.
16
Annex 1: Results/ Monitoring Framework
INDIA: PUNJAB STATE ROAD SECTOR PROJECT
RESTRUCTURING PAPER
(a) Results/ Monitoring Framework till Year 5 of the project
Target Values3 Data Collection and Reporting
YR1
(2008)
YR2
(2009)
YR3
(2010)
YR4
(2011)
YR5
(2012)
Project Outcome Indicators Baseline (T)
(T)
(T)
(T) (A) (T)
Frequency and
Reports
Data Collection
Instruments
Responsibility
for Data
Collection
Average Network Speed (kmph) 33.5 NA NA 39 43 45 MTR and end-
of-
implementation
PRBDB Report
Surveys PRBDB
Reduction in VOC (%) 0% NA NA 6% 19%4 20% MTR and end-
of-
implementation
PRBDB Report
Surveys PRBDB
Maintain number of fatal
accidents
2655 2655 2655 2655 2655 26425 2655 Aide memoire,
every six
months
First
Information
Reports (FIRs)
Police/ PRBDB/
Bank
User Satisfaction 61.11%
(Baseline
survey
undertak
en in
2009)
NA NA NA NA 63.33% User satisfaction
Survey Report,
every two year
Survey PWD/ PRBDB
Efficiency of Road Agency
(PWD, PRBDB)
60.27%
(Baseline
survey
undertak
en in
2009)
NA NA NA NA 63.27% User
Satisfaction
Survey Report,
every two year
Survey PWD/ PRBDB
Results Indicators for Each
Component
3Target Values have been compared with initial target values and actual results achieved till date.
4 19 percent reduction in VOC achieved on improved road and 8 percent reduction achieved on entire state road network.
5 The number of fatalities i.e. 2,655 pertains to year 2003, for year 2006 the fatalities were 3,060. For the calendar year 2011 (up to Sept) the fatalities were 2,462.
17
Target Values3 Data Collection and Reporting
YR1
(2008)
YR2
(2009)
YR3
(2010)
YR4
(2011)
YR5
(2012)
Project Outcome Indicators Baseline (T)
(T)
(T)
(T) (A) (T)
Frequency and
Reports
Data Collection
Instruments
Responsibility
for Data
Collection
Component 1: About 1050 km
of roads rehabilitated, resurfaced
and maintained
To be
undertak
en YR1
550 km 640 km
(Phase I
works
complet
e)
Monthly
Construction
Supervision
Reports;
Quarterly
FRMs, Aide
Memoire (every
6 months)
Certification of
Quantities by
the Engineer
Construction
Supervision
Consultant;
PRBDB
Reduction in IRI (m/ km) 6.9 5.3 2.6
m/Km
PRBDB’s
Annual Report,
Yearly
Roughness and
Condition
Surveys
PRBDB
Reduction in network in poor
and bad condition from 52% to
10%
52% 25% 4% PRBDB’s
Annual Report,
yearly
Roughness and
Condition
Surveys
PRBDB
Component 2: Routine and
periodic maintenance fully
funded during the project period;
training program
INR 750
mn
2200 mn -
Once a year
Quarterly
reports by DOF,
Implementation
Support Mission
DOF/ PRBDB/
Bank
About 250 km of roads
maintained through performance
based contracts
0 Annual Aide
Memoire
Implementation
Support Mission
(every six
months)
PWD/ PRBDB/
Bank
Department wide
computerization and use of
integrated systems for planning,
management, financial
accounting, monitoring
Partial Full
Computeriza
tion
Not yet
done
As per
implementation
schedule
- PWD/ PRBBDB
18
(b) Proposed Results/ Monitoring Framework for extended term
Target Values Data Collection and Reporting
Project Outcome Indicators Baseline
YR6
(2013)
YR7
(2014)
YR8
(2015)
YR9
(2016)
YR10
(2017)
Frequency and
Reports
Data Collection
Instruments
Responsibility for
Data Collection
Average Network Speed (kmph) 33.5 46 48 MTR and end-of-
implementation
PRBDB Report
Surveys PRBDB
Maintain VOC (%) 0% 20% 20% MTR and end-of-
implementation
PRBDB Report
Surveys PRBDB
Reduction in number of fatal accidents 2655 2522 2390 Aide memoire, every
six months
First Information
Reports (FIRs)
Police/ PRBDB/
Bank
Increase in User Satisfaction 61.11% 64% 67% User satisfaction
Survey Report, every
two year
Survey PWD/ PRBDB
Improvement in efficiency of Road
Agency (PWD, PRBDB)
60.27% 63% 65% User Satisfaction
Survey Report, every
two year
Survey PWD/ PRBDB
Results Indicators for Each
Component
Component 1: Total km of roads
improved and rehabilitated under the
project w.e.f. YR 6
0 km 27km 82km 136km 161km 166km Monthly
Construction
Supervision Reports;
Quarterly FRMs,
Aide Memoire (every
6 months)
Certification of
Quantities by the
Engineer
Construction
Supervision
Consultant; PRBDB
Maintain IRI (m/ km) 6.9/km 2.6/
km
2.6/km PRBDB’s Annual
Report, Yearly
Roughness and
Condition Surveys
PRBDB
Maintain poor and bad network
condition @ 4%
52% 4% 4% PRBDB’s Annual
Report, yearly
Roughness and
Condition Surveys
PRBDB
Component 2: Department wide
computerization and use of integrated
systems for planning, management,
financial accounting, monitoring
Vendor
on-
board
Pilot
testing
Final Roll-
out to the
entire
department
As per
implementation
schedule
- PWD/ PRBBDB
19
Annex 2: OPRC Contracting System
INDIA: PUNJAB STATE ROAD SECTOR PROJECT
RESTRUCTURING PAPER
1. Basic Concept of Road Asset Management with OPRC. Output- and Performance-based
contracting for Roads is designed to increase the efficiency and effectiveness of road asset
management and maintenance. It should ensure that the physical condition of the roads under contract
is adequate for the needs of road users, over the entire period of the contract which is normally several
years. This type of contract significantly expands the role of the private sector, from the simple
execution of works to the management and conservation of road assets.
2. In traditional road construction and maintenance contracts, the Contractor is responsible for the
execution of works which are normally defined by the Road Administration or the Employer, and the
Contractor is paid on the basis of unit prices for different work items, i.e. a contract based on “inputs”
to the works. The results of traditional road contracts are in many cases less-than-optimal. The problem
is that the Contractor has the wrong incentive, which is to carry out the maximum amount of works, in
order to maximize his turnover and profits. Even if the work is carried out according to plan and
considerable money is spent, the overall service quality for the road user depends on the quality of the
design given to the Contractor who is not accountable for it. In many cases the roads do not last as long
as they should because of deficiencies in the original design, aggravated by inadequate maintenance.
3. The OPRC as a model for road asset management is similar to Design, Build, Maintain,
Operate and Transfer (DBMOT) model of contracts which addresses the issue of inadequate
incentives. During the bidding process, contractors compete among each other by essentially proposing
fixed lump-sum prices for bringing the road to a certain service level and then maintaining it at that
level for a relatively long period. It is important to understand that contractors are not paid directly for
“inputs” or physical works (which they will undoubtedly have to carry out), but for achieving specified
Service Levels, i.e., the Rehabilitation of the road to pre-defined standards, the maintenance service of
ensuring certain Service Levels on the roads under contract, and specific improvements, all represented
in outputs or outcomes, expressed in Service-Levels criteria. A lump-sum periodic remuneration paid
to the Contractor will cover all physical and non-physical services provided by the Contractor, except
for unforeseen emergency works which are remunerated separately. In order to be entitled to these
periodic payments, the Contractor must ensure that the roads under contract comply with the Service
Levels which have been specified in the bidding document. It is possible that during some months he
will have to carry out a rather large amount of physical works in order to comply with the required
Service Levels and very little work during other months. However, his periodic payment remains the
same as long as the required Service Levels are complied with.
4. A fundamental feature of the OPRC is that the “Contractor” must not necessarily be a
traditional works contractor, but can be any type of firm or business venture “Contractor” having the
necessary technical, managerial and financial capacity to fulfill the contract. In any case, the contractor
is responsible for designing and carrying out the works, services and actions he believes are necessary
in order to achieve and maintain the Service Levels stated in the contract. The Service Levels are
defined from a road user‘s perspective and from a “strength of the pavement” point of view and may
include factors such as, riding comfort, safety features, residual strength of pavement, etc. If the
20
Service Level is not achieved in any given month, the payment for that month may be reduced or even
suspended.
5. Under the OPRC, the Contractor has a strong financial incentive to be both efficient and
effective whenever he undertakes work. In order to maximize profits, he must reduce his activities to
the smallest possible volume of well designed interventions, which nevertheless ensure that pre-
defined indicators of Service Level are achieved and maintained over time. This type of contract makes
it necessary for the Contractor to have a good management capacity. Here, “management” means the
capability to define, optimize and carry out on a timely basis the physical interventions which are
needed in the short, medium and long term, in order to guarantee that the roads remain above the
agreed Service Levels. In other words, within the contract limitations and those required to comply
with local legislation, technical and performance specifications and environmental and social
regulations, the Contractor is entitled to independently define (within the limits indicated in the
schedule of payment): (i) what to do, (ii) where to do it, (iii) how to do it, and (iv) when to do it. The
role of the Road Administration and of the Employer is to enforce the contract by verifying compliance
with the agreed Service Levels and with all applicable legislation and regulations. The Contractor will
be responsible for the detailed design of the rehabilitation and other consequent phases included in the
life-span of the project (the Contractor is not entitled to any payment for the design). The Design
Standards and specifications shall be recommended by the Project Manager and meet at least the
minimum specified design standards The bidder can propose higher standards if it serves better his
optimal Programming for the project designed for 10 years period.
6. The project managing triangle is composed of the Employer, Contractor and the Project
Manager from the Monitoring Consultant.
7. Maintaining a road network includes both routine and periodic tasks. Routine Maintenance
consists of many different tasks frequently necessary to maintain the function of the road (such as
pothole repairs, cleaning of drainage, sealing of cracks, cutting of vegetation, etc.). Periodic
Maintenance consists of predictable and more costly measures of a less frequent nature designed to