Document of The World Bank FOR OFFICIAL USE ONLY Report …€¦ · · 2016-07-19The World Bank FOR OFFICIAL USE ONLY Report No ... DPWH has established a Road and Bridge Management

1

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: RES13970

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

NATIONAL ROADS IMPROVEMENT AND MANAGEMENT PROGRAM (APL) PHASE 2

LOAN IBRD-7552-PH

BOARD APPROVAL DATE: MAY 13, 2008

TO THE

REPUBLIC OF THE PHILIPPINES

December 12, 2014

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

2

GTIDR

EAST ASIA AND PACIFIC

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.

3

ABBREVIATIONS AND ACRONYMS

BQS

CPS

Bureau of Quality and Safety

Country Partnership Strategy

DPWH

FM

GOP

IAS

Department of Public Works and Highways

Financial Management

Government of Philippines

Internal Audit Services

ICD

IPE

Irap

ISAP

Institutional Capacity Development

Independent Procurement Evaluator

International Road Assessment Program

Integrity Strengthening Action Plan

LGU Local Government Unit

LTPBM Long-Term Performance-Based Maintenance

NRIMP2 National Roads Improvement and Management Program Phase 2

NRS

OCCP

National Road System

Organizational Culture Change Program

PDO Project Development Objective

PMO Project Management Office

PMS Pavement Management System

RI

SEMS

Road Improvement

Social and Environment Management System

4

UTF AusAID-World Bank Umbrella Trust Fund

Regional Vice President: Axel van Trotsenburg

Country Director:

Sector Director:

Motoo Konishi

John Roome, EASSD (through June 30, 2014)

Senior Global Senior Practice Director:

Global Practice Director:

Sector Manager

Practice Manager:

Pierre Guislain (from July 1, 2014)

Jose Luis Irigoyen (from July 1, 2014)

Ousmane Dione, EASPS (through June 30, 2014)

Michel Kerf (from July 1, 2014)

Task Team Leader: Ashok Kumar

5

PHILIPPINES

NATIONAL ROADS IMPROVEMENT AND MANAGEMENT PROGRAM (APL) PHASE 2

CONTENTS

Page

A. SUMMARY 6

B. PROJECT STATUS 8

C. PROPOSED CHANGES 9

ANNEX 1: RESULTS FRAMEWORK AND MONITORING 20

ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK 27

6

PROJECT RESTRUCTURING DATA SHEET

Philippines

National Roads Improvement and Management Program (APL) Phase 2 (P079935)

EAST ASIA AND PACIFIC

Report No: RES13970

Basic Information

Project ID: P079935 Lending Instrument: Adaptable Program Loan

Regional Vice President: Axel van Trotsenburg Original EA Category: Partial Assessment (B)

Country Director: Motoo Konishi Current EA Category: Partial Assessment (B)

Senior Global Practice

Director: Pierre Guislain Original Approval Date: 13-May-2008

Practice

Manager/Manager: Michel Kerf Current Closing Date: 31-Dec-2014

Team Leader: Ashok Kumar

Borrower: Republic of the Philippines

Responsible

Agency: Department of Public Works and Highways

Restructuring Type

Form Type: Full Restructuring Paper Decision Authority: Board Approval

Restructuring Level: Level 1

7

Financing ( as of 07-Nov-2014 )

Key Dates

Project Ln/Cr/TF Status Approval

Date Signing Date

Effectiveness

Date

Original

Closing Date

Revised

Closing Date

P079935 IBRD-75520 Effective 13-May-2008 24-Oct-2008 16-Apr-2009 31-Dec-2012 31-Dec-2014

Disbursements (in Millions)

Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Undis-

bursed

% Dis-

bursed

P079935 IBRD-75520 Effective USD 232.00 232.00 0.00 112.02 119.98 48

8

Policy Waivers

Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ]

Does the project require any policy waiver(s)? Yes [ ] No [ X ]

A. Summary of Proposed Changes

This proposed restructuring of the Second National Road Improvement Management Project (NRIMP2) is being

undertaken in response to the request of the Borrower (the Republic of the Philippines) to allow DPWH to

provide urgent technical assistance to Local Government Units (LGUs) for reconstruction and rehabilitation of

local infrastructure in Typhoon Yolanda/Haiyan affected areas and mapping of local roads network in

Mindanao. The Government of Philippines (GOP), as per its policy to “build back better”, has deputed DPWH to

provide high quality technical assistance, overall policy guidance and oversight, and project management

support to LGUs which lack the required capacity and technical expertise to support this policy. To

accommodate the expanded scope of the original PDO that focused on the national road system, the PDO will

be revised to the following: “to improve the condition of the national roads network and management

effectiveness of the Department of Public Works and Highways (DPWH) at national and local level”. This is a

level 1 restructuring because of the change in the PDO. Other proposed changes are:

a. Modifications in the Results Framework mainly to include outcome indicators that will measure the

management effectiveness of DPWH at the local level, and align and link indicators to each of the PDO

outcomes;

b. Extension of the Loan Closing Date from December 31, 2014 to December 31, 2016 to enable DPWH to

provide the proposed technical assistance, implement the ongoing asset preservation works, and carry

forward the on-going institutional capacity development initiatives which are critical to accomplish the PDO;

c. Addition of a new component “C: Technical Assistance to LGUs amounting to US$8.1 million”;

d. Increase in Bank Financing percentage from 50 percent to 75 percent for Expenditure Category 2A Civil

works for “National Road Improvement Works” component under Part A.1 and from 36 percent to 75 percent

for Expenditure Category 2B Civil works for “Long Term Performance Based Maintenance (LTPBM) Contracts”

component under Part A.2 (a) of the Project;

9

e. Reallocation of US$30.22 million from Expenditure Category 2A Civil Works under Part A.1 (Road

Improvement Works) to Expenditure Category 1 (Goods, Consultant Services, Training and Workshops) for

US$12.167 million and to Expenditure Category 2B Civil Works under Part A.2a (LTPBM) for US$18.053 million.

f. Change in Australian co-financing, as all funds from the Government of Australia was used for separate

Australian technical assistant project or shifted to other parallel technical assistance activities to support

NRIMP2 (and not Borrower-executed activities); and

g. Changes in Social and Environment Management System Policy Framework (SEMS) to incorporate

management of social and environment aspects during the design and supervision of

rehabilitation/reconstruction of local infrastructure works;

h. Change in the Legal Covenant, as DPWH will now use its Bureau of Quality and Safety (BQS) and

Internal Audit Services (IAS) to provide integrity support services instead of the consulting firm that was

originally envisaged under Australian financing. The legal covenant in paragraph 4, Section I of Schedule 2 to

the Loan Agreement will be amended accordingly.

This restructuring follows the previous restructuring of the project undertaken in December 2012 to extend

the Loan Closing Date from December 31, 2012 to December 31, 2014 and modified the project scope and

activities.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ X ] No [ ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ ] No [ X ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ X ] No [ ]

Change in Legal Covenants Yes [ X ] No [ ]

10

Change in Loan Closing Date(s) Yes [ X ] No [ ]

Cancellations Proposed Yes [ ] No [ X ]

Change to Financing Plan Yes [ X ] No [ ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ X ] No [ ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ ] No [ X ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ ] No [ X ]

Change in Implementation Schedule Yes [X] No [ ]

Other Change(s) Yes [ ] No [ X ]

Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Social Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ]

B. Project Status

Both overall project implementation and progress towards achievement of PDO have been rated as

“moderately satisfactory” or above since May 2013. Most of the civil works under the project are approaching

satisfactory completion. There are no significant safeguards and fiduciary related issues. The progress on

institutional capacity development initiatives is impressive, and the senior management of DPWH is showing

11

high level of commitment to institutional development initiatives supported under the project.

National Road Improvement and Asset Preservation Works: All of the road improvement works have been

substantially completed. Despite the delayed start, all four LTPBM contracts are progressing well

(implementation period 2013 to 2018). DPWH is synthesizing the experiences gained from these contracts for

their wider application on the national road network to promote efficient delivery of maintenance works.

DPWH has decided to implement road safety improvement schemes on these contracts during the proposed

extension period. The “Year 1” and “Year 2” preventive maintenance works have been substantially

completed. “Year 3” and “Year 4” preventive maintenance works are either under an advanced stage of

procurement or at the beginning of implementation.

Institutional Capacity Development (ICD): This component is supporting overall transformation of DPWH.

DPWH is now using a Pavement Management System for allocating the Road Fund Budget. Road Board

Secretariat policy and procedures are being improved to institute internal controls for approvals and release of

funds. DPWH has established a Road and Bridge Management Information System for the entire national road

network in Geographical Information System Platform. The e-NGAS (New Government Accounting System) and

e-Budget have been implemented in 203 offices of DPWH as part of financial management reforms. DPWH has

made substantial reduction in the unreconciled general ledger balances with the associated subsidiary ledgers,

improving the accuracy and reliability of financial information and reporting. It is introducing “Organizational

Culture Changes” in its various offices including regions and districts through IT-enabled process improvements

such as Multi-Year Programming and Scheduling, Electronic Project Life cycle, enhanced Project and Contract

and Management Application, and Executive Information System to assist management in the monitoring of

civil works projects including procurement.

DPWH is also (i) upgrading its IT infrastructure and communication network in its various offices to support the

above initiatives; (ii) preparing right-of-way legislation to improve right-of-way acquisition; (iii) expanding its

current Data Administration Program into a full Data Governance Program; (iv) implementing an “Integrity

Strengthening Action Plan” and a comprehensive Rationalization Plan in various offices; (v) preparing road

safety improvement schemes on major traffic corridors (supported through the World Bank Global Road Safety

Facility); (vi) reforming DPWH public procurement using a state-of-the-art e-procurement system; and (vii)

preparing comprehensive design guidelines to improve design practices for national roads.

Procurement and Financial Management (FM): All major procurements under the project have been

completed, except for a few preventive maintenance works. Overall FM is rated moderately satisfactory and

Procurement satisfactory. There are no pending audit reports.

12

Social and environment safeguards are currently rated satisfactory. All land acquisition and compensation

packages have been fulfilled. Ten Environmental Assessments/Environment Management Plans, two

Indigenous People Development Plans, and nine Resettlement Action Plans have been prepared and

implemented under the project after approval from the Bank. The Environmental and Social Safeguards

Division of DPWH is ensuring effective management and monitoring of safeguards issues for the project roads.

Project Disbursements/Allocations: Out of US$232 million of the Bank funds, US$112 million have been

disbursed to date, and additional US$25 million would be disbursed by December 31, 2014, leaving an

unutilized amount of about US$95 million if there were no restructuring. The breakdown of this amount by

component is as follows: National Roads Improvement (NRI, US$36 million); LTPBM (US$32 million);

Preventive Maintenance (US$12 million); and Institutional Capacity Development (ICD, US$15 million). The NRI

component could not use its full loan allocation because three (3) road improvement packages were dropped

from the project scope to be funded locally, and at the same time for NRIMP2 packages, there were lower bid

prices compared to original estimates. LTPBM and PM procurement was delayed because priority was given

by the implementing agency to NRI procurement, the biggest component of the project. This however allowed

more extensive discussion to resolve policy questions and administrative issues regarding LTPBM and PM

contracts. From an original program of eight (8) LTPBM contract packages, DPWH decided to pursue four (4) in

Luzon, Mindoro and Panay, but the existing road conditions warranted higher civil works cost across all four (4)

packages. Each annual PM program consists of 8-10 civil works packages that are procured using national

competitive bidding procedures. Selection of road sections required coordination with and approval of the

Road Board. Given the delayed start, the project was able to finance two out of the initially planned four years

of PM contracts before the current closing date. The scope and packaging of several ICD contracts were

reviewed prior to procurement causing some delays. There are currently 16 ICD goods and consultancy

contracts, and additional contracts are expected to be procured in the extension period.

C. Proposed Changes

Development Objectives/Results

Project Development Objectives

Original PDO

The Program goal is the establishment of road management arrangements which ensure the upgrading and

13

preservation of the National Road System (NRS) in an environmentally, socially and financially sustainable

manner.

The development objective for Phase 2 is: Improved operation, organizational effectiveness and fiduciary

control in the management and financing of the national road system, to enhance road user satisfaction in the

project areas and efficiency and integrity in the use of financial resources.

Change in Project's Development Objectives

Explanation

The change in project development objective is proposed to allow DPWH to provide technical assistance to

LGUs for reconstruction and rehabilitation of local infrastructure sub-projects in Typhoon Yolanda/Haiyan

affected areas and mapping of local roads network in Mindanao (as per DPWH’s request dated April 4, 2014).

The PDO has also been reformulated to better align and link it to various project activities, and to clarify the

achievements and transformations expected from this project. This reformulated PDO also clarifies and

simplifies the expected achievements envisioned from this project given its expansion towards providing

assistance to LGUs’ rehabilitation and reconstruction efforts. Apart from including the technical assistance to

LGUs (US$8.1 million; involving about 3 percent of the Bank funding), the project will continue to focus on the

activities supported under the original PDO.

Typhoon Yolanda (international code name: Haiyan) has caused large scale destruction to physical

infrastructure in Philippines in November 2013. GOP has been undertaking recovery programs to avoid

national losses equivalent to one percent of GDP due to typhoon Yolanda. These programs include

rehabilitation and reconstruction of local infrastructure through LGUs, which are also being supported by many

donors, NGOs and the private sector. Two World Bank-assisted projects, the Regional Infrastructure for

Growth Project (RIGP; P108904) and the Support for Strategic Local Development and Investment Project

(SSLDIP; P064925) are being restructured to provide financial assistance to LGUs for post-disaster

rehabilitation/reconstruction of local infrastructure.

GOP is committed to support LGUs both financially and technically to effectively prepare and implement a

large number of post-disaster reconstruction and rehabilitation sub-projects, using cost-effective and climate

resilient designs, ensuring value for money and adequate quality of construction, and avoiding time and cost

overruns. To achieve this and pursue its policy to “build back better”, GOP has deputed the national agency,

“DPWH”, to provide high quality technical assistance, overall policy guidance and oversight, and project

management support to LGUs. The LGUs are responsible for preparing and delivering the local infrastructure

sub-projects but lack the required capacity and technical expertise. The proposed technical assistance under

this project will enable LGUs to quickly prepare and implement a large number of sub-projects with technical

support from consultants having experience and expertise in post-disaster reconstruction works, operating

14

under the overall guidance and oversight of DPWH. Apart from meeting these needs, the proposed technical

assistance will see significant improvements in the way local infrastructure is designed and delivered by LGUs

and set new models for partnership between DPWH and LGUs.

The restructured NRIMP2 will only finance technical assistance in relation to the above sub-projects. Civil

works under those will be financed under the RIGP and SSLDIP or from other sources.

Proposed New PDO

To improve the condition of the national roads network and management effectiveness of the Department of

Public Works and Highways at national and local level.

Change in Results Framework

Explanation:

The changes in the results framework are being sought to: (i) include outcome indicators that will measure

management effectiveness of DPWH at the local level and the improved condition of national roads network;

(ii) clearly align and link results indicators with each of the PDO outcomes; (iii) include Core Sector indicators;

(iv) drop or modify results indicators that are either not measurable or outside the project scope; and (v)

capture important institutional development initiatives which are missing in the current results framework.

Annex I shows the revised results framework after incorporating these changes. Some of the important

changes are as follows:

PDO Level:

The first PDO indicator “Administrative Efficiency – project delivery time reduced” is modified to

“Administrative Efficiency – percentage of projects delivered with less than 15 percent excess to original cost

and time” which is considered a better definition of administrative efficiency. It was difficult to fix a common

delivery time to a variety of contract sizes;

The second PDO indicator “Sustainability of financing for NRS asset management – Increased cost recovery

from road users” is revised to “Improved asset management of National Road Network – Percentage of roads

in good and fair condition as a share of total classified national roads”. This is also a Core Sector Indicator.

There is no project activity linked to increased cost recovery;

15

The third PDO indicator “Value for money – Medium-term average cost of preserving national paved roads

reduced” is dropped as it is hard to measure value for money. The cost of preserving national roads would vary

widely according to traffic, climate, technical specifications, and many other factors. DPWH has no reliable

data (yet) to measure this indicator; and

The fourth PDO indicator “Road user satisfaction with the National Road System (NRS)” is revised to

“Percentage of satisfactory perception of external stakeholders with the National Road System (NRS)” as

DPWH is currently undertaking regular surveys for “external stakeholder perception” after the closure of the

consultancy services to measure road user satisfaction.

New PDO Indicators:

“Percentage of local infrastructure subprojects, receiving technical assistance under the project, that are in

compliance with the prescribed technical standards by DPWH” to capture management effectiveness of DPWH

at the local level.

“Percentage of DPWH’s infrastructure projects subjected to life cycle monitoring using improved IT enabled

tools” to capture management effectiveness of DPWH at the national level.

New Intermediate Outcome Indicators:

“Number of kilometers of National Roads rehabilitated, non-rural” is added as a Core Sector Indicator. Other

new and revised indicators are shown under Annex I.

Compliance

Other Changes to Safeguards

Explanation:

The current Social and Environment Management System Policy Framework (SEMS) for NRIMP2 is mainly

focused on national roads. Therefore, DPWH has revised it to ensure effective management of social and

environment aspects during the detailed engineering designs and construction supervision for local

infrastructure (e.g., schools, clinics, public markets, water systems, municipality buildings) under the

16

restructured project to ensure compliance with the Bank polices and to introduce good practice examples as

per the “build back better” policy. Rehabilitation/reconstruction of local infrastructure is not expected to

generate significant social and environment impacts as the local infrastructure will mostly be

rehabilitated/reconstructed at their existing sites. Most of the impacts would be construction related and

could be managed using good construction practices as defined in the technical specifications.

DPWH will also introduce many good practice examples of design and construction of local infrastructure such

as use of climate resilient and environmentally optimized engineering designs, improved drainage,

construction waste management, community oversight, and construction related impacts. These good

practices will be integrated with the current design guidelines, technical specifications, and construction

procedures that will be used by DPWH. Suitable training will be provided to the local engineers and LGUs on

the use of these good practices.

Already DPWH has an environmental policy which requires integration of environmental and social concerns in

all stages of the project cycle of an infrastructure sub-project. The revised SEMS includes simplified screening

procedures for local infrastructure subprojects which are to be used by the design consultants to identify the

site-specific environmental and social impacts that may be generated by the restoration of the damaged local

infrastructure. The revised SEMS is fully consistent with the Environment and Social Management Frameworks

of the restructured RIGP and SSLIDP (already agreed by the Bank) which will be funding most of the

rehabilitation/reconstruction works. The design consultants will prepare sub-project specific safeguard

documents to mitigate the impacts identified through the screening process. The revised SEMS also defines

the institutional responsibility of managing the safeguards aspects during the design stages of the sub-projects.

The DPWH has carried out requisite consultations on the revised SEMS with LGUs and locally disclosed it on

October 28, 2014. The same has also been re-disclosed in the Bank Infoshop on October 30, 2014.

Change in Legal Covenants

Explanation:

Paragraph 4 of Section I, Schedule 2 of the Loan Agreement requires that a consulting firm be engaged by the

Government of Australia (parallel co-financier of the project) to provide integrity support services to DPWH.

However, the subsidiary arrangements for the Australian co-financing closed before there were a sufficient

number of road works under implementation under NRIMP2 to justify engagement of an audit firm. The legal

covenant in the Loan Agreement was not dated, i.e., there was no specific date by which the consulting firm

had to be engaged. By the time all parties concerned agreed that the consulting firm should be engaged, the

17

subsidiary arrangements for the AusAID co-financing had already closed. In addition, the Bureau of Quality

and Safety (BQS) had been established within DPWH which was non-existent at the time of project approval..

DPWH is already using BQS and IAS to undertake regular audits of its various activities including the civil works

supported under NRIMP2. The Bank reviewed the guidelines on audit procedures, and sample reports and

outputs of BQS and IAS, and found that these will meet the expected standards. IAS reports directly to the

Secretary of DPWH. Using BQS and IAS for the audit of project activities will further strengthen DPWH’s

capacity to undertake regular audits of the entire national roads network. The Bank will closely review the

audit reports including compliance with the observations made during the audit.

Paragraph 4 of Section 1, Schedule 2 of the Loan Agreement will, therefore, be amended to require DPWH to

undertake the necessary integrity support services, which will be provided by its BQS and IAS. The technical

audits will be done on a semi-annual basis, or as often as otherwise agreed with the Bank for specific NRIMP2

activities.

Further, paragraph 5 of Section 1, Schedule 2 of the Loan Agreement requires that a consulting firm be

engaged by the Government of Australia (co-financier of the project) to assist DWPH to implement its

Rationalization Plan. The consulting firm was not engaged by the Government of Australia as DPWH used the

“Project Management and Coordination Consultant” already engaged under NRIMP2 to assist in implementing

the Plan. DPWH, nevertheless, implemented its Rationalization Plan as required. The legal covenant in

paragraph 5 of Section 1, Schedule 2 of the Loan Agreement is therefore amended to remove the reference to

the consulting firm to be engaged by the co-financier, but the obligations on DPWH otherwise remain the

same.

Ln/Cr/TF

Finance

Agreement

Reference

Description of Covenant Date Due Status Recurrent Frequenc

y Action

IBRD-

75520 Section 1. 3

The Borrower shall

undertake semi-annual

internal audits for

DPWH’s operations and

Project accounts.

Complied

with

SemiAnn

ual

No

Change

IBRD-

75520 Section 1.5

The Borrower shall

implement its

Rationalization Plan after

31-Oct-

2011

After delay

complied

with

Revised

18

approval by DBM in the

event that the

Rationalization Plan is

not put in to effect,

develop a plan.

IBRD-

75520 Section 1.6

The Borrower through

DPWH shall post the

Road Watch report cards

on its website by

November 30, 2009, and

biannually on November

30thereafter.

30-Nov-

2011

Complied

with

No

Change

IBRD-

75520 Section 1.7

Within one month, the

Borrower shall publish a

business plan comprising

of its proposed annual

program for next year

and the expenditure

incurred and outputs

delivered in the previous

year.

31-Dec-

2009

Complied

with

No

Change

IBRD-

75520 Section 1.8

The Borrower through

DPWH shall furnish to

the Road Partners a road

assets preservation plan

for the national road

networks.

31-Mar-

2012

Complied

with

No

Change

IBRD-

75520 Section 1.10

The Borrower shall

ensure that amendments

updating the operations

and responsibilities of

the Road Board will be

approved by DPWH and

the Department of

Transport and

Communications.

31-Mar-

2011

After delay

complied

with

No

Change

19

IBRD-

75520 Section 1. 11

The Borrower shall

submit a progress report

on implementing the

Integrity Strengthening

Action Plan.

31-Oct-

2011

Complied

with

No

Change

IBRD-

75520 Section 1.12

The Borrower shall

complete the

implementation of

recommendations arising

from its 2006 external

audit report.

30-Jun-

2011

Complied

with

No

Change

IBRD-

75520 Section II. B.1

Maintain a financial

management system and

prepare financial

statements in

accordance with

consistently applied

accounting standards

Complied

with

Yearly No

Change

IBRD-


Furnish quarterly interim

unaudited financial

report to the Bank, not

later than one month

after each calendar

quarter

Complied

with

Quarterly No

Change

IBRD-


Financial statements to

be audited by

independent auditors

acceptable to the Bank

and audit report

submitted to the Bank

not later than six month

after the end of each

fiscal year.

Complied

with

Yearly No

Change

IBRD-

75520 Section 1.4

The Borrower shall

undertake technical

audits on Project

Not yet due

SemiAnn

ual Revised

20

expenditures and

implementation of

Project activities.

Financing

Change in Loan Closing Date(s)

Explanation:

The current Loan Closing Date of December 31, 2014 is proposed to be extended by two years to December

31, 2016 to enable DPWH to implement the following activities by using about US$95 million of undisbursed

balance beyond the current closing date:

a) Provide technical assistance to LGUs for reconstruction and rehabilitation of local infrastructure in

Typhoon Yolanda/Haiyan affected areas and mapping of local road network in Mindanao (US$8

million);

b) Finance an increased share of the civil works under NRI (for payments made after March 31, 2014)

(US$6 million);

c) Implement the remaining activities of the ongoing LTPBM contracts, at an increased financing share

(after March 31, 2014), including road safety infrastructure improvements (US$50 million);

d) Implement ongoing Year 3 and 4 Preventive Maintenance Program, as originally envisaged (US$ 12

million);

e) Build on and carry-forward the ongoing institutional development initiatives (US$19 million).

The proposed two years extension is essential to accomplish the above activities and to achieve the PDO.

Continued Bank support is critical to ensure effective implementation of the comprehensive and rich

institutional agenda supported under the project which, when fully implemented, will see major reforms in the

management of the national road network in the Philippines and organizational effectiveness of DPWH. DPWH

will also be able to synthesize the rich experience being gained through implementation of LTPBM contracts

and road safety improvements for their wider application on the national road network ensuring efficient

delivery of maintenance and improved road safety. It will also allow the Bank to further deepen and enhance

its engagement in the road sector in Philippines.

The proposed extension meets the requirements of paragraph 47 of BP 10.00 as the revised PDO is achievable

within the extended period; the performance of DPWH remains satisfactory; and the Bank and the Borrower

have already identified the activities to be supported during the proposed extension period and agreed on the

21

actions to be taken to complete those during the last implementation support mission in May 2014 and

subsequent discussions with DPWH. All the technical assistance activities are to be procured latest by March

31, 2015.

Ln/Cr/TF Status Original Closing

Date

Current Closing

Date Proposed Closing Date

Previous Closing

Date(s)

IBRD-

75520 Effective 31-Dec-2012 31-Dec-2014 31-Dec-2016 31-Dec-2012

Change to Financing Plan

Explanation:

The Government of Australia (through then AusAID) originally committed to allocate parallel co-financing of

US$10.5 million for various activities under the Institutional Capacity Development (ICD) component of

NRIMP2. This amount was to be allocated from two existing grant facilities provided by the Government of

Australia under Subsidiary Agreements with the Government. Of this amount, US$6.72 million was granted to

support the Independent Procurement Evaluator (IPE), Road Partnership Support (with Bantay Lansangan or

RoadWatch), Financial Management, Internal Control and Internal Audit Capacity Building activities. These

activities were executed by AusAID through its Partnership for Economic Governance Reforms under a

Subsidiary Agreement with the Government. This grant facility has since ceased operation. As part of the first

restructuring of the Project in December 2012, implementation of the two governance activities (Corporate

Modernization and Support to the Integrity Strengthening Action Plan), which were to be funded and managed

under the AusAID grant, were shifted to be executed by DPWH. However, these two activities have been

absorbed by the existing DPWH functions and consultants, and under a Bank-executed technical assistance

package. Therefore, all references to the AusAID co-financing will be removed from the Loan Agreement. This

does not change the amount of the Bank’s loan.

It is proposed to increase the Loan Financing percentage from 50 percent to 75 percent for Expenditure

Category 2A for Civil Works under Part A.1 “National Road Improvement Works component”, and from 36

percent to 75 percent for Expenditure Category 2B for Civil Works under Part A.2 (a) “Long Term Performance

Based Maintenance Contracts component” of the Project. These changes are to be applied to the unpaid

balance as of March 31, 2014 as per the DPWH request of May 21, 2014. The proposed change will allow the

Borrower to fully utilize the loan funds given that a number of projects on road improvement have achieved

substantial completion progress with relatively low disbursements of 48 percent. This will also reduce the

Borrower’s counterpart contribution from US$333.52 million to US$270.26 million.

Considering the above, the percentages of Eligible Expenditures to be financed will be amended in Section

22

IV.A.2, Schedule 2 of the Loan Agreement, and the project financing plan is to be changed as follows (The

figures are in USD):

Source(s) At Approval Current (from AUS) Proposed

AUSL 10,500,000.00 10,500,000.00 0.00

BORR 333,520,000.00 333,520,000.00 270,260,000.00

IBRD 232,000,000.00 232,000,000.00 232,000,000.00

Total 576,020,000.00 576,020,000.00 502,260,000.00

Reallocations

Explanation:

The National Road Improvement Works component (Expenditure Category IBRD75520 CW PT A1) would have

an unutilized allocation of US$30.22 million after accounting for the increase in Bank financing percentage to

this component. On the other hand, there would be a shortfall of US$18.053 million to fund the LTPBM

contracts (Expenditure Category IBRD75520 CW PT A2a) with a revised Bank financing percentage (current

allocations US$53 million; requirements US$72.053 million). Finally, US$55.587 million are required (under the

Expenditure Category IBRD75520 GO CS TR WS) to support the technical assistance to LGUs (US$8.1 million)

and ongoing institutional development initiatives but only US$43.42 million are currently available, which

means additional allocation of US$12.167 million is needed. Thus the estimated unutilized amount of

US$30.22 million is proposed to be reallocated to meet the requirements of LTPBM and ICD as shown in the

Table below. The current allocation of US$32 million for Year 1 to 4 Preventive Maintenance Programs will be

adequate.

Ln/Cr/TF Currency Current Category of

Expenditure Allocation

Disbursement % (Type

Total)

Current Proposed Current Proposed

IBRD-75520 USD IBRD75520 GO CS TR WS 43,420,000.00 55,587,000.00 100.00 100.00

IBRD75520 CW PT A1:

Nat. Road Improvement

103,000,000.0

0 72,780,000.00 50.00 75.00

IBRD75520 CW PT A2(a): 53,000,000.00 71,053,000.00 36.00 75.00

23

LTPBM

IBRD75520 CW PT A2(b)

FY08 8,000,000.00 8,000,000.00 100.00 100.00


FY09 8,000,000.00 8,000,000.00 100.00 100.00


FY10 8,000,000.00 8,000,000.00 100.00 100.00


FY11 8,000,000.00 8,000,000.00 100.00 100.00

IBRD75520 PREMIA INT

RATE CAP 0.00 0.00 0.00 0.00

Designated Account 0.00 0.00 0.00 0.00

FRONT END FEE 580,000.00 580,000.00 0.00 0.00

Total: 232,000,000.0

0

232,000,000.0

0

Disbursement Estimates

Change in Disbursement Estimates

Explanation:

The revised disbursement estimates, taking into account the increase in Bank financing percentage to the Road

Improvement Works and LTPBM contracts, reallocation to different categories, technical assistance to LGUs

and implementation of the ongoing institutional development initiatives during the proposed extension period

are as follows:

Fiscal Year Current (USD) Proposed (USD)

2008 0.00 0.00

2009 580,000.00 580,000.00

24

2010 5,016,860.11 5,016,860.11

2011 8,222,118.45 8,222,118.45

2012 15,657,138.01 15,657,138.01

2013 36,940,022.47 36,940,022.47

2014 33,279,066.95 33,279,066.95

2015 12,316,933.61 61,880,794.01

2016 45,000,000.00

2017 26,000,000.00

Total 111,436,139.60 232,000,000.00

Components

Change to Components and Cost

Explanation:

A new component “C Technical Assistance to Local Government Units” has been added to allow DPWH to

provide technical assistance support LGUs on post-disaster reconstruction activities. The new component is

described as follows:

“Component C: Technical Assistance to Local Government Units (US$8.1 million): To support DPWH to provide

technical assistance support to LGUs to prepare and effectively deliver good quality, cost-effective, and climate

resilient sub-projects for reconstruction and rehabilitation of local infrastructure in the Typhoon

Yolanda/Haiyan affected areas. This technical assistance will include: (a) selection of sub-projects, detailed

engineering designs, management of social and environment issues, and preparation of contract document of

various infrastructure such as city/municipal/barangay halls, classrooms, public hospitals/health centers, local

roads, water supply and irrigation facilities; (b) construction supervision for local infrastructure; (c) project

management and capacity building support to DPWH and LGUs including training, workshops, and preparation

of related technical documents; and (d) preparation of maps and road inventory data-base for local roads

network in Mindanao”.

25

The above component will be implemented in a way to complement the restructured RIGP and SSLIDP as well

as the multi-donor support to the affected areas. DPWH would mobilize 50 licensed engineers and 100

engineering graduates to augment its capacity to respond to the technical assistance needs of the LGUs. It

would also engage a coordinating consultant to provide overall technical supervision; undertake field

investigations and site surveys; prepare/review detailed engineering designs, and tender documents; assist in

procurement of local infrastructure works; and conduct output measurements and independent verifications

of engineering designs, safeguard documents, and construction quality to ensure their compliance to the

prescribed standards and Bank’s safeguards policies. DPWH plans to procure all the technical assistance

services before March 31, 2015, leaving sufficient time for their execution. The responsibility to implement this

component remains with DPWH.

Consultancy activities under A.3 Maintenance Engineering Services, B.2 Corporate Effectiveness and Integrity,

and B.3 Strategic Road Sector Reform in the table below were implemented under the ICD component.

Moreover, selected activities under B.2 and B.3 were implemented by DPWH and Road Board with local

funding or with existing consultants,

Costs: The revised costs of various project components are given below. The total cost of the National Road

Improvement component has been reduced from US$238.50 million to US$183.67 million due to its reduced

scope because of the dropping of some roads and bridges, and lower bid prices compared to the original

estimates. Similarly, the total cost of the LTPBM contracts component is also reduced marginally from

US$280.80 million to US$269.52 million, mainly due to lower bid prices compared to the estimated costs.

Current Component

Name

Proposed Component

Name

Current Cost

(US$M)

Proposed Cost

(US$M) Action

C. Technical Assistance to

LGUs 8.10 New

A.1 National Road

Improvement

A.1 Road Network

Improvement 238.50 183.67 Revised

A.2 Road Asset

Preservation

A.2 Road Asset

Preservation 280.80 269.52 Revised

A.3 Maintenance

Engineering Services 2.80 0.00

Merged under B.

ICD

26

B.1 Optimization of

Business Process

improvements

B. Institutional Capacity

Development 47.10 40.39 Revised

B.2 Corporate

Effectiveness and

Integrity

7.50 0.00 Merged under B.

ICD

B.3 Strategic Road Sector

Reform 1.20 0.00

Merged under B.

ICD

Front End Fee 0.58

Total: 577.90 502.26

27

ANNEX 1: RESULTS FRAMEWORK AND MONITORING

Project

Name:

National Roads Improvement and Management Program

(APL) Phase 2 (P079935)

Project

Stage: Restructuring Status: DRAFT

Team

Leader: Ashok Kumar

Requesting

Unit: EACPF Created by: Kristine May San Juan Ante on 04-Mar-2014

Product

Line: IBRD/IDA

Responsible

Unit: GTIDR Modified by: Kristine May San Juan Ante on 11-Dec-2014

Country: Philippines Approval FY: 2008

Region: EAST ASIA AND PACIFIC Lending

Instrument: Adaptable Program Loan

Project Development Objectives

Original Project Development Objective:

The Program goal is the establishment of road management arrangements which ensure the upgrading and preservation of the National Road

System (NRS) in an environmentally, socially and financially sustainable manner.

28

The development objective for Phase 2 is: Improved operation, organizational effectiveness and fiduciary control in the management and

financing of the national road system, to enhance road user satisfaction in the project areas and efficiency and integrity in the use of financial

resources.

Proposed Project Development Objective (from Restructuring Paper):

To improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways at

national and local level.

Results

Core sector indicators are considered: No Results reporting level: Project Level

Project Development Objective Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target

Revised Indicator one: Administrative

Efficiency – Percentage of

projects delivered with less

than 15 percent excess to

original cost and time.

Text Value 6 70

Date 31-Mar-2014 31-Dec-2016

Comment The project

delivered within

original cost and

29

time is a better

indicator than

the delivery

time alone

(used earlier)

which would

vary according

to project size

and thus it is

difficult to set a

bench mark

delivery time

against which

the reduction

could be

measured.

New Roads in good and fair

condition as a share of total

classified roads

Percentage Value 55.00 55.00 60.00

Date 30-Nov-2014 31-Dec-2016

Comment Indicator Two:

“Improved

asset

management

of National

Roads

IRI<7

30

Network –

“Percentage of

roads in good

and fair

condition as a

share of total

classified

national

roads”

New Size of the total classified

network

Kilometers Value 32226.00 32226.00 32226.00

Sub Type

Supplemental

Revised Indicator Three: Percentage of

satisfactory perception of

external stakeholders with the

National Road System (NRS)

Text Value 55% >60%

Date 30-Nov-2014 31-Dec-2016

Comment

New Indicator Four: Percentage of

DPWH’s infrastructure projects

subjected to life cycle

Percentage Value 0.00 70.00

Date 31-Oct-2014 31-Dec-2016

31

monitoring using improved IT

enabled tools

Comment

New Indicator Five: Percentage of

Local infrastructure

subprojects, receiving

technical assistance under the

project, that are in compliance

with the prescribed standards

of DPWH.

Percentage Value 80.00

Date 31-Oct-2014 31-Dec-2016

Comment

Intermediate Results Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target

Revised Component A1: National Roads

Improved

Text Value 0 280 280

Date 31-Dec-2008 31-Oct-2014 31-Dec-2014

Comment

Revised Component A2: Number of

kms of roads maintained

efficiently through Long-Term

Performance Based

Maintenance Contracts

Text Value 0 680 680

Date 31-Dec-2008 31-Dec-2013 31-Dec-2016

Comment

32

New Roads rehabilitated, Non-rural

Kilometers Value 0.00 1200.00 1500.00

Date 31-Dec-2008 31-Mar-2014 31-Dec-2014

Comment Under Project

Components A1

and A2 (a) and

(b)

New Percentage of Annual Road

and Bridge Asset Preservation

Program of DPWH evaluated

by technical and economic

criteria through the use of

DPWH planning applications

Percentage Value 0.00 70.00 80.00

Date 18-Aug-2009 10-Oct-2014 31-Dec-2016

Comment Planning

systems not

operational

Already being

evaluated using

HDM4

New Percentage of Central and

Regional Offices with

operational Multi Year

Programming and Scheduling

(MYPS)

Percentage Value

Date 30-Nov-2014 31-Dec-2015 31-Dec-2016

Comment Operation in

Central offices

Operational in

Central and

Regional Offices

New Number of DPWH offices with

Number Value 0.00 203.00 203.00

33

improved Financial

Management systems of e-

NGAS and e-Budget

Date 18-Aug-2009 31-Oct-2014 31-Dec-2015

Comment These modules

already

introduced in 203

offices

e-NGAS – New

Government

Accounting

System

New National Roads design

guidelines and standards

updated by DPWH and in use

Yes/No Value No Yes

Date 31-Dec-2013 31-Oct-2014 31-Dec-2015

Comment Guidelines are

under

preparation

New Percentage (or number) of

regional and central offices

that are implementing (phase

1) enhanced Project and

Contract Management

Application processes

Number Value

Date 31-Dec-2008 31-Dec-2014 31-Dec-2016

Comment Pilot Launched Implemented in

Central,

Regional, and

Districts

New Percentage (or number) of Number Value 0.00

34

regional and central offices

that are using GIS for forward-

planning through integration

with MYPS (Planning Services

and Regions) Module

Date 31-Dec-2013 31-Oct-2014 31-Dec-2016

Comment Ongoing

initiatives

Both in Central

and Regional

Offices

New Percentage of classified

network of Road Inventory,

condition and traffic data up-

to-date in accordance with

update cycle.

Percentage Value 80.00

Date 31-Dec-2013

Comment Including IRI

New Number of offices that

upgraded/expanded IT

Infrastructure “Voice and Data

communication network”

Number Value 0.00 95.00

Date 31-Dec-2013 31-Dec-2016

Comment

New Enhanced Data Governance

Program implemented Yes/No Value No Yes

Date 31-Dec-2013 31-Dec-2016

Comment New policy to be

issued by end of

2014

35

Revised Improved and Effective

Corporate Structure: Number

of DPWH offices implementing

Rational Plan of DPWH, as

approved by the DBM

Text Value

Date 18-Aug-2009 31-Oct-2014 31-Dec-2016

Comment Rationalization

Plan under

consideration

by

Government

The

Rationalization

Plan, as approved

by DBM

(Department of

Budget and

Management), is

implemented in

203 offices of

DPWH

Revised Improved Road Fund

Performance: Number of New

Road Board Secretariat policy

and procedures introduced to

institute internal controls for

approvals and release of funds

Text Value Yes Yes

Date 31-Oct-2014 31-Dec-2014

Comment Already

achieved

Date 06-Dec-2012 31-Dec-2014

Comment

36

Revised Number of staff trained in

various subjects for

enhancement of Project

Implementation Capacity and

road safety

Text Value 150

Date 31-Dec-2008 31-Oct-2014 16-Dec-2014

Comment The areas of

training include

planning-related

business

procedures,

organizational

Culture Change,

Asset

Preservation,

Change

Management, e-

Procurement, IT

applications,

and road safety

New OCCP (Organizational Culture

Change Program) Road Map

adopted by DPWH

Yes/No Value Yes

Date 31-Dec-2013 31-Oct-2014 31-Dec-2015

Comment To be finalized by

end December

2014

37

38

ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK

Project Stakeholder Risks

Stakeholder Risk Rating Moderate

Risk Description: Risk Management:

Compared to other stakeholders, people who are residing

or doing business in the roads vicinity, who are directly

affected by roads projects are least consulted during

preparation and implementation. On the other hand,

politicians and LGU officials have extraordinary influence

in the project development process for roads.

DPWH has adopted various feedback mechanisms, which need to be supported,

including public consultations, call center, complaints desk, etc. DPWH uses HDM4 in

selection and prioritization of preventive maintenance sections. Procurement decisions

are published.

Resp: Status: Stage: Recurrent: Due Date: Frequency:

Client In Progress Implementation

Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Moderate


DPWH is not able to provide adequate supervision for the

various components of the Project, including civil works,

goods procurement, ICD consultancies, and Technical

Regular supervision meetings with DPWH staff supervising various components to

ensure that proper attention is devoted to each component. Three component

managers from DPWH are in charge of the key components, and Bureaus/Services are

39

Assistance to LGUs, by not being able to assign staff with

the appropriate qualifications and experience.

supervising each activity. A project management consultant will be mobilized for

technical assistance to LGUs.


Both In Progress Implementation

Governance Rating Substantial

Risk Description:

DPWH’s public roads program is heavily influenced by

non-transparent decisions, resulting from influence of

political personalities, and not based on technical and

economic criteria. Quality control is not stringently

enforced resulting in poor quality of road works.

Risk Management:

Construction supervision contracts are in place for roads improvement component

while Advisors are engaged for the LTPBM contracts reporting to the PMO. BQS and IAS

are, respectively, conducting regular technical audits of civil works and internal audits.



Risk Management:

DPWH has adopted an Integrity Strengthening Action Plan (ISAP) that is regularly

monitored for implementation.



40

Project Risks

Design Rating Moderate


The project, with its multiplicity of components and

activities, encounter serious issues during

implementation and does not lead to the attainment of

the desired development objective. Results framework is

not directly and completely linked to specific components

and thus becomes beyond the scope of the project. LGUs

do not comply with the prescribed technical standards for

local infrastructure.

Regular supervision missions and constant communication with DPWH PMO and other

units to identify implementation issues and jointly find solutions. The results

framework has already been revised to take away the result indicators which are either

difficult to measure or are outside the project scope. The project is performing well

since its first restructuring in December 2012. Senior management of DPWH is fully

committed to the project specifically to the institutional development initiatives. A

project management consultant will monitor the technical assistance to LGUs.



Social and Environmental Rating Moderate


Civil works components are implemented without

compliance with social and environmental management

plans developed for the Project, and have adverse impact

on affected persons and the environment. LGUs do not

Regular supervision meetings with DPWH safeguards team and site visits will be

undertaken to ensure relevant issues are spotted early and appropriately addressed.

Management of safeguards in the ongoing civil works has been found satisfactory.

Training of LGUs is included in modified SEMS.

41

fully understand the modified SEMS Resp: Status: Stage: Recurrent: Due Date: Frequency:

Bank In Progress Implementation

Program and Donor Rating Substantial


The Bank suspends disbursement for the project or any of

its components because of reports on fraud and

corruption. Similar programs of other development

partners have overlapping components which are not

coordinated during implementation.

Regular monitoring of ISAP. Regular donor coordination meetings are held during each

mission, and there is open and constant communication with other development

partners engaged in the roads sector.



Delivery Monitoring and Sustainability Rating Moderate


DPWH business innovations are not sustained by

concerned units, especially when there is a change in

DPWH leadership.

DPWH ICD Steering Committee monitors all ICD activities to ensure that appropriate

DPWH units are fully engaged for each activity, and that learning by doing is happening

to increase capacity of DPWH staff.


42

Client In Progress Implementation

Other (Optional) Rating



Other (Optional) Rating



Overall Risk

Overall Implementation Risk: Rating Moderate

Risk Description:

43

Procurement-related risks for major contracts are significantly reduced considering that only a few preventive maintenance works remain to be

procured. With substantial completion of National Road Improvement Works, critical risks now pertain to quality and payment transactions for

LTPBM and PM contracts. Also important will be monitoring the impact of the ongoing works on affected residents and the environment. The key

risk with ICD activities will be on institutionalization and sustainability of the improvements in business processes and capacity building.

Documents

Document of The World Bank FOR OFFICIAL USE ONLY Report …€¦ · · 2016-07-19The World Bank FOR OFFICIAL USE ONLY Report No ... DPWH has established a Road and Bridge Management