Project Performance Audit Report
34 Pages
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Project Performance Audit Report


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34 Pages


ASIAN DEVELOPMENT BANK PPA: INO 27078 PROJECT PERFORMANCE AUDIT REPORT ON THE FLORES EMERGENCY RECONSTRUCTION PROJECT (Loan 1241-INO[SF]) IN INDONESIA October 2000 CURRENCY EQUIVALENTS Currency Unit – Rupiah (Rp) At Appraisal At Project Completion At Operations Evaluation (May 1993) (May 1998) (April 2000) Rp1.00 = $0.0004815 $0.0001219 $0.0001333 $1.Rp2,077 Rp8,200 Rp7,500 ABBREVIATIONS ADB − Asian Development Bank BAPPENAS − Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) CDE − chief design engineer CMT − core management team DBST − double bituminous surface treatment DGH − Directorate General of Highways DGWRD − Directorate General of Water Resources Development EIA − environmental impact assessment EIRR − economic internal rate of return IEE − initial environmental examination km − kilometer LTACC − loan and technical assistance coordination committee MPW − Ministry of Public Works NTADP − Nusa Tenggara Agricultural Development Project O&M − operation and maintenance OEM − Operations Evaluation Mission m − meter PCR − project completion report PIU − project implementation unit PPAR − project performance audit report PWRS − Provincial Water Resource Service RMT − reconstruction management team TOR − terms of reference WUA − water users association NOTES (i) The fiscal year (FY) of the ...



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 ASIAN DEVELOPMENT BANK                 
PPA: INO 27078
   CURRENCY EQUIVALENTS  Currency Unit – Rupiah (Rp)    At Project Completion At Appraisal At Operations Evaluation  (May 1993) (May 1998) (April 2000) Rp1.00 = $0.0004815 $0.0001219 $0.0001333 $1.00 = Rp2,077 Rp8,200 Rp7,500          
ABBREVIATIONS ADB Asian Development Bank BAPPENAS Perencanaan Pembangunan Nasional Badan  (National Development Planning Agency) CDE chief design engineer CMT core management team DBST bituminous surface treatment double DGH General of Highways Directorate DGWRD Directorate General of Water Resources Development EIA environmental impact assessment EIRR economic internal rate of return IEE environmental examination initial km kilometer LTACC loan and technical assistance coordination committee MPW of Public Works Ministry NTADP Nusa Tenggara Agricultural Development Project O&M and maintenance operation OEM Evaluation Mission Operations m meter PCR project completion report PIU project implementation unit PPAR performance audit report project PWRS Water Resource Service Provincial RMT management team reconstruction TOR terms of reference WUA users association water    NOTES  (i) The fiscal year (FY) of the Government ends on 31 March.  (ii) In this report, “$” refers to US dollars.  
Operations Evaluation Office, PE-552
 BASIC DATA  EXECUTIVE SUMMARY  MAPS  I. BACKGROUND   A. Rationale  B. Formulation  C. Purpose and Outputs  D. Cost, Financing, and Executing Arrangements  E. Completion and Self-Evaluation  F. Operations Evaluation Office Evaluation  II. PLANNING AND IMPLEMENTATION PERFORMANCE   A. Formulation and Design  B. Achievement of Outputs  C. Cost and Scheduling  D. Procurement and Construction  E. Organization and Management  III. ACHIEVEMENT OF PROJECT PURPOSE   A. Operational Performance  B. Performance of the Operating Entity  C. Economic Aspect  D. Sustainability  IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS   A. Socioeconomic Impact  B. Environmental Impact  C. Impact on Institutions and Policy  V. OVERALL ASSESSMENT   A. Relevance  B. Efficacy  C. Efficiency  D. Sustainability  E. Institutional Development and Other Impacts  F. Overall Project Rating  G. Assessment of ADB and Borrower Performance  VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS   A. Key Issues for the Future  B. Lessons Identified  C. Follow-Up Actions  APPENDIXES
Page ii iii v 1 1 1 2 2 2 3 3 3 4 5 6 7 9 9 9 9 10 10 10 11 12 13 13 13 13 13 13 14 15 15 15 16 17 18
BASIC DATA Flores Emergency Reconstruction Project (Loan 1241-INO[SF])  KEY PROJECT DATA($ million) Actual per ADB As Loan Documents Total Project Cost 43.70 37.80 Foreign Exchange Cost 17.80 13.95 Local Currency Cost 25.90 23.85 ADB Loan Amount/Utilization 26.00 20.64 ADB Loan Amount/Cancellation 3.50   KEY DATES Expected Actual Fact-Finding 27 Jan-19 Feb 1993 Appraisal 11-20 Mar 1993 Loan Negotiations 17-19 May 1993 24-25 May 1993 Board Approval 1 Jul 1993 Loan Agreement 2 Aug 1993 Loan Effectiveness 1 Nov 1993 27 Sep 1993 First Disbursement 29 July 1994 Project Completion 31 Mar 1997 Loan Closing 30 Sep 1996 31 Jul 1997 Months (effectiveness to completion) 35 42  BORROWER of Indonesia Republic  EXECUTING AGENCYMinistry of Public Works  IMPLEMENTING AGENCIESDirectorate General of Highways  Directorate General of Water Resources Development  MISSION DATA  Type of Mission No. of Missions Fact-Finding 1 Appraisal 1 Project Administration Inception Part A 1 Part B 1 Review 5 Project Completion 21 Operations Evaluation 1  
                                                          ADB = Asian Development Bank. 1 First mission was staff consultant’s mission.
No. of Person-Days 20 9   3 5 25 53  
EXECUTIVE SUMMARY  Following the massive earthquake of December 1992 that destroyed lives and infrastructure on Flores Island in eastern Indonesia, the Government of Indonesia asked the Asian Development Bank (ADB) for emergency funds for reconstruction. ADB approved an emergency loan of $26 million on 1 July 1993 from its Special Funds resources. In the coordinated efforts mounted by several external agencies to help with the reconstruction, ADB focused on roads, bridges, and water resources facilities because it was already supporting similar activities in the area. The Project aimed to rehabilitate national and provincial roads, bridges, surface and groundwater irrigation schemes, and flood control works.  As part of the preparation of this project performance audit report, the Operations Evaluation Mission (OEM) visited Flores, met with key government officials, interviewed beneficiaries, and made physical inspections of selected infrastructure. The objectives of this report are to evaluate (i) the processes and procedures in designing and implementing an emergency project; (ii) the quality of work done by ADB, the Government, and the consultants; (iii) the extent to which benefits are being sustained three years after loan closure; and (iv) lessons for future projects.  During project preparation, ADB performance was swift, innovative, and in line with the existing guidelines. Feasibility studies were not prepared, and the usual review meetings were substituted by a loan and technical assistance coordination committee meeting to accommodate the emergency. The project design included several special elements such as more than the standard amount of local cost financing, advance procurement, retroactive financing, and direct hiring. The Executing Agency was the Ministry of Public Works and the implementing agencies were the Directorate General of Highways and the Directorate General of Water Resources Development. Although there was a need to process the Project quickly, ADB emphasized the value of providing earthquake-resistant reconstruction to the extent possible. To ensure appropriate mitigating measures were designed against future earthquake risks, international consultants were engaged.  In implementing the Project, there were several coordination problems. Although direct hiring was approved by ADB, the Government’s consultant approval procedures and disbursement channels were not modified to suit the emergency. As a result, the international consultants’ appointments and the establishment of quality control procedures were delayed. However, physical works were initiated rapidly resulting in an initial period of work that was not supervised by international consultants. In addition, subsequent organizational changes made by the Government reduced the role of consultants to advisers rather than supervisors. This created a problem of balancing urgent reconstruction and long-term sustainability. A more proactive role by ADB during implementation may have helped to improve project quality. The OEM also observed that the infrastructure provided by the Project has deteriorated because of lack of maintenance and inadequate drainage systems.  The OEM confirms that the Project was relevant and the project design was conceptually clear and reasonably flexible to meet the emergency. It incorporated many features to accommodate the urgency of the reconstruction effort and provided adequate inputs to achieve the project objectives. The reconstruction of the national and provincial roads, as well as segments of the roads that were added for socioeconomic reasons, have improved the quality of life for the beneficiaries. The farmers are able to harvest two or three crops per year
depending upon their location. The road links built under the Project provide the sole means of access to some poor coastal villages. The OEM, therefore, assigns a successful rating to the Project.  Some key issues need to be resolved. Inadequate financial resources amid the financial crisis have resulted in poor routine maintenance of roads and structures. ADB and the Government should work together to find a viable solution to the long-term problem of the operation and maintenance of roads and bridges in Indonesia. ADB should also consider how to respond to bureaucratic delays by the borrower and problems caused by poor communications with remote areas during the processing of an emergency loan. It may have to stipulate that for borrowers to take advantage of the flexibility attached to ADB loans processed under emergency conditions, the government should make adequate arrangements to quickly process contracts, channel funds, and provide adequate quality control.  The lessons learned from the Project indicate that the ADBOperations Manual guidelines for processing emergency loans are adequate and appropriate. However, the Government of Indonesia should streamline its approval procedures to expedite the engagement of consultants and contractors to respond to emergencies. ADB help in building the capacity of borrowers to respond effectively to disasters, especially in disaster-prone areas, will be very valuable. Given the flexibility allowed in emergency loans, ADB staff need to play a proactive role during project implementation to ensure timely implementation and quality of work.  The Government needs to take urgent action on providing lateral stops on bridges in the earthquake-prone area to prevent extensive damage due from any future earthquakes. The provincial government should also ensure that routine maintenance is carried out not only because of the large economic investment, but also for safety and environmental protection.  
 A. Rationale  1. On 12 December 1992, an earthquake of magnitude 7.5 on the Richter scale occurred on Flores island1 eastern Indonesia. It was one of the most destructive in recent history. A in wide range of infrastructure and agricultural facilities were destroyed including 750 kilometers (km) of roads, over 700 meters (m) of bridges, and 42 water resources facilities. The main damage occurred over an area of about 6,000 square kilometers, affecting the districts of Flores Timur, Sikka, Ende, and Ngada, and the towns of Maumere and Ende. To cope with the disaster, the Government of Indonesia used a three-stage program: (i) rescue and relief operations, (ii) rehabilitation and recovery, and (iii) reconstruction. A month after the disaster, the Government asked the Asian Development Bank (ADB) for emergency funds to reconstruct the damaged roads, bridges, and water resources facilities on a permanent basis.  2. Along with ADB, several other donor/lending agencies (Australian Agency for International Development, Overseas Economic Cooperation Fund, World Bank, etc.) made a coordinated effort to support reconstruction. Each agency concentrated on the sectors and locations in which it had experience. ADB’s focus was on roads, bridges, and water resources facilities. ADB was already supporting national and provincial road rehabilitation and improvement programs under the tenth and eleventh road sector projects, as well as the Nusa Tenggara Agricultural Development Project (NTADP), which includes rehabilitation and expansion of irrigation facilities.2  B. Formulation  3. In response to the Government’s 13 January 1993 request for assistance in reconstructing infrastructure damaged by the earthquake, the ADB Fact-Finding Mission visited Indonesia from 28 January to 19 February. The loan Appraisal Mission was fielded in mid-March and the draft appraisal report was ready in early April 1993. In view of the emergency nature of the Project, feasibility studies were not prepared and the requirement for management and staff review committee meetings was waived. A loan and technical assistance coordination committee (LTACC) meeting was held on 28 April 1993. Loan negotiations were held in Manila on 24-25 May 1993, and the loan was approved on 1 July and became effective on 27 September 1993.  4. The Project also provided international consultants (70 person-months) to review designs and supervise construction. A chief design engineer (CDE) was provided (18 person-months) to ensure that appropriate earthquake-resistant design criteria were used. In addition, coordination consultants based in Jakarta were made available to coordinate the reconstruction                                                           1of Nusa Tenggara Timur Province and has an area of 14,000 square Flores is one of the three largest islands kilometers with rugged, mountainous, and deeply dissected terrain. The earthquake and the resultant tidal wave caused the death of about 2,000 of the estimated one million people living in the affected areas. 2 (i) Loans 952-INO(SF) and 953-INO:Nusa Tenggara Agricultural Development Project, for $25 million, approved on 7 February 1989 and completed in September 1995; (ii) Loan 966-INO:Tenth Road (Sector) Project, for $120 million, approved on 10 August 1989 and completed in October 1994; and (iii) Loan 1115-INO:Eleventh Road (Sector) Projectapproved on 7 November 1991 and completed in April 1998., for $150 million,  
program.3of the Project, ADB approved a Government request for trainingIn the last six months in Australia and New Zealand in earthquake engineering and earthquake disaster management for 2-3 weeks4for 40 government engineers from Jakarta, Flores, and 17 provinces.  5. During loan negotiations, important project design aspects were considered. ADB and the Government agreed the Project would give high priority to ensure that reconstruction works addressed inappropriate design standards for an earthquake-prone region. The Government confirmed that general reconstruction guidelines were under preparation for earthquake-resistant infrastructure design. The project title was amended by replacing “rehabilitation” with “reconstruction” to avoid misunderstanding within the Government system regarding the Project’s place in the third phase of the Government’s response to the disaster (para. 1).5  C. Purpose and Outputs  6. The main objective of the Project was to assist the Government with the efficient and expeditious reconstruction of the roads, bridges, and water resources facilities damaged by the earthquake. The Project consisted of two parts. Part A was to rehabilitate about 332 km of national and provincial roads and about 335 m of bridges. Part B was to (i) rehabilitate 10 surface irrigation schemes, 14 groundwater irrigation schemes, and 13 riverbank protection and flood control works; (ii) provide equipment; and (iii) finance the incremental operation and maintenance (O&M) of the irrigation schemes. The Project did not include a formal technical assistance component, but the international consultants provided considerable on-the-job training to their counterpart staff. Capacity building was not initially included in the design of the Project as it was already included in similar ongoing loans (Appendix 1). However, at the request of the Government, a training program was supported during implementation (para. 51).  D. Cost, Financing, and Executing Arrangements  7. The total project cost was estimated to be $43.7 million, about 41 percent of it in foreign exchange. ADB provided $26 million, amounting to about 60 percent of the total project cost, from its Special Funds resources to be used over the next three years. The balance of funds for the Project was to be provided by the Government. The loan was to be repaid in 35 years with a 10 year grace period and a service charge of 1 percent per annum.  8. A reconstruction management team (RMT) headed by a steering committee was appointed to implement the Government reconstruction program. The Ministry of Public Works (MPW) was the Executing Agency and worked under the guidance of the steering committee. Implementing agencies for parts A and B were the Directorate General of Highways (DGH) and the Directorate General of Water Resources Development (DGWRD), respectively.  E. Completion and Self-Evaluation                                                            3consultants were engaged for 12 person-months and domestic consultants for For coordination work, international 24 person-months. 4 loan  Atnegotiations, it had been agreed that training would be provided if adequate funds remained after reconstruction. 5 Minutes of loan negotiations held on 24-25 May 1993.  
9. ADB’s project completion report (PCR) is of good quality, and is detailed and objective in its presentations. It reports that ADB responded expeditiously in assisting with the reconstruction effort, especially part A of the Project, which was focused on roads and bridges.6 By project completion, 345 km of roads and 361 m of bridges had been reconstructed, constituting 104 percent and 108 percent of the respective targets. The PCR indicates that part A was more successful due in part to the higher priority given to improving the road network and the greater attention it received from the district highway offices and the RMT. Under part B, 74 percent of the initially targeted irrigation systems were reconstructed and river channels were stabilized at 16 locations.7  10. The ADB PCR identified several useful lessons that are well supported by the evidence. The Operations Evaluation Mission (OEM) endorses many of these lessons. However, it did not cover aspects such as the training program that was added to the Project during implementation. The Indonesia Resident Mission administered the loan, prepared the ADB PCR, and gave the Project an overall rating of partly successful.  F. Operations Evaluation Office Evaluation  11. The objectives of this project performance audit report (PPAR) are to evaluate (i) the processes and procedures in designing and implementing an emergency project; (ii) the quality of work done by ADB, the Government, and the consultants; (iii) the extent to which benefits are being sustained three years after loan closure; and (iv) lessons for future projects. The OEM visited Jakarta, Kupang (the provincial capital), and several project sites on Flores Island. OEM members met with key government officials and interviewed beneficiaries and made physical inspections of selected roads; bridges; and water resources facilities—surface irrigation, tubewells, and river works.8The views of ADB’s concerned departments and offices and those of the Government and MPW were sought and noted to the extent possible.9  II. PLANNING AND IMPLEMENTATION PERFORMANCE  A. Formulation and Design  12. The project rationale and formulation was appropriate and in line with ADB’s strategy of providing funds on concessional terms when an emergency threatens the normal development momentum of a developing member country (Operations Manual, section 26). From the beginning, the focus of the Project also matched Government commitment and the efforts of other aid agencies and good coordination was evident between the different external agencies and the Government. Each agency undertook reconstruction in the areas in which it had prior                                                           6by a staff consultant after his mission to Flores from 11-24 The ADB PCR was based partly on a report prepared Ma 98. 78 eadameg hTy 19itilicaf secruosrer tewae tho  tht ea  tgutht ohthaness as les wce trpjoo  fitemDugn. desi  e to the poor archiving of documents, the OEM was unable to access any of the design drawings and 9cancdeonsp e.t fo seitfard ehatiolculr prns o tisjoceroeretc  Cop PPAR were forwarded to the Borrower and executing/implementing agencies on 14 August 2000 with a request that comments be provided within two weeks. Although the request was followed up subsequently, no comments were received; it is, therefore, assumed that neither the Borrower nor the executing/implementing agencies wishes to comment on the PPAR.  
projects and the possibility of quickly providing experienced personnel. Although there was a need to implement the Project quickly, ADB emphasized the value of providing earthquake-resistant reconstruction to the extent possible.10 To ensure appropriate mitigating measures were designed against future earthquake risks, a CDE was to be engaged.  13. During project formulation, ADB followed itsOperations Manual on Rehabilitation Assistance after Disasters and included several design features recommended in the manual. These design elements catered to the emergency nature of the Project. First, the loan was financed by ADB’s Special Funds resources because of the high level of poverty on Flores and the increased burden caused by the earthquake. Second, it provided more than the standard amount of local cost financing because of inadequate government funds for such unplanned reconstruction (para. 7). Third, to facilitate expeditious implementation of the Project, ADB permitted advance procurement and retroactive financing up to 10 percent of the loan. Fourth, approval was given for the Government to directly appoint civil works contractors already engaged under the ongoing ADB-financed road and water resources facilities projects on Flores. Fifth, instead of providing supplementary financing for ongoing ADB projects, the required rehabilitation of both roads and irrigation schemes were included as components of the same loan. Finally, to enable timely release of funds, ADB agreed that the Government would establish a special account after loan effectiveness.  14. While the Project contained these useful design elements to facilitate smooth implementation, there were several coordination problems (para. 33). During project design, the coordination between parts A and B was inadequate. This was apparent in the terms of reference (TOR) for the two parts. The TOR had different quality control and supervision arrangements,11 caused confusion during implementation, exacerbated by the shared which supervision arrangements between the World Bank and ADB-appointed consultants.12Although the intention to share the consultants was useful, having one set of clear and strict supervision and quality control procedures would have compelled the contractors, consultants, and local agencies to abide by the set procedures.  15. Early project formulation is crucial for an emergency loan and ADB appears to have responded well to this need. The LTACC meeting was held within three months of the Fact-Finding Mission, and the ADB Board of Directors approved the loan within six months of the Government request for it (para. 3). However, it took about three months from loan approval to loan effectiveness because of the time required to submit a legal opinion regarding the loan document by the Ministry of Justice. The Government made no special effort to speed up these legal procedures. Although direct hiring was approved by ADB, the government consultant approval procedures were not modified to suit the emergency nature of the Project and this led to delays in consultant approvals (para. 22).  
                                                          10The OEM recognizes and supports the idea that improved standards incorporating earthquake-resistant designs should be used and that the quality of work has to be improved. However, it believes that the earthquake damage was not solely due to inappropriate design standards and poor quality work. With magnitude 7.5 earthquakes, considerable damage can be expected regardless of the design standards or the quality of the work done in the affected area. 11The TORs for the roads consultant made clear their role in certifying payments to contractors, but the TORs for water resources facilities consultants were to assist the chief construction engineer to review and approve all payments of contractors. The TORs were prepared under a time constraint by different project divisions of ADB. 12 The RMT consisted of several international consultants tasked with coordinating and supervising the reconstruction efforts. Of these, the CDE and coordination consultants were financed by ADB while the chief construction engineer and quality assurance engineer were financed by the World Bank.