71178 NEPAL: Bridges Improvement and Maintenance Program Technical Assessment South Asia Region (SAR) June 27, 2012 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version CONTENTS 1 EXECUTIVE SUMMARY ................................................................................................................... 1 2 MACROECONOMIC, FISCAL, AND POLITICAL CONTEXT FOR THE SRN BRIDGE PROGRAM .... 1 3 STRATEGIC RELEVANCE OF THE SRN BRIDGE PROGRAM ......................................................... 4 4 DETAILED PROGRAM DEFINITION ................................................................................................ 5 4.1 Program Summary ................................................................................................................ 5 4.2 Envisaged Program Scope – 5 Year Horizon ........................................................................ 6 4.3 Bridges Outside of the SRN Bridge Program‟s 5 Year Scope .............................................. 7 4.4 Sizing up the Future SRN Bridge Program ........................................................................... 8 4.5 Important Policy and Political Economy Considerations ..................................................... 9 4.6 SRN Bridge Needs and the Case for Improving Program Effectiveness ............................ 10 5 TECHNICAL SOUNDNESS OF THE SRN BRIDGE PROGRAM ........................................................ 11 5.1 Implementation Approach................................................................................................... 11 5.2 Institutional Arrangements .................................................................................................. 12 5.2.1 Broader Institutional and Governance Framework ........................................................ 13 5.2.2 Governance Arrangements for Technical Aspects of the Program................................. 15 5.3 Contract and Quality Management Considerations ............................................................ 16 5.3.1 Regional Directorates and Quality Management ........................................................... 16 5.4 Engineering Design and Contractor Capacity ..................................................................... 17 5.5 Legal and Regulatory Framework Relating to Technical Functions................................... 18 6 BUDGET AND EXPENDITURE FRAMEWORK ................................................................................ 19 6.1 Budget Allocations .............................................................................................................. 20 6.2 Expenditure Framework ...................................................................................................... 20 7 RESULTS FRAMEWORK ................................................................................................................ 21 7.1 Government‟s Intended Results and the Program Development Objective ........................ 21 7.2 Setting Disbursement Linked Indicators ............................................................................. 22 7.2.2 Monitoring and Evaluating Results ................................................................................ 23 8 PROGRAM ECONOMIC EVALUATION .......................................................................................... 24 8.1 Introduction ......................................................................................................................... 24 8.2 Appraisal Approach ............................................................................................................ 24 8.2.2 Appraisal Results ............................................................................................................ 25 9 ANNEXES ....................................................................................................................................... 27 ANNEX 1 CLASSIFICATION OF MAINTENANCE INTERVENTIONS.................................................... 28 i Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version ANNEX 2 HISTORICAL EXPENDITURE FRAMEWORK ...................................................................... 29 ANNEX 3 HISTORICAL VARIANCE AGAINST BUDGET FY2009/10 .................................................. 30 ANNEX 4 MAP OF SRN BRIDGE PROGRAM BRIDGES ...................................................................... 31 ii Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version NEPAL BRIDGE MAINTENANCE AND IMPROVEMENT PROGRAM (BIMP) Technical Assessment June 27, 2012 ACRONYMS ACRONYM EXPANDED DEF. ACRONYM EXPANDED DEF. ARMP Annual Road Maintenance Plan IMF International Monetary Fund BMS Bridge Management System M&E Monitoring and Evaluation CA Constituent Assembly MIS Management Information System Commission for the Investigation of CIAA MoF Ministry of Finance Abuse of Authority Ministry of Physical Planning, Works DLI Disbursement Linked Indicator MOPPWTM and Transport Management DOR Department of Roads OAG Office of the Auditor General Financial Comptroller General‟s FCGO PAD Program Appraisal Document Office FY Fiscal Year PWD Public Works Directives GON Government of Nepal RSDP Road Sector Development Project International Development IDA SRN Strategic Road Network Association iii Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 1 EXECUTIVE SUMMARY The Department of Road„s program of Strategic Roads Network bridge investment (hereafter referred to as the „SRN Bridge Program‟) is strategically relevant to Nepal‟s development. Strategic Road Network roads comprise Nepal‟s primary corridors for trade and economic activities. They also provide socially important connectivity between development regions. Current and planned SRN roads are essential for ensuring the sustainability of hard-won peace and stability by providing connectivity to post conflict areas in line with the GON‟s strategy of integration. The SRN Bridge Program has the necessary technical and institutional framework to support the Bank‟s proposed operation. However, there exists considerable scope for improving the SRN Bridge Program‟s processes in order to deliver optimum results. Specific areas for improvement include: (i) planning and budgeting; (ii) quality control; (iii) procurement and contract management; and (iv) monitoring and evaluation. These are fundamentally important for planning and implementing capital investment effectively, which is the primary determinant of the SRN Bridge Program‟s intended outcomes. DOR‟s approach to addressing SRN bridges through a dedicated program is technically sound for the following reasons: (i) the SRN is a nationally significant network of infrastructure assets that cannot function without bridges to connect different linkages; (ii) bridge structures are fundamentally different from roads and involve unique technical considerations; (iii) the political economy associated with SRN bridges is very different from other types of bridges; and (iv) many critical linkages of the SRN require a high density of bridges to provide year-round access. The general structure for managing the SRN Bridge Program is sound. The Department of Roads relies heavily on its 25 divisional offices to implement investments under the technical oversight of a specialized Kathmandu-based unit. This is appropriate given the challenges of travel throughout Nepal, the need for close supervision of civil works, and the nature of SRN bridge assets concerned. Most SRN bridges are short in span and relatively simple structures. While bridges do require specialized expertise, most SRN bridges are not particularly complex. Those bridges that are complex in nature fall under the jurisdiction of DOR‟s specialized Kathmandu-based unit. In contrast, the SRN Bridge Program's budget framework requires immediate attention to support desired Program results. Most notably, the SRN Bridge Program needs independent capital expenditure budgets that prevent diversion for other purposes. The current budgeting system does not allow the SRN Bridge Program to credibly plan and execute multi-year contracts effectively. Changing the current budget framework is essential to improving the Program‟s ability to deliver results. The Department of Roads has a Bridge Policy and Strategy (2004) which sets out the overall vision for the SRN Bridge Program along with its intended outcomes. This, together with the Public Works Directives, the Guidelines for Inspection and Maintenance of Bridges (2007) and DOR‟s environmental and social guidelines, provides a sound basis for the SRN Bridge Program. The Department of Roads is one of the GON‟s strongest implementing agencies and has benefited from a long history of interaction with the Bank and other development partners. This experience has helped the department to develop implementation frameworks that are in line with best practice. Applying these frameworks consistently, monitoring results, and subsequently revising key processes to improve effectiveness is now the next stage in DOR‟s development and a key opportunity for the PforR approach to add value. 2 MACROECONOMIC, FISCAL, AND POLITICAL CONTEXT FOR THE SRN BRIDGE PROGRAM 1. Nepal is one of the poorest countries in the world and has the second lowest GDP per capita in the South Asia Region. Remittances play a large role in the Nepalese economy and were equivalent to 20% 1 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version of GDP in 2010 according to the World Bank‟s Migration and Remittances Unit statistics.1 The International Monetary Fund‟s 2011 Article IV consultations note that large remittance inflows have significantly contributed to Nepal‟s trade deficit (estimated at 24% of GDP) by increasing consumption without a commensurate increase in productive capacity. The net result of remittances has been an appreciation of Nepal‟s real effective exchange rate at the expense of international competitiveness – especially relative to India. Based on different analytical techniques, the Nepalese rupee appears 10% to 26% overvalued which may complicate the Nepal Rastra Bank‟s efforts to maintain its nominal exchange rate peg with the Indian Rupee. 2. Between 2005 and 2010, Nepal‟s real GDP grew at an average annual rate of 4.2%. Services comprised both the largest and the fastest growing sector of the Nepalese economy during this period. However, the agriculture sector is still very important to Nepal‟s economy and population. In 2010 agriculture accounted for more than a third of GDP. Volatile agricultural production, high oil prices, and imported inflation from India have recently contributed to high food price inflation in Nepal. The World Bank‟s Economic Update on Nepal (November 2011) noted that the prices of vegetables, fruit, sugar, milk, and grain had increased by 47%, 28%, 23%, 17%, and 10% respectively in the 12 months prior to the end of FY 2010/11. Higher food prices are particularly relevant to poverty in Nepal. A 2011 Asian Development Bank (ADB) study estimated that 10%, 20%, or 30% increases in food prices would likely increase poverty in Nepal by 2.0%, 4.1%, or 6.1% respectively.2 3. The proportion of Nepal‟s population living in rural areas is estimated at 87%. This figure is the the highest in South Asia and one of the highest in the world. Nepal‟s topography and geology, combined with a rural population distribution, significantly complicate efforts to provide adequate transport infrastructure. According to the World Bank‟s Logistic Performance Index estimates from 2008, the quality of Nepal‟s trade and transport related infrastructure is below the average for all low income countries. Survey data used to compile the Logistics Performance Index suggest that Nepal‟s road infrastructure is particularly poor. Approximately 80% of respondents ranked Nepal‟s roads as low / very low quality and 100% of survey respondents ranked the cost of road transport as high / very high.3 Table 2.A Key Economic and Other Statistics SAR (2010 figures or other as marked) INDICATOR AFGHANISTAN BANGLADESH BHUTAN NEPAL INDIA MALDIVES PAKISTAN SRI LANKA GDP per capita [current US$] 501 675 2088 525 1410 6039 1019 2375 Agriculture, value added [% of GDP] 29.9 18.6 N/A 36.1 19.0 3.1 21.2 12.8 Rural population [% of total population] 78.7 76.4 74.6 86.6 72.3 72.3 66.8 84.3 External balance on goods and services [% of GDP] -38.1 -6.6 N/A -27.3 -3.2 -17.6 -5.2 -9.1 Net current transfers from abroad [as % of GDP] N/A 0.6 N/A 24.1 3.1 N/A 7.1 7.3 Ease of doing business [1=most business-friendly] 154 118 146 110 139 78 96 98 † Logistics performance index: Quality of trade and 1.9 2.5 1.8 1.8 2.9 2.2 2.1 1.9 transport-related infrastructure [1=low to 5=high] †† Time required to enforce a contract [days] 1642 1442 225 910 1420 665 976 1318 Cost to import [US$ per container] 3830 1370 2805 2095 1070 1526 705 745 Sources: World Development Indicators, Doing Business Survey †† figures from 2009, †figures from 2008 4. Nepal‟s fiscal position is stable. However, it is heavily dependent on foreign assistance and taxes on imported goods. The Government of Nepal‟s (GON) overall expenditure budget increased by 26% in 2011/12 to NPR 384.9 billion (US$ 4.7 billion). Foreign grants and loans enabled much of this expansion and were roughly equivalent to the amount by which GON‟s budget grew. Support from the International Development Association (IDA) and the Asian Development Bank (ADB) alone accounted for 4% and 4.25% of the 2011/12 budget respectively. GON‟s primary and overall fiscal deficits are steadily 1 World Bank Migration and Remittances website available at: http://go.worldbank.org/A8EKPX2IA0 2 Asian Development Bank; “Global Food Price Inflation and Developing Asia,� 2011. 3 http://info.worldbank.org/etools/tradesurvey/mode2a.asp?countryID=85 2 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version increasing. However, public debt levels are yet to reach unsustainable levels. Gross borrowings remain low relative to GDP (34%) and are the lowest in South Asia by a significant margin. Similarly, Nepal‟s level of government spending is lower than the regional average. However, Nepal‟s general government revenues relative to GDP are below the overall average for low income countries (LICs). The International Monetary Fund notes that reforming GON‟s framework for revenue generation will be critical for Nepal‟s long term fiscal health.4 Improving the quality of the GON‟s expenditures is an important parallel consideration. This is especially crucial in the transport sector which accounts for a significant and growing proportion of the GON‟s expenditures on capital investment. Table 2.B Fiscal Statistics for the South Asia Region (2012 estimates or otherwise marked) INDICATOR AFGHANISTAN BANGLADESH BHUTAN NEPAL INDIA MALDIVES PAKISTAN SRI LANKA General gov. primary net lending/borrowing [% of GDP] N/A N/A N/A -1.6 -3.9 -13.9 -2.9 N/A General gov. net lending/borrowing [% of GDP] -1.5 -3.9 -6.4 -2.6 -8.3 -16.6 -6.7 -6.2 General government gross debt [% of GDP] N/A N/A 99.2 34.0 67.6 79.0 61.7 N/A General government revenue [% of GDP] 23.6 13.1 38.6 17.8 18.8 30.7 12.8 15.0 General government total expenditure [% of GDP] 25.1 17.0 44.9 20.4 27.1 47.3 19.5 21.2 Source: World Economic Outlook Database and World Development Indicators † Afghanistan figure from 2008. All other figures from 2011. 5. GON‟s fiscal priorities are shifting toward greater levels of investment in physical infrastructure in an effort to drive economic growth and to achieve policy goals relating to socioeconomic integration. GON budgeted US$895 million for capital investment in 2011/12 which was equivalent to roughly 5.4% of estimated 2011 GDP. Budgeted spending in the transport sector was US$458 million (2.8% of GDP) which represented a 38% increase from the previous fiscal year (2010/11). The Ministry of Physical Planning, Works and Transport Management (MoPPWTM) is GON‟s lead line ministry for developing transport infrastructure and manages over four-fifths if of the all budgeted expenditures in the sector. MoPPWTM‟s transport sector capital spending alone accounted for nearly 39% of the GON‟s entire capital expenditure budget during the 2011/12 fiscal year. A key aim of increased transport sector investment is to connect all 75 district headquarters with all-weather road access. Increasing resource allocations to the transport sector show the importance of achieving this policy objective. Table 2.C Spending and Revenue Patterns in Nepal and SAR (2010 figures) INDICATOR AFGHANISTAN BANGLADESH BHUTAN NEPAL INDIA MALDIVES PAKISTAN SRI LANKA Public spending on education, total [% of GDP] N/A 2.4 5.8 3.0 4.4 0.0 1.8 N/A Health expenditure, public [% of GDP] 2.3 1.1 5.3 1.3 1.3 4.1 0.6 1.8 Military expenditure [% of GDP] N/A 1.4 N/A 1.0 3.1 N/A 4.0 5.0 Customs and other import duties [% of tax revenue] N/A N/A 2.9 31.2 25.0 64.4 16.0 13.1 Taxes on income, profit & capital gains [% of revenue] N/A N/A 13.6 15.1 27.0 2.0 19.0 12.7 Taxes on goods and services [% of revenue] N/A N/A 10.8 30.0 28.9 12.7 30.3 56.8 Source: World Economic Outlook Database and World Development Indicators 6. As of April 2012, key political challenges facing Nepal are: (i) finalizing a new Constitution; (ii) determining how to restructure the Government based on a federal model; and (iii) continuing the process of post-conflict integration. Nepal‟s Interim Constitution (2007) provides for a Constituent Assembly to draft a Constitution and act as a temporary legislative body. However, there have been four successful motions to extend the Interim Constitution on account of political impasse. The most recent of these extensions expired in late May 2012. Provisions within the Interim Constitution also provide for a Restructuring Committee to research and propose a federal democratic structure for Government. The Restructuring Committee has published multiple recommendations from its majority / minority factions including models with 14, 11, and 6 provinces or states. Finalizing details of Nepal‟s federal structure remains politically divisive. Despite political uncertainties, GON‟s line ministries and departments continue to discharge their functions. Initiatives such as the SRN Bridge Program enjoy widespread 4 IMF Country Report No. 11/319 from November 2011 3 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version political support and there is common consensus that Nepal‟s transport infrastructure needs increased levels of investment. 3 STRATEGIC RELEVANCE OF THE SRN BRIDGE PROGRAM 7. Nepal‟s Strategic Roads Network (SRN) includes approximately 10,835 km of existing roads (769 km of roads under construction and 2,509 km of planned roads). The Strategic Roads Network is different from Nepal‟s other road and bridge transport infrastructure because of its critical role in economic growth and social development. SRN roads comprise Nepal‟s primary corridors for trade and economic activity. The East-West Highway (SRN road H001) is particularly important in this regard. SRN roads also form the key linkages providing socially important connectivity between Nepal‟s development regions. The current and planned SRN is essential for ensuring the sustainability of hard-won peace and stability by providing connectivity to post conflict areas in line with the GON‟s strategy of inclusion. According to a 2009 study, the intensity of conflict in Nepal between 1996 and 2006 showed an inverse correlation with the availability of road transport infrastructure. The causality of this relationship is uncertain, but may result from road infrastructure‟s role in: (i) providing access to economic opportunity; and/or (ii) facilitating Government‟s efforts to counter insurgency once it has started (Do & Iyer 2009).5 8. SRN Bridges are essential for providing year round road access. Many existing SRN roads do not provide year-round access for lack of adequate bridge structures. During summer months heavy rains make many SRN routes that lack bridges impassable. Much of the SRN‟s existing bridge stock is 35-40 years old and in desperate need of rehabilitation and repair. Constructing and maintaining the Strategic Roads Network and its bridges falls under the DOR‟s mandate. Managing the SRN Bridge Program effectively is significant to Nepal‟s development as the Strategic Roads Network cannot function reliably as an integrated transport network without bridges to connect different linkages. 9. In late 2011 / early 2012 the Bank-supported Road Sector Development Project (RSDP) assisted The Department of Roads with commissioning an inventory of bridges on the SRN. The results of this inventory indicate that there are 1,537 bridges on SRN roads. The average length of an existing SRN bridge is approximately 43 meters, 47% of SRN bridges are single span (average length 22 m) and only about 10% of SRN bridges have six or more spans (average length of 214m). Roughly a third of SRN bridges are located along the East-West Highway, which forms the backbone of Nepal‟s national transport network. Nepal‟s unique topography requires a relatively large number of bridges. For example, there is approximately 1 SRN bridge per 2 km of the East-West Highway. The Department of Roads is planning to expand the Strategic Roads Network further and to upgrade roads that presently provide only seasonal connectivity. DOR‟s 2012 bridge asset inventory noted that there are 515 gaps on the Strategic Roads Network that will require bridges. The SRN Bridge Program will play a lead role in addressing a portion of new bridge construction needed for the SRN‟s continued development. Figure 3.A (below) describes the existing SRN and its bridges. 5 Do, Quy-Toan (World Bank DECPI); Iyer, Lakshmi; “Geography, Poverty and Conflict in Nepal� Harvard Business School, 2009. 4 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Figure 3.A Snapshot of Nepal’s SRN and Its Bridges Composition of Existing Location of Existing SRN Location of SRN Bridges by SRN Roads Roads by Dev. Region Road Type Other National Highway Eastern Central East Highway Feeder 427 2,495 km 2,978 km West 31% Road 28% Highway Network 533 (Major) 35% 51% Postal Road Far 6% Western Western 1,253 km 1,967 km Feeder Feeder Mid Hill Mid- Roads Road Highway Western 578 Ordinary 7% 2,143 km 37% (Minor) 5% Sources: DOR Statistics of SRN Roads 2009/10 and 2012 SRN bridge asset inventory data 4 DETAILED PROGRAM DEFINITION 4.1 PROGRAM SUMMARY 10. The SRN Bridge Program is a part of Department of Road‟s overall program of capital investment in Nepal‟s road and bridge infrastructure. The scope of the DOR‟s SRN Bridge Program encompasses three primary activities: (i) planning, technical design and quality control of bridges; (ii) major and minor maintenance of existing bridge assets; and (iii) investments in new bridge construction. Planning and implementing capital investment effectively is the most critical part of achieving the SRN Bridge Program‟s intended outcomes. Table 4.A provides a summary of the core elements that comprise the SRN Bridge Program. In addition, the Roads Board Nepal (RBN) provides complementary support by funding and monitoring the implementation of routine maintenance of SRN bridges. RBN support forms a part of DOR‟s Annual Road Maintenance Plans (ARMP). Table 4.A summarizes the scope of the SRN Bridge Program. Annex 1 contains detailed definitions of different types of maintenance interventions. Table 4.A Summary of SRN Bridge Program ELEMENT OF SCOPE DESCRIPTION AND EXPLANATION #1 Planning technical design and  Engineering design, environmental and social impact assessment and quality management of bridges management, construction supervision, site surveys, quality management, etc.  Major maintenance activities require engineering inputs and involve significant civil works (e.g. structural repairs) #2A Major bridge maintenance  In practice DOR differentiates between major and minor maintenance by whether an activity requires engineering inputs  Does not involve engineering design input #2B Minor bridge maintenance  Examples include minor railing repair, drainage improvement, minor expansion joint repair, etc.  Involves new structures along existing alignments #3 New bridge construction  Many existing SRN roads lack bridge structures and vehicles must ford crossings when seasonal conditions allow. New bridges can allow for year-round access on such roads 5 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 4.2 ENVISAGED PROGRAM SCOPE – 5 YEAR HORIZON 11. The PforR operation to support the SRN Bridge Program will span over a period of five years (hereafter the ‘Program support period’). Over this time period, the Program will spend approximately US$147.6 million. IDA will finance approximately US$60 million (41% of total expenditure under the Program) of this amount and the Government will fund the remaining US$87.6 million (59%). The scope of the SRN Bridge Program includes the following:  Design, feasibility study, and quality management of SRN bridges (US$7.4 million): the Program will allocate an amount not less than 5 percent of its civil works budget for activities to plan, prepare, supervise, and monitor the quality of civil works. This amount also includes the cost of identifying and managing social and environmental impacts. The Program will spend these funds on consultancy services to: (i) prepare detailed engineering designs; (ii) supervise bridge construction works; (iii) undertake quality assurance monitoring; (iv) collect data on bridge condition for the Bridge Management System; (v) audit different aspects of the program and verify Disbursement Linked Indicator achievement; and (vi) train staff and carry out miscellaneous activities.  SRN bridge maintenance (US$58.5 million): The Program will support approximately 98 bridges (about 6,225 meters) that urgently need major maintenance in order to prevent impending failures. Many of these bridges are considered structurally unsound and therefore unsafe. In addition, the Program will also complete major maintenance (233 bridges; totaling 10,900 meters in length) and minor maintenance (95 bridges; totaling 3,500 meters in length) on bridges that are in relatively stable condition.  SRN bridge construction (US$81.7 million): The SRN Bridge Program will complete construction on approximately 121 new bridges (6,000 meters). This figure includes approximately 95 bridges (5,000 meters) in DOR‟s backlog of bridges under construction. In addition, the Program will complete 26 new bridges (1,000 meters) to provide year round access on existing SRN roads that currently become impassible during the rainy season. 12. The Government has not specified a finite life for the SRN Bridge Program and some investments will not reach completion within the Program support period due to the duration of works. For example, new bridge construction generally takes between 3 and 5 years. New construction taken up in years 4 or 5 of the PforR operation is therefore unlikely to generate outputs within the Program support period. Similarly major maintenance contracts often take 2 years to reach completion. The Department of Roads and the Bank‟s Task Team have estimated a Program expenditure profile based on: (i) investment needs; (ii) estimated durations for different types of works; (iii), the need to adequately fund all active contracts. Agreed DLI values reflect the Program‟s estimated expenditure profile and the timing of when works should reach completion. Table 4.B summarizes activities, expenditures, and envisaged outputs over the Program period. Early Program years focus primarily on addressing urgent major maintenance needs and completing DOR‟s exiting backlog of bridges under construction. Later Program years will address non- urgent major maintenance and construction of entirely new crossings. 6 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Table 4.B Envisaged SRN Bridge Program Activities, Expenditures, and Outputs PROGRAM ACTIVITY UNIT YR. 0† YR. 1 YR. 2 YR. 3 YR. 4 YR. 5 TOTAL Urgent major maintenance Program Spend [US$ m] 6.5 13.3 6.3 0.0 0.0 26.1 Included in DLI-1 # bridges taken up 9 33 56 0 0 0 98 # bridges completed 8 1 33 56 0 0 98 # meters completed 325 100 2,150 3,650 0 0 6,225 Non urgent major maintenance Program Spend [US$ m] 0.0 0.0 5.0 11.5 14.8 31.3 Included in DLI-1 # bridges taken up 0 0 102 131 168 401 # bridges completed 0 0 0 102 131 233 # meters completed 0 0 0 4,800 6,100 10,900 Minor maintenance Amount [US$ m] 0.2 0.2 0.2 0.2 0.2 1.1 Included in DLI-2 # bridges taken up 19 19 19 19 19 95 # bridges completed 19 19 19 19 19 95 # meters completed 700 700 700 700 700 3,500 New construction (crossings not Program Spend [US$ m] already under construction) 1.8 3.6 5.5 7.2 9.2 27.3 Included in DLI-3 # bridges taken up 13 13 13 12 20 71 # bridges completed 0 0 0 13 13 26 # meters completed 0 0 0 500 500 1,000 New construction (backlog already Program Spend [US$ m] under construction) 18.6 10.9 10.9 9.4 4.5 54.4 Included in DLI-3 # bridges completed 12 20 20 19 16 8 95 # meters completed 600 1,100 1,100 1,000 800 400 5,000 Design, feasibility study, and Program Spend [US$ m] quality management 2.4 1.5 1.5 1.2 0.9 7.4 EST. DOR SPEND / YEAR (US$ million) 29.5 29.5 29.5 29.5 29.5 147.6 4.3 BRIDGES OUTSIDE OF THE SRN BRIDGE PROGRAM‟S 5 YEAR SCOPE 13. Over the five years period the SRN Bridge Program will concern approximately 760 SRN Bridges. This figure is not equal to the entire stock of SRN bridges in Nepal. Some SRN bridges will not require investment from the SRN Bridge Program over the next five years (i.e. they are already in good condition). Others have lower priority defects, and their maintenance can be deferred while the SRN Bridge Program uses available resources on higher priority needs. Stand alone integrated road projects (e.g., with JICA, ADB, Government of India support) will also develop many of the new SRN crossings outside the scope of the SRN Bridge Program. DOR‟s approach to bridge construction involves both stand alone projects that typically concern integrated road linkages and the SRN Bridge Program. This dual approach provides The Department of Roads with flexibility to accommodate technical considerations, development partner requirements, or broader GON policy objectives as necessary. Beyond these „natural‟ boundaries, restrictions on the Bank‟s PforR instrument will apply to approximately 24 bridges from the SRN Bridge Program. 14. OP/BP 9.00, which governs the PforR instrument, explicitly excludes activities from using the PforR instrument that: (i) are judged to be likely to have a significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people; or (ii) involve procurement of goods, works, and services under high-value contracts�. As of June 2012, the bank‟s thresholds for „high value‟ contracts included: (i) works contracts estimated to cost US$50 million equivalent or more per contract; (ii) goods, estimated to cost US$30 million equivalent or more per contract; (iii) non-consulting 7 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version services, estimated to cost US$20 million equivalent or more per contract; and (iv) consultants‟ services, estimated to cost US$15 million equivalent or more per contract. Regardless of the Bank‟s support, the SRN Bridge Program would not include any „high value‟ contracts given the nature of investments concerned. However, DOR‟s 2012 bridge inventory has identified 49 existing SRN bridges, 5 SRN bridges under construction, and 21 planned new SRN crossings that fall within the boundaries of Nepal‟s national parks. Since these areas are considered to be environmentally sensitive, the bridges within their boundaries will be excluded from the SRN Bridge Program in order to comply with OP/BP 9.00. 15. The Department of Roads‟ 2012 bridge asset inventory has identified that the majority of existing or proposed SRN bridges within national parks are low priority or already part of stand-alone projects outside of the SRN Bridge Program. Regardless of OP/BP 9.00 requirements, the Program would therefore be unlikely to undertake works on most SRN bridges within national parks during the next five years. Table 4.C summarizes the relatively few SRN bridges that are within national parks and would otherwise be relevant to the SRN Bridge Program. The Department of Roads may choose to address these bridges through other programs or projects. However, the Ministry of Finance (MoF) will make budget provisions for such works outside of the SRN Bridge Program‟s expenditure framework. Outputs related to these bridges will not count towards Disbursement-Linked Indicators for the operation under the PforR instrument. Table 4.C Summary of Relevant PforR Exclusions for 5 Year SRN Bridge Program NOS. OF US$ MIL ITEM NPR '000 BRIDGES EQU. Major maintenance 6 58,734 0.73 Minor maintenance 6 2,135 0.03 Bridges under construction 5 228,600 2.83 New crossings 7 108,000 1.34 TOTAL relevant to 5 year program 24 397,469 4.92 % of estimated 5 year SRN Bridge Program 3.3% 4.4 SIZING UP THE FUTURE SRN BRIDGE PROGRAM 16. Most SRN bridges are short in span and relatively simple structures. While bridges do require specialized expertise, most SRN bridges are simple and relatively inexpensive. The average span of an SRN bridge is about 43 meters, 47% of them are single span (average length 22 m) and only about 10% have 6 or more spans (average length of 214 m). Figure 4.A below summarizes the distribution of span length for existing and planned SRN bridges. 8 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Figure 4.A Distribution of Span Length for SRN Bridges 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Major Maintenance Major maintenance Under maintenance Under construction New br. needed for All existing bridges needed (URGENT) needed (not urgent) existing alignment needing / under major maintenance more than 100 meters 50 meters to 100 meters 25 meters to 50 meters up to 25 meters 17. Figure 4.B summarizes the distribution of estimated per-bridge costs for different potential SRN Bridge Program investments. Estimates based on DOR‟s 2012 bridge asset survey suggest that for 71% of SRN bridges requiring major maintenance interventions the costs will be less than US$250,000. Similar estimates suggest that 85% of new bridges that the SRN Bridge Program may build are likely to cost less than US$1 million per bridge. The single most expensive bridge that the SRN Bridge Program is considering should cost between US$5 - 10 million. Costs of engineering designs, feasibility studies, and quality management are estimated to be approximately 5% of capital spending. Figure 4.B Distribution of Estimated Per-Bridge Costs for Program Investments 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Major Maintenance Major maintenance Under maintenance Under construction New br. needed for All works on existing needed (URGENT) needed (not urgent) existing alignment bridges 1000k USD to 10m USD 500k USD to 1000k USD 200k USD to 500k USD 50k USD to 200k USD up to 50k USD 18. Cost estimates for SRN Bridge Program investments are approximate and will depend on final detailed designs and macro-economic factors (e.g., inflation, exchange rates, commodity prices, etc.). However, these rough cost estimates are a useful tool for planning medium term expenditures. DOR‟s 2012 bridge asset inventory provided a basis for developing a preliminary five year investment plan using estimated costs in order to prepare the PforR operation and set appropriate DLI values. Although approximate in nature, this exercise enabled the SRN Bridge Program to link a medium term budget envelope with a „bottom up‟ analysis of network wide investment needs. Continuing and improving theses initial planning exercises will significantly improve DOR‟s ability to manage the SRN Bridge Program for results. 4.5 IMPORTANT POLICY AND POLITICAL ECONOMY CONSIDERATIONS 19. Providing year-round access to social and economic facilities and services for residents in remote areas is a key aim of the SNR Bridge Program. This is critically important to the GON's strategy of post- 9 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version conflict integration and overall social development. Many planned SRN bridges will improve access on roads that link Nepal's remotest areas to the critical East-West Highway (e.g., the Karnali and Rapti highways). Several SRN roads that will benefit from new bridges also serve post conflict areas - most notably in the mid-western development region. Whilst the case for these new bridges is often difficult to capture through the traditional economic analysis, they deliver significant benefits to Nepal‟s development and are hugely important from a policy perspective. There is accordingly a strong expectation for the SRN Bridge Program to continue building new bridges at an aggressive pace whilst simultaneously maintaining existing bridges. Similarly, completing construction in progress for a backlog of approximately 95 SRN bridges already under construction is a high priority for the SRN Bridge Program. 20. Additional funding from the PforR operation will support the SRN Bridge Program to deliver an increased volume of civil works, which would otherwise not be possible with Government funding alone. Regardless of the PforR operation, The Department of Roads would continue taking up new SRN bridge construction on account of the social and political importance of new bridges. However, IDA funds from the PforR operation will prevent the SRN Bridge Program from making a tradeoff between completing its backlog of bridges under construction and undertaking critical major maintenance needed to sustain the existing stock of SRN bridges. The amount of IDA funds committed to the PfroR operation (US$60 million) is roughly equivalent to the expected amount of SRN Bridge Program spending on major maintenance over the next five years (US$58.5 million). 21. Political pressures have previously influenced the SRN Bridge Program‟s ability to deliver intended results. Historically, Program results have suffered on account of a budget framework that does not accommodate different political economy considerations between SRN and other types of bridges. In the past, the SRN bridge program‟s capital budgets also supported bridge development on local and urban roads. The benefits of SRN bridge construction and maintenance accrue broadly as SRN roads are the major and most widely influential roads in Nepal‟s road hierarchy. In contrast, the benefits of bridge construction on local and urban roads typically accrue very narrowly to local road users. This key difference provides an incentive for political actors to divert investment from SRN bridges to LRN bridges. Comingled capital budgets provided a means for doing this without transparency and without proper budgetary controls. The Program Action Plan includes agreement that the Ministry of Finance will revise the Program‟s expenditure framework in order to prevent this from occurring in the future as discussed in section 6.2. 4.6 SRN BRIDGE NEEDS AND THE CASE FOR IMPROVING PROGRAM EFFECTIVENESS 22. DOR‟s 2012 bridge asset inventory classified the stock of existing SRN bridges according to condition and identified a list of new crossings required to improve year-round access on SRN roads. Table 4.D summarizes findings from this survey. Table 4.D Existing and Planned SRN Bridge Stock According to Region and Condition MAJOR MAINT. MAJOR MAINT. MINOR ROUTINE # EXISTING # PLANNED REGION REQUIRED REQUIRED MAINTENANCE MAINTENANCE BRIDGES BRIDGES (URGENT) (NOT URGENT) NEEDED NEEDED Eastern 337 17 214 15 91 120 Central 444 45 167 22 206 135 Western 308 9 131 17 146 73 Mid Western 311 5 80 28 197 145 Far Western 137 13 35 18 71 42 † TOTALS 1537 89 627 100 711 515 10 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version † There are an additional 9 bridges currently undergoing urgent major maintenance under the SRN Bridge Program. Once completed, these bridges will count towards DLIs as shown in Table 4.B 23. Department of Roads estimates that the largest need for new SRN bridges is in the mid-western development region which was heavily affected by recent conflict and has the lowest road density among all 5 of Nepal‟s development regions. Building new SRN bridges in this region will facilitate year-round road access and will support the GON‟s strategy for post-conflict integration. 24. A forward looking estimate for aggregated SRN bridge investment needs based on the 2012 bridge asset inventory demonstrates why improving the SRN Bridge Program is an important priority. Over the medium-term future, there is a need to invest approximately US$328 million in SRN bridge maintenance and construction in order to sustain and expand the Strategic Road Network. This figure is equivalent to 6.7% of the GON's 2011/12 national budget. Table 4.E provides a summary of estimated needs by category of investment. This summary represents only a snapshot based on the 2012 bridge asset inventory and does not account for inevitable future needs that will develop from continued use and natural degradation. Table 4.E Snapshot of SRN Bridge Needs (FY2011/12) EST. AMOUNT SRN BRIDGE NEEDS (US$ M) Major maintenance 88.0 Minor maintenance 9.4 New bridge construction 215.5 (including existing backlog) Feasibility study, design, and 15.2 quality management TOTAL 328.1 25. The Government of Nepal has indicated that the SRN Bridge Program‟s funding envelope will be approximately US$87.6 million over the next five years. Even with IDA support (US$60 million) it will not be possible to meet all existing or inevitable future SRN bridge needs. Prioritizing expenditures is therefore an important part of the SRN Bridge Program‟s effectiveness. The Bridge Management System (see section 5.2.2) was developed for this purpose and features prominently in the PforR operation‟s action plan and Disbursement Linked Indicators (DLIs). 5 TECHNICAL SOUNDNESS OF THE SRN BRIDGE PROGRAM 5.1 IMPLEMENTATION APPROACH 26. DOR‟s implementation approach for the SRN Bridge Program is technically sound and appropriate for the nature of investments concerned. In order to strengthen the Program‟s implementation, the PforR operation will focus particular effort on improving the effectiveness of divisional offices as they manage the largest number and greatest financial volume of investments. There is also a need to strengthen DOR‟s Kathmandu-based Geo-Environment and Social Unit (GESU) as discussed in the accompanying Environmental and Social Systems Assessment (ESSA). DOR‟s Kathmandu-based Bridge Project will also receive support from the Bank-supported Road Sector Development Project in order to strengthen its capacity for overall Program management. 27. The Department of Roads implements the SRN Bridge Program through its 25 divisional offices and a specialized Kathmandu-based team, known as the “Bridge Project.� Although labeled as a „project‟ for administrative purposes, the Bridge Project has a long term programmatic mandate for managing SRN bridge policy, strategy, technical standards, and physical assets themselves. In the near-term future, the 11 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Department of Roads may even restructure the Bridge Project into a separate operational branch with four functional sections, under a newly appointed Deputy Director General position. 28. The Bridge Project directly implements SRN bridge investments that involve technically complex designs or contractual arrangements (e.g., design build). Such bridges constitute only a minority of all SRN Bridge Program investments. Most new construction and maintenance contracts are handled by DOR‟s divisional offices once the Bridge Project has vetted the corresponding technical designs. DOR‟s mixed approach to managing the SRN Bridge Program with both centralized and decentralized implementing units is technically sound considering: (i) the large number of SRN bridges spread throughout Nepal; (ii) the difficulties of traveling between regions due to Nepal‟s difficult terrain; (iii) the relatively simplicity of most SRN bridges; and (v) the need for specialized technical oversight in some instances. 29. DOR‟s department-wide systems underpin the SRN Bridge Program. Most notably, Geo- Environment and Social Unit (GESU) identifies and manages social and environmental risks for the SRN Bridge Program and will apply DOR‟s Environmental and Social Management Framework (ESMF) throughout the PforR operation. DOR‟s Finance and Administration Section and Maintenance Branch also have key roles in supporting the SRN Bridge Program‟s fiduciary systems as summarized in Table 5.A below. The Environmental and Social Systems Assessment and Integrated Fiduciary Assessment (IFA) provide additional information on these units and the adequacy of the systems they manage. Table 5.A Summary of DOR’s Program Implementation Arrangements DOR ENTITY SRN BRIDGE PROGRAM ROLES  Coordinating all activities under the SRN Bridge Program  Providing technical advice and design vetting for regional directorates and divisional offices implementing SRN bridge investments  Implementing technically complex SRN bridge investments The Bridge Project  Overall stewardship of the Bridge Management System and providing (lead entity for Program inputs into the Annual Road Maintenance Plans delivery)  Design, planning, monitoring, and maintaining budgetary control for all SRN Bridge Program investments  Undertaking quality monitoring and evaluation  All coordination activities with the Bank  Regional directorates: contract monitoring of Program investments 5 regional directorate offices and  Divisional offices: procurement and contract management within their 25 divisional offices financial limits and technical capacity Financial Administration Section  Financial control and reporting Geo-Environment and Social  Social and environmental assessment and impact management Unit (GESU)  Application of DOR‟s Environmental and Social Management Framework  Integrating SRN Bridge Program‟s maintenance planning within DOR‟s Maintenance Branch ARMP. The basis for this planning will be outputs from the Bridge Management System. 5.2 INSTITUTIONAL ARRANGEMENTS 30. The SNR Bridge Program‟s institutional arrangements are broadly sound and well aligned with Government‟s policies for the transport sector and public institutions in general. The Department of Roads has sufficient capacity to implement the SRN Bridge Program and will receive additional support to further improve capacity in key areas that are relevant to delivering results. In addition, the agreed audit arrangements for the PforR operation include additional oversight to identify and address any unforeseen institutional issues that arise during implementation. 12 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 31. The Ministry of Physical Planning, Works and Transport Management is the GON‟s mandated lead entity for the transport sector and serves as DOR‟s parent ministry. The Department of Roads manages the SRN Bridge Program as MoPPWTM‟s implementing arm for road and bridge investments on the SRN. This arrangement is technically sound from a policy perspective and aligns with the official mandates of each entity. From a technical perspective, DOR‟s relationship with the Ministry of Physical Planning, Works and Transport Management is relevant for three primary reasons: (i) DOR‟s budget allocations from GON must fit within MoPPWTM‟s assigned budget ceiling; (ii) DOR‟s planned investments in SRN bridges must obtain approval from the Ministry of Physical Planning, Works and Transport Management before implementing units may procure contracts and spend available budgets; and (iii) the Ministry of Physical Planning, Works and Transport Management has ultimate responsibility to the Government for the SRN Bridge Program‟s results. 32. The Department of Roads has the necessary capacity to implement the SRN Bridge Program and has benefitted from extensive work with development partners. The Bank and other development partners6 have previously invested in developing the DOR‟s capacity and capabilities. The Bank- supported Roads Maintenance and Rehabilitation Project (RMRP) from 1994-1999 included a dedicated institutional strengthening component which aimed at improving DOR‟s capacity for: (i) financial management; (ii) environmental assessment; (iii) geo-technical engineering; (iv) bio-engineering; (v) long term investment planning; and (vi) bridge asset management. Similarly, ADB‟s Road Network Development Project (RNDP) from 2001 and 2010 helped strengthen DOR‟s ability to tender, negotiate, and manage complex Performance Based Maintenance (PBM) contracts for individual stretches of highway along the SRN. Project completion reports from both the Roads Maintenance and Rehabilitation Project and Road Network Development Project rated DOR‟s participation as satisfactory. ADB‟s Resident Mission awarded MoPPWTM/DOR as the “best project management team� for three consecutive years during the Road Network Development Project. Most recently, the Bank-supported Road Sector Development Project has continued to help the Department of Roads improve its fiduciary systems and has prepared the SRN Bridge Program for receiving support via the PforR lending instrument. DOR‟s 2012 bridge asset inventory and the newly developed Bridge Management System are both products of RSDP support. 5.2.1 Broader Institutional and Governance Framework 33. The SRN Bridge Program‟s broader institutional arrangements are sound for supporting the Program‟s technical aspects. Aside from the Department of Roads, there are eight Government institutions that have noteworthy roles in supporting and / or governing the SRN Bridge Program. Table 5.B (below), summarizes the roles and first-instance accountability arrangements for each of these institutions. Table 5.B Summary of Relevant Institutions ACCOUNTABILITY POSITION IN BUDGET INSTITUTION ROLE (FIRST INSTANCE) FRAMEWORK Institutions Directly Assisting Implementation Ministry of Physical  Office of the  Independent budget Planning, Works and  Oversight of DOR Prime Minister headings Transport Management (PM) Institutions Providing Complementary Inputs 6 e.g., Asian Development Bank (ADB), German Society for International Cooperation (GIZ), UK‟s Department for International Development (DFID), United Nations Development Program (UNDP), Japan International Cooperation Agency (JICA) 13 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version  Provide guidelines on policy targets and priorities regarding formulation of budget for National Development  Office of the PM the coming fiscal year to the Ministry of  Independent budget Council / National Finance / Council of headings Planning Commission Ministers  Highest GON policy-level body  Verification of DLIs  Office of the PM  Budget allocations to MoPPWTM, RBN,  Treasury (source of Ministry of Finance / Council of DOR and others GON funds) Ministers  Compliance audits (financial) Office of the Auditor  Constitutional  Independent budget  Performance audits – including achievement General Council headings of results against targets and value-for-money Financial Comptroller  Exercise of financial controls and expenditure  Independent budget  MoF General oversight for all GON headings  Oversee application of Public Procurement Act, 2063 (B.S.) & Public Procurement Regulation, 2064 (B.S.) including procurement complaint resolution  Office of the PM  Headings under PM Public Procurement / Council of Office / Council of Monitoring Office  Maintaining national „blacklist‟ of ineligible Ministers Ministers contract recipients  Provide standard bidding documents and manage e-procurement portal  Corruption prevention  Integrated technical audits of the SNR Bridge  Headings under PM National Vigilance Program covering: technical performance  Office of the PM Office / Council of Centre (design, quality etc.), procurement Ministers performance, social and environmental performance Commission for the  Investigation and prosecution of alleged  Constitutional  Independent budget Investigation of Abuse corruption Council headings of Authority (CIAA) 34. Figure 5.A (below) summarizes the budget and accountability structure for institutions that are relevant to the SRN Bridge Program and the PforR operation. DOR‟s internal units are able to engage external support via consultancy contracts as required for implementing different aspects of the SRN Bridge Program. This is particularly important for managing and improving the quality of program outputs. 14 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Figure 5.A Institutional Framework for the SRN Bridge Program LEGEND Funding & Budget Const. World Office of the PM (incl. authorization to spend) Council Bank / Council of Ministers Accountability ACRONYM EXPANDED CIAA NPC/NDC Commissions for Investigation of NVC CIAA Abuse of Authority MoF MoPPWTM DLI Disbursement Linked Indicator Capacity-Bld. DOR Department of Roads Consultants Financial Comptroller General FCGO Office FCGO DOR GESU Geo-Environment and Social Unit Reg. Direct. Admin/cont OAG Office of the Auditor General OAG GESU RSDP MoF Ministry of Finance Br. Project Div. Offices Ministry of Physical Planning, DLI Verification MoPPWTM Works and Transport Consultants Management Simpler, smaller Impl. Support Complex larger (contract and payment National Planning Commission / investments investments from NPC) Consultants NPC/NDC SRN Br. Program National Development Committee investments NVC National Vigilance Centre PM Prime Minister RSDP Road Sector Dev. Project 5.2.2 Governance Arrangements for Technical Aspects of the Program 35. The roles of the Commission for the Investigation of Abuse of Authority, Office of the Auditor General, Financial Comptroller General‟s Office and Public Procurement Monitoring Office are highly relevant to governing the SRN Bridge Program‟s fiduciary systems as described in the Integrated Fiduciary Assessment. Similarly, DOR‟s Geo-Environment and Social Unit team will have a lead role in governing the SRN Bridge Program‟s social and environmental risk management functions as described in the Environmental and Social Assessment. From a technical perspective, there are four important institutional arrangements for governing the SRN Bridge Program as summarized below:  MOPPWTM oversight: The MOPPWTM functions as the „gatekeeper‟ for DOR‟s activities on the SRN. All DOR plans, feasibility studies, contracts, budgets, and authorization to spend budgets require MOPPWTM approval. This arrangement exists regardless of the PforR operation and represents an important governance check on the SRN Bridge Program‟s technical activities.  Integrated technical audits by the NVC: Audit arrangements for the PforR operation include provisions for annual „integrated technical audits‟ to examine the SRN Bridge Program‟s key technical, procurement, and environmental and social management processes. Integrated technical audits are not a GON requirement, but will support the PforR operation‟s development objectives. Whereas standard GON audits focus mostly on compliance, the integrated technical audit will focus more on measuring and improving processes. Findings will help the Department of Roads to identify gaps and remedies in the systems that deliver Program results.  Performance audits by the OAG: The OAG‟s performance audits will gauge value for money and examine the SRN Bridge Program‟s achievements against original expectations. These 15 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version audits are part of GON‟s existing governance framework (i.e. not additional to the PforR operation). Technical implications of performance audits may include adjustments to the Program‟s budget allocation, engineering approach, or areas of focus (i.e. maintenance vs. construction).  DLI verification by the NPC: Disbursement-Linked Indicator verification is an additional requirement of the PforR operation and important for linking payments to results. NPC‟s role in verifying Disbursement-Linked Indicators aligns with the Government‟s institutional framework. The National Planning Commission has an official role in progressing Government ministries towards results-based monitoring and evaluation for program management. In the future, the MOPPWTM may use metrics similar to Disbursement-Linked Indicators for managing the SRN Bridge Program. 36. The SRN Bridge Program will also deploy a newly-developed technical governance tool known as the Bridge Management System (BMS). The Bridge Management System will improve the technical rigor of DOR‟s approach to allocating Program resources across different SRN bridge investments. In the past, resource allocations have followed political whims or been entirely reactive (i.e. in response to full or partial bridge failures). The Bridge Management System will improve upon this by using multi-criteria analysis techniques to prioritize projects for funding. The criteria that the Bridge Management System will use include: (i) physical bridge characteristics and recent works (e.g. condition, location, or meters constructed/maintained); (ii) network information (e.g. potential detour time if a bridge is out of service); and (iii) „soft‟ variables (e.g. population served by a bridge). 37. The Bridge Management System is a technically sound method of allocating scare resources across many concurrent needs. As of May 2012, the Bridge Management System is functional and contains updated condition data from DOR‟s 2012 SRN bridge asset inventory survey. In the next two years the Department of Roads will be making the Bridge Management System operational in its headquarters and field offices. Because the Bridge Management System is web-based, each of DOR‟s 25 divisional offices will be able to access and update data for bridges within their respective jurisdictions. In order to control the quality of BMS data, Department of Roads is developing a hierarchy of checks and approvals that aligns with the SRN Bridge Program‟s implementation structure. According to this approach, the Bridge Project will have an important role in controlling the quality of BMS data that divisional offices input. 5.3 CONTRACT AND QUALITY MANAGEMENT CONSIDERATIONS 38. The SRN Bridge Program has mechanisms in place to manage contact performance and the quality of works. However, the functionality of these mechanisms is incomplete and they often fail at delivering intended results. Contract and quality management is a key area for improving the SRN Bridge Program and a particular area of focus for the Program Action Plan. 5.3.1 Regional Directorates and Quality Management 39. The SRN Bridge Program is highly decentralized and divisional offices implement the majority of contracts for new bridge construction and maintenance. Geographical distance and transportation difficulties limit the Bridge Project‟s ability to oversee implementation-stage activities. DOR‟s regional directorates are meant to oversee Divisional offices within their respective regions. However, regional directorates have been largely ‘hollowed out’. Many of DOR‟s Regional directorates lack their full complement of engineering staff – despite having official approval for these positions from the Public Service Commission. Recurrent budgets include allocations for all approved positions but the Department of Roads historically under spends against this budget and leaves vacancies unfilled (see Annex 3). There is a disconnect between authorization to spend funds (i.e. an organizational endorsement for filling vacant positions) and budgets that leaves a large human resource gap in DOR‟s decentralized model. It is also important to note that frequent stand alone projects (often involving development 16 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version partners) are culpable for reducing the human resource allocations to regional directorates. When new projects come into formation, they can absorb senior regional directorate engineering staff. The Department of Roads often chooses not to refill the vacancies that stand-alone projects create. 40. DOR‟s decision to leave vacancies unfilled means that the SRN bridge program relies heavily on budgets to engage external support for implementing key technical functions (e.g., supervision of construction against design). This is an acceptable model for Program implementation provided that sufficient resources are available for engaging and managing external advisors. However, the magnitude of historical budget allocations has been insufficient to engage adequate support. The bridge-related component of DOR‟s 2010/2011 budget for design and feasibility study was approximately NPR 24 million - slightly less than 1% of the overall civil works budget. Rough estimates based on international benchmarks suggest that design and feasibility expenditures should total approximately 5 - 8% of a similar capital program‟s cost. The Program Action Plan includes agreement that the Ministry of Finance will allocate an amount not less than 5% of civil works budgets for feasibility studies, design, quality management, and other miscellaneous functions in support of DOR‟s implementing units. The Bridge Project will control this budget and deploy it to support other units (e.g., Geo-Environment and Social Unit or divisional offices) as necessary. The Bank-supported Road Sector Development Project (RSDP) will provide support for building DOR‟s internal capacity to manage the SRN Bridge Program via engagements with independent Capacity-Building Consultants. 41. DOR‟s organizational structure includes a dedicated “Asset Management, Contract Management, and Quality Control Project.� However, the name for this unit is slightly deceptive as its primary functions include managing IT systems and presiding over DOR‟s Central Road Research Laboratory. In practice, the Asset Management, Contract Management, and Quality Control Project does not handle contract management for bridge investments. DOR‟s Financial Administrative Section manages spending against contracts and maintains financial control over expenditures. However, managing contractual compliance and technical performance occurs at the level of DOR‟s procuring units. In the case of smaller, less complex bridge investments, divisional offices undertake core contract management and quality management functions. Similarly, the Bridge Project handles technical contract management for larger, more complex bridge investments. The Bridge Project may also assist divisional offices as and when called upon. The Program Action Plan includes agreement that the Department of Roads will improve its approach to quality control for the SRN Bridge Program. Specifically, each SRN bridge will have an individual Quality Assurance Plan or will fall under a standard Quality Assurance Plan (e.g., minor investments). Contract provisions between the Department of Roads and contractors will ensure that materials testing (or other inspections) will follow Quality Assurance Plan specifications. Quality Assurance Plans will also help to clarify the roles that different DOR units play in managing specific investments. 5.4 ENGINEERING DESIGN AND CONTRACTOR CAPACITY 42. The Department of Roads designs bridges to Indian Roads Congress standards (IRC Class A or Class AA loading standards). These standards are fit for the purpose of supporting SRN traffic. In the future, the department may also look at technical alternatives to bridges in the interest of optimizing costs. For example vented causeways may serve adequately for low-volume networks where short periods of seasonal inaccessibility could be acceptable. A greater issue facing the SRN Bridge Program relates to managing quality and adherence to standards during design and construction of works. Addressing this gap will require improved contract management as discussed above. 43. The capacity of Nepal's contracting industry has significantly improved over recent years and national contractors now carry out the majority of works. In 2012 the Department of Roads received Bank support to assess the local construction industry and has identified that approximately 30 firms are active 17 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version in the bridge sector. Roughly 20 of these firms act as lead partners with the remaining 10 serving exclusively as sub-contractors. However, Nepalese contractors are still reliant on materials and equipment from India, which can cause delays in contract implementation. International consultants/contractors are often DOR‟s choice for implementing complex bridges. Given that SRN bridges are relatively small and inexpensive, the interest of international contractors may be limited. The Department of Roads is keen to develop the capacity of Nepal‟s national construction industry. Applying rigorous contract management is an important part of driving the industry‟s development. 44. It is important to note that bridge maintenance is an evolving segment of the local construction market on account of limited experience. The Department of Roads perceives a need to improve its maintenance contracting approach in order to attract greater market interest. DOR‟s recent study has recommended increasing the size of contract packages by bundling a number of contracts together in order to achieve economies of scale and to attract more competent contractors. Contractors have expressed concerns that maintenance of one-off bridge sites provides relatively meager pipelines of work that do not compare favorably with the cost and trouble of bidding, mobilizing, and allocating staff resources. The Department of Roads plans to follow a bundling strategy when implementing maintenance contracts for the SRN Bridge Program. Although bundling will increase the size of maintenance contracts, the Department of Roads will not exceed the Bank‟s thresholds for „high value‟ contracts which would not be eligible for support using the PforR instrument. 5.5 LEGAL AND REGULATORY FRAMEWORK RELATING TO TECHNICAL FUNCTIONS 45. The SRN Bridge Program does not have its own bridge-specific legislative act but operates under the framework provided by DOR‟s Bridge Policy and Strategy which MOPPWTM approved in 2004. The Interim Constitution of Nepal along and four non-bridge specific legislative Acts provide an adequate legal framework for the Program‟s technical functions. However, there are historical instances where DOR‟s implementing units have not applied relevant laws or regulations correctly. The Department of Roads is addressing this gap by developing a Bridge Operations Toolkit to delineate responsibilities and provide a convenient reference for Program procedures such as procurement and project-level financial management. Table 5.C summarizes the legal framework that is most relevant to the SRN Bridge Program‟s technical functions. Table 5.C Legal Framework Relating to Technical Aspects of the Program LEGAL INSTRUMENT TECHNICAL RELEVANCE TO THE PROGRAM Establishes the national governance framework that is relevant to the SRN Bridge Program‟s institutional arrangements. The Interim Constitution specifically: Interim Constitution of Nepal  Establishes the CIAA as the entity responsible for investigating fraud and corruption across all GON programs  Establishes the OAG as the independent financial auditor for government offices Provides the legal framework for managing and developing road and bridge assets. Specifically:  Empowers the GON to classify roads by type Public Roads Act  Establishes a right of way for the road network and empowers DOR as the custodian for approving all activities within that right of way  Empowers DOR to requisition land (permanently or temporarily and with compensation paid) for road sector activities 18 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version LEGAL INSTRUMENT TECHNICAL RELEVANCE TO THE PROGRAM Frames the procurement rules and procedures that the SRN Bridge Program will follow when letting contracts for goods, works, or services. The Public Procurement Act does the following: Public Procurement Act  Empowers the PPPMO to set procurement regulations, provide technical (and associated public assistance, issue standard documents, and field procurement-related complaints procurement regulations)  Describes specific processes that public entities may use for procuring goods works and services  Codifies mechanisms for complaints, contract modifications, contract remedies, and procurement monitoring Frames GON‟s systems for budgeting, financial controls, and interactions with development partners such as IDA. This is relevant to the SRN Bridge Program‟s expenditure framework and financial management. The Financial Procedures Act specifically: Financial Procedures Act  Codifies Nepal‟s budget processes and procedures along with the roles of MoF (and associated financial procedures rules) and NPC in allocating funding to specific programs and projects.  Establishes reporting and budget guidelines for funding from development partners. Empowers MoF as GON‟s official overseer / approver of such assistance  Establishes procedures for financial controls and establishes FCGO‟s role as the comptroller for GON expenditures Provides the legal framework for identifying and assessing environmental impacts. The Environmental Protection Act specifically:  Provides protection for environmentally or culturally sensitive areas. Bridges in Environmental Protection these areas will automatically be excluded from the SRN Bridge Program Act (along with complementary  Establishes legal requirements for undertaking Initial Environmental Examinations legislation and regulations) and Environmental Impact Assessments where a proposed intervention may involve adverse environmental impacts Complementary legislation governs specific technical activities that may be relevant such as works in forested areas, the use of explosives, impacts on aquatic animals, etc. 46. The Integrated Fiduciary Assessment describes the Public Procurement Act and Financial Procedures Act in further detail. Similarly, the Environmental and Social Systems Assessment describes the Environmental Protection Act and its complementary legislation in greater detail. 47. As of June 2012 the legal and regulatory framework for the SRN bridge program remains adequate to support program implementation despite continued political impasse over a new Constitution and federal structure for Nepal‟s Government. Future constitutional or legislative changes may impact the SRN Bridge Program. However, those aspects of Nepal‟s legal and regulatory framework that are most relevant to the Program are not currently contentious. The Bank‟s task team will monitor whether remedial actions to adjust for changes in law or the Constitution become necessary throughout the Program support period. 6 BUDGET AND EXPENDITURE FRAMEWORK 48. The Government‟s projected budget allocations to the SRN Bridge Program are adequate to deliver intended results and noticeable improvements to SRN bridges. However, previous budget allocations to the Program have yielded mixed results on account of an expenditure framework that facilitates diversion of funding for other purposes. The Program Action Plan includes agreement that the Ministry of Finance will change the Program‟s expenditure framework to include independent capital budgets. This change will enable improved planning and mitigate the risk that other programs may divert funding in a non- transparent manner. 19 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 6.1 BUDGET ALLOCATIONS 49. GON's budget activity reflects increased priority for SRN bridges. Most notably, there has been a 450% increase in the SRN Bridge Program's budget for major maintenance works - albeit from a low base. The SRN Bridge Program's budget was approximately US$10 million in the 2011/12 fiscal year. However, the Government has stated that this figure will increase to US$17.5 million in the next fiscal year. While this is encouraging, the estimated cost of meeting all SRN bridge needs is in the region of US$328 million (see section 4.6). 50. The SRN Bridge Program‟s budget fits within the fiscal space that the Government has allocated for DOR‟s bridge sector investment programs and leaves sufficient room for other programs. Throughout the Program Support Period, the Government will contribute approximately US$87.6 million to the SRN Bridge Program. Annual Program expenditures (including IDA support) will be equivalent to roughly 0.2% of International Monetary Fund's estimates for Nepal's 2012 GDP or 3.3 percent of what the Government budgeted for capital investment in FY 2011/12. This level of expenditure is significant but unlikely to introduce unmanageable fiscal stress on the national budget. Table 6.A summarizes the SRN Bridge Program‟s estimated 5 year budget sources and estimated expenditures. Table 6.A Estimated Expenditures and Funding Sources – 5 Year Totals ITEM AMOUNT % OF TOTAL (US$ M) Estimated Program Expenditures SRN bridge maintenance 58.5 40% SRN bridge construction 81.7 55% SRN bridge feasibility, design and quality management 7.4 5% (minimum) TOTAL estimated expenditures 147.6 100% Program Funding Sources IDA (via DOR budget lines) 60.0 41% GON (via DOR budget lines) 87.6 59% TOTAL sources 147.6 100% 6.2 EXPENDITURE FRAMEWORK 51. The SRN Bridge Program's expenditure framework requires immediate attention to support desired program results. Most notably, the SRN Bridge Program needs independent capital expenditure budgets that prevent diversion for other purposes. The current budgeting structure does not allow the SRN Bridge Program to credibly plan and execute multi-year contracts effectively. Changing the Program‟s current expenditure framework is essential for improving its effectiveness. 52. Annex 2 summarizes the SRN Bridge Program‟s historic budget framework. Annex 3 compares actual expenditures for relevant line items with original budgets for the 2009/10 fiscal year (the most recent data available). Most notably, capital spending was 74% above original budget estimates. The large variance against budgets reflects a lack of technically sound planning and the impact of political interference on DOR‟s investment program. Historically, it has been nearly impossible for The Department of Roads to plan against a medium term expenditure envelope. 53. Most investments in SRN bridge maintenance and new construction involve multi-year contracts which require detailed technical preparation along with multi-year budgeting. Previous planning efforts have not accurately matched procurement activities with envisaged future resources. As a result, the SRN Bridge Program has historically existed in a perpetual state of over procurement and under funding. 20 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Many contacts have received less funding than was necessary to support timely completion as new contracts have strained available resources. This has left the Department of Roads with a large backlog of unfinished SRN bridge construction as progress against active contracts could only occur to the extent of available funding. The Bridge Management System and DOR‟s revised planning processes will help to prevent this situation from occurring in the future. In preparing for the PforR operation, the Department of Roads has designed an investment program to fit MOF‟s indicated medium-term funding envelope. In the future, MOF will continue to inform the Department of Roads of any changes to the resource envelope well in advance of each fiscal year so that the department can manage its procurement activities accordingly. 54. MOF‟s revisions to the SRN Bridge Program‟s expenditure framework will significantly improve the Program‟s ability to credibly plan and deliver contracts on time. Technical assistance associated with the PforR operation will include both training for existing DOR staff in addition to embedded advisors who will also assist with planning and budgeting. This will provide the SRN Bridge Program with access to expertise along with direct „on the job‟ assistance to develop capacity. In the future, the Department of Roads will need to match contract procurement with the future financial resources needed for timely completion. This is not simple as the cash flow profile for bridge investments are not uniform by year and will depend on contractually agreed payment milestones. Therefore, each individual contract will require an accurate forecast for both physical progress of works and the timing of payments. In order to spend available budgets, the Department of Roads will also need to have a sufficient number of active contracts ready to absorb payments in a given year. A key aim of technical assistance will be helping DOR staff to build competency for striking a balance between too many and too few active contracts. 7 RESULTS FRAMEWORK 55. Annex 3 of the Project Appraisal Document contains a full summary of the results framework for the PforR operation along with the verification procedures pertaining to Disbursement-Linked Indicators. DOR‟s own strategy for the bridge sector has provided the basis for designing this results framework as discussed below. The 2012 bridge asset inventory along with the Department of Roads estimates for the duration and phasing of specific works provided the basis for specific DLI targets. 7.1 GOVERNMENT‟S INTENDED RESULTS AND THE PROGRAM DEVELOPMENT OBJECTIVE 56. The Department of Roads has developed a Bridge Policy and Strategy (2004) to guide the SRN Bridge Program and provide a framework for its intended results. Key results and the defining criteria for those results are as follows: Table 7.A SRN Bridge Program – Intended Results RESULTS DEFINING CRITERIA  Structural integrity of bridges (both at initial design and throughout the life of physical assets)  Application of sound design standards for loading, geometry, seismic events, and geotechnical/hydrological considerations Safety  Quality of environmental and social assessments and application of mitigation measures to protect (primary concern) against negative impacts  Adequacy of maintenance practices along with associated planning and funding processes  Adequate public awareness regarding the protection of bridges  Availability of bridges both during normal periods AND during times of emergency (e.g., natural disasters) Reliability  Socio-economic reliability with respect to public confidence in the uninterrupted movement of goods and people  Sufficient institutional capacity for DOR to respond to natural calamities or other disasters 21 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version RESULTS DEFINING CRITERIA  Enhanced institutional performance through quality assurance, planning, feedback mechanisms, and control of construction schedules and costs  Implementation of design, safety, and overall performance auditing Cost effectiveness  Application of appropriate standard designs and value engineering practices to enhance engineering efficiency  Improved technical capacity of both public and private partners 57. The Department of Roads does not currently specify quantitative targets for SRN Bridge Program‟s results but has informally identified the following medium-term goals: (i) completing all urgent major maintenance requirements; (ii) completing the current backlog of unfinished bridges already under construction; (iii) reducing the accumulated backlog of major maintenance requirements; (iv) undertaking minor and routine maintenance to prolong existing asset lives; and (v) continuing to develop new economically and socially important bridge crossings. 58. The results framework for the PforR operation (see the Project Appraisal Document) represents an initial step towards developing a quantifiable results framework for the SRN Bridge Program. The Program Development Objective for the PforR operation is the same objective articulated within DOR‟s Bridge Policy and Strategy. Disbursement-Linked Indicators and other intermediate indicators capture important safety, reliability, and cost effectiveness considerations in line with the intended results articulated in DOR‟s own Bridge Policy and Strategy Document. 7.2 SETTING DISBURSEMENT LINKED INDICATORS 59. The Task Team and the Department of Roads have analyzed data from DOR‟s 2012 bridge asset inventory that a basis for setting and agreeing DLI targets. The duration and phasing of investments was a key consideration in planning Disbursement-Linked Indicators. For example, new bridge construction takes between 3 and 5 years and many maintenance contracts require 2 years to reach completion. This lag between project inception and completion means that bridge works taken up in later program years may not reach completion during the Program Support Period. Figure 7.A (below) includes the estimated expenditure profile for the SRN Bridge Program based on a US$147.6 million funding envelope over the next five years. The phasing of this expenditure profile reflects DOR‟s estimates for contract duration and the rate at which new bridges can be taken up for maintenance or new construction. Figure 7.A Forecasted Expenditure Profile – Sources and Uses of Funds 40.0 30.0 Design, feas., & quality mgmt USD million equ. 20.0 Minor maintenance 10.0 New crossings Existing construction backlog completion 0.0 Non urgent major maintenance backlog -10.0 YR1 YR2 YR3 YR4 YR5 URGENT major maintenance backlog -20.0 WB financing -30.0 GON funding envelope (USD equ.) -40.0 22 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 60. According to these estimates, targeted results for the SRN Bridge Program over the next 5 years include: (i) 100% completion of all urgent and minor maintenance; (ii) 95% completion of all current SRN bridges under construction; and (iii) 51% completion of non-urgent major maintenance; and (iv) completion of 26 new SRN bridge crossings. 61. Scalable Disbursement-Linked Indicators will allow the Department of Roads to earn disbursements in any period that results occur. Delivering results slower than planned will push disbursements farther out in time (effectively pushing disbursement into later years). Delivering faster than planned will enable disbursements to occur sooner. Scalable Disbursement-Linked Indicators mean that DOR‟s performance at achieving results will set the pace of disbursement. It is also important to note that one Disbursement-Linked Indicator (i.e. DLI-6), which relates to a Grievance Redressal Mechanism, is not scalable. Missing DLI-6 targets in a given year completely foregoes the disbursement amount. This reflects the importance of developing the Program‟s the Grievance Redressal Mechanism. 7.2.2 Monitoring and Evaluating Results 62. At present, DOR‟s ‘Planning and Design Branch’ includes a monitoring and evaluation unit. However, this unit focuses primarily on tracking progress against budgets and proposed work plans with less focus on monitoring or evaluating program quality and associated outcomes. Indicators of success (or failure) have not previously existed in a form that would allow the Department of Roads to assess, review and improve the effectiveness of its bridge investment program. In the past, the National Vigilance Centre has undertaken technical audits of DOR bridge projects in order to provide occasional feedback. Agreed audit arrangements for the PforR operation include annual integrated technical audits of the Program by the National Vigilance Centre. These audits will help the Department of Roads to evaluate the SRN Bridge Program‟s processes in a more systematic manner. 63. DOR‟s efforts to monitor and evaluate the SRN Bridge Program have been rudimentary to date largely on account of limited information available. The Bridge Management System will significantly improve this situation and will provide greater ability to track and manage data. Table 7.B provides a list of suggested indicators which the Department of Roads may consider deploying based on the information that the Bridge Management System can provide. Table 7.B Suggested M&E Indicators for DOR’s Consideration RESULT AREA(S) INDICATOR DESCRIPTION Restrictions on use or Number of bridges considered unsafe or subject to Safety maximum loading loading restrictions % of bridges classified as being in fair or good Safety / reliability Condition condition # of bridge crossings experiencing unanticipated Safety / reliability Failure events closures due to failures or unsafe conditions # of district headquarters without year-round access Reliability Access for lack of SRN bridge structures Detour length and network Sum of kilometers of detour required should individual Reliability robustness bridges be closed to traffic Total annual capital expenditure for bridges divided by Reliability Capital reinvestment replacement cost expressed as a percent NPR „000 spent for new construction per meter of Cost effectiveness New construction costs new bridge construction NPR „000 spent for maintenance per meter of major Cost effectiveness Maintenance maintenance 23 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 8 PROGRAM ECONOMIC EVALUATION 8.1 INTRODUCTION 64. The economic analysis presents a framework for investment decision-making and prioritization of bridge improvement and construction within Department of Roads. Nine bridges that represent the typical intervention likely under the SRN Bridge Program were selected for a sample-based economic appraisal. The sample included three bridges proposed for new construction, 3 proposed for rehabilitation, and 3 proposed for upgraded capacity. Interventions were appraised over a period to 2033, and both the rate of discount and the opportunity cost of capital were taken to be 12 percent. The World Bank‟s RED software provided a means for calculating road user costs saved by the investments. Traffic growth rates have been estimated at 6.6% over the period of the appraisal and maintenance costs at 1.8% per year of the new construction cost. Table 8.A summarizes the appraisal scope includes characteristics relevant to each type of appraisal, together with indicative economic costs of intervention (in terms of costs per meter). 8.2 APPRAISAL APPROACH 65. New construction: Construction of a new bridge reduces both distance and time costs of road use by shortening access distance, avoiding costs of crossing by ford or ferry, or both. Ford crossings are generally closed in the rainy season; and thus benefits to bridge construction are: (i) distance cost savings (of a detour) during the rainy season; and (ii) time saved during the dry season (by crossing by bridge as opposed to fording). Time taken to negotiate a ford is naturally longer than the time taken to cross a single-lane bridge. Where a new bridge replaces a ferry crossing, avoided costs comprise time savings verses ferry services. 66. Weak bridges: When a weak bridge fails, two sets of costs may be incurred: the cost of providing a temporary crossing while the bridge is reconstructed (not considered in the present appraisal) and the costs of additional kilometres driven to find a detour. The main issue is determining just when a weak bridge may be expected to fail and result in road closure. For this exercise, probability of failure was assessed according to DOR‟s 2012 bridge asset inventory with probability of failure increasing every year over the appraisal period. The economic assessment classified weak bridges into two categories:  High probability of failure (within a period of four years): In the first appraisal year the probability of failure was assumed to be 25 percent. In subsequent years this probability increased by 5 percent a year until reaching near certainty and remaining at that level for the remainder of the appraisal period.  Medium probability of failure (with a period of 20 years or more): the appraisal assumed that these bridges had a 5 percent probably of failure that increased at 5 percent over a 20-year period. 67. Inadequate capacity bridges: Replacing single-lane bridges with two-lane structures avoids delays caused both by vehicles slowing to negotiate the narrower bridge and by waiting for approaching vehicles to cross. The appraisal incorporated estimations of delays at single lane bridges based an Erlang queuing model. A single lane bridge would have a width of 3.5m; the three bridges that were assessed are all wider than this, but still have less than a full two-lane capacity. Accordingly, benefits from increased capacity are factored by the difference between current width and a single lane 24 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version Table 8.A Economic appraisal scope BRIDGE/ RAINY DETOUR CURRENT 2012 SPAN COST FAILURE CROSSING INTERVENTIO ROAD SEASON ROUTE CROSSING ADT (M) [US$/M] PROBABILITY TYPE N TYPE % (KM) TIMES/SPEEDS New Construction Chinchu- Goji Jajarkot 70 16,576 NA Ford 20 35 26.5 sec 69 Jaleshwar- Dhedua Bharatpur 70 33,151 NA Ford 30 12 25.8 sec 119 Dhud Jayaramghat- Koshi Diktel 300 3,868 NA Ferry NA NA 138 min 82 Rehabilitation Sansara EWH 40 3,347 High NA NA 10 NA 3,140 Tinau EWH 226 4,937 Medium NA NA 50 NA 14,770 Kathmandu- Bagmati Sankhu 260 2,146 Medium NA NA 1.5 NA 11,808 Widening Bagmati EWH 366 1,252 6 NA NA NA 25 kph 2,196 Banmara EWH 33 258 5.5 NA NA NA 28 kph 2,338 Chandi EWH 168 272 5.5 NA NA NA 38 kph 2,319 Note: NA = Not applicable 8.2.2 Appraisal Results 68. Table 8.B provides combined economic evaluation results from the sample of nine bridges. Rehabilitation or deferred maintenance and investments to increase capacity are generally easy to justify based on high rates of return. New construction shows lower rates of return given that current gaps on the SRN are likely on low-volume roads and new construction is typically more expensive than maintenance. However, if investments are grouped, overall measures of economic return are much more attractive and well in excess of the 12% hurdle rate. It is also important to note that this economic assessment did not capture many benefits associated with new bridge construction (discussed below). 69. Taking the sample of nine bridges as a package, an investment of US$8.7 million will offer a return at 64 percent, greatly above the cost of capital, with a ratio of value to capital of five. Switching values in Table 8.B indicate that the degree to which the package could withstand uncertainties in appraisal assumptions and method are considerable. Table 8.B Summary Economic Evaluation Results ITEM VALUE ITEM VALUE EIRR 64.2% NPV/CAP 5.0 Present Value of Costs (US$000) 6,134 Benefit to Cost ratio 8.0 Present Value of Benefits (US$‟000) 49,280 Switch Value for Costs 703% Net Present Value percent (US$‟000) 43,146 Switch Value for Benefits -86% Financial Capital Cost [CAP) (US$‟000) 8,700 70. This appraisal used a partial equilibrium approach and only considered users‟ benefits in calculations for economic benefits. Due to resource and procedural limitations, some benefits could not be estimated and factored into the benefit calculations. They include benefits from the value added of induced production, generated traffic and modal shift (from non-motorized modes to motorized modes and from 2-wheeled motorized modes to 4-wheeled motorized modes). Other benefits, real but 25 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version unquantifiable, include improved access to social and economic facilities and services. Such access is crucial to reducing poverty and achieving the MDGs. 26 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version 9 ANNEXES 27 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version ANNEX 1 CLASSIFICATION OF MAINTENANCE INTERVENTIONS CLASS DIAGNOSTIC SCOPE OF WORK  Removal of debris(soil, aggregate, cow dung and or any foreign  No significant defect & no material) from deck, footpath, railings, bearing, expansion joints; replacement or repair of  Cleaning and lubrication of bearing; and any element of the bridge is required. The work  Removal of grass, bushes from bridge surfaces, wing and or 1. Routine abutment wall, bearing area approach road involves routine activities Maintenance  Cleaning of drainage spout on the deck to be conducted in a cyclic manner. RM is defined as  Drain out the accumulated water in the chambers, cleaning and re- the servicing of a bridge greasing of main and hanger cables for suspension bridge and structure check the abnormal vibration of stay –cable for cable-stayed bridge.  Rectification and replacement of bridge expansion joints, railing posts, safety barriers, sign board;  Rectification damages of approach slabs, ballast walls etc.  Damages detected are very minor and do not require  Minor bed protection to minimize scour required to keep the 2. Minor foundations unexposed, bank protection in order to prevent any design input to carry Maintenance breaching of approach road; out the treatment or rectify the defects.  Tightening of loose bolts/ U-hooks, replacement of missing knot bolts in the steel members, spot re-painting work of steel members of suspension as well as cable-stayed bridge. Reporting to DRO office in case of abnormal vibration of cable system during wind.  All or some of the minor maintenance work scope plus  Major repair/replacement of slabs/ railings, bearings, piers  Painting and replacement of steel members  Numerous defects of  Greasing, covering of cables, changing of deck material and structural and hydraulic tightening or replacing bolts, inspection of anchoring system etc significance which may of suspension /cable-stayed bridge soon prevent the bridge in  Bed and or bank protection works (River training works) costing 3. Major its proper functioning. more than 0.3 million rupees Maintenance Detailed investigation may  Major maintenance of decking system and re-painting of steel be required to design the members maintenance work (e.g. non-destructive testing)  Seeking expert advice for major maintenance of anchorage system, main cable/hanger, cable/suspension devices/saddles for suspension bridges and also stay-cable pylon/tower and anchoring devices at pylon as well as at deck for cable-stayed bridges  Jacketing of pier columns  One or more elements of the bridge is heavily and  All or some of the minor maintenance work scope plus critically damaged that compromises the safety of  Major repair/replacement of slabs; and/or the traffic using the bridge;  Major repair/replacement of railings 4. Emergency  Emergency repair of one or  Major repair/replacement of piers; and/or Maintenance more parts are required  Repair rehabilitation or new construction of check dam when the followed by major bridge is at risk from scour maintenance of the bridge;  Load restriction and traffic  Remedial measures as advised by experts after investigations safety signs need to be put shown in scope of works for Major Maintenance. in place 28 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version ANNEX 2 HISTORICAL EXPENDITURE FRAMEWORK Table 9.A DOR Capital Budgets for All Bridge Programs (Including SRN Bridge Program) LINE 2011/12 DESCRIPTION RELEVANCE TO SRN BRIDGE PROGRAM ITEM ALLOCATION Capital Budgets (NOTE: currently co-mingled between SRN and LRN)  Funded construction of new bridges. Comingled SRN and LRN Bridge Construction 3371574 2,000,000 investments (estimated ≈ 30% SRN). In 2010/11 Divisional offices Program spent roughly 83% of this line item  Supported major repairs and maintenance of bridges. Historically Bridges and Culverts comingled between LRN and SRN 3371584 Protection, Repair and 600,000  In 2011/2012 about half of this line item went to centrally Maintenance managed investment with the remaining balance supporting divisional office led projects  Funded design and feasibility studies. Historically comingled between roads SRN and LRN bridges Detail Feasibility Study of 3371594 30,000  The Bridge Project received about NPR 24m from this budget in Roads and Bridges 2011/12. Anecdotes suggest they spent 5 to 6 times the budget amount Capital Budgets (NPR’000) 2,630,000 - roughly US$31.5 million Table 9.B Other Relevant Line Items and 2011/2012 Budget Allocations (NPR ‘000) LINE 2011/12 DESCRIPTION RELEVANCE TO SRN BRIDGE PROGRAM ITEM ALLOCATION Recurrent Budgets (NOTE: fund broad DOR expenditures- NOT just SRN Bridge Program)  Funded DOR‟s recurrent budget for central units (e.g., staff salaries, facilities, etc.) – including the Bridge Project 3370123 DOR (central offices) 85,360  The Bridge Project receives about NPR 5m of this budget for its central staff  Funded Regional directorate recurrent budgets (e.g., staff salaries, 3370173 Regional Road Offices 22,315 facilities, etc.). Regional directorates oversee Divisional offices  Funds divisional office recurrent budgets (e.g., staff salaries, 3370143 Division Road Offices 210,800 facilities, etc.) across many concurrent programs  Funded DOR‟s central laboratory which undertakes some testing and quality management functions for bridge investments. Testing 3370173 Laboratory 4,918 is often bundled into construction contracts that divisional offices let  Supported program planning, environmental & social assessment, Planning, Program, M&E, and monitoring and evaluation of DOR investments 3371643 Geo-Environment and 35,000  In 2011/2012 the Bridge Project received about 700k from this Other Programs budget for its centrally managed projects. Divisional offices received about 300k for their projects DOR Recurrent Budgets (NPR’000) 358,393 – roughly US$4.3 million Other Budgets – (NOTE: only a small fraction of RBN funding goes towards bridge maintenance)  RBN funding supports routine bridge maintenance RBN (recurrent but funds 3371653 2,768,000  In 2010/2011 DOR received about 14.37 million from RBN for capital) bridge related maintenance RBN (NPR’000) 2,768,000 - roughly US$33.6 million 29 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version ANNEX 3 HISTORICAL VARIANCE AGAINST BUDGET FY2009/10 Table 9.C Actual Expenditure Vs. Original Budgets FY 09/10 (NPR ‘000) LINE ITEM 2009/10 2009/10 2009/10 LINE ITEM (2008/09) DESCRIPTION ORIGINAL ACTUAL ESTIMATED (2011/2012) (2009/10) BUDGET EXPENDITURE VARIANCE SRN Bridge Program Capital Budgets 3371574 48-4-650 Bridge Construction Program (capital) 1,350,000 2,252,257 66.8% Bridges and Culverts Protection, Repair 3371584 48-4-660 30,000 49,335 64.5% and Maintenance (capital) Detail Feasibility Study of Roads and 3371594 48-4-661 25,000 148,634 494.5% Bridges (capital) Subtotal – SRN br. prog. budgets 1,405,000 2,450,226 +74.4% Table 9.D Complementary Budgets Expenditure Vs. Original Budget FY 09/10 (NPR ‘000) LINE ITEM 2009/10 2009/10 2009/10 LINE ITEM (2008/09) DESCRIPTION ORIGINAL ACTUAL ESTIMATED (2011/2012) (2009/10) BUDGET EXPENDITURE VARIANCE Complementary Budgets 3370123 48-3-120 DOR central office recurrent budget 75,442 43,319 -42.6% 3370173 48-3-121 Regional road offices recurrent budget 20,902 13,515 -35.3% 3370143 48-3-122 Divisional road offices recurrent budget 152,132 165,624 8.9% 3370173 48-3-161 Laboratory recurrent budget 4,615 4,263 -7.6% 48-3-681 Planning, program, M&E, geo- 3371643 31,500 23,538 -25.3% 48-4-681 environment and other programs Subtotal – complementary budgets 284,591 250,259 -12.1% NOTE: GON revised its budget structure after 2009/10. Headings for 2011/12 have different numbers and may also contain slightly different cost items within economic sub-headings 30 Nepal Bridges Improvement and Maintenance Program June 27, 2012 Technical Assessment Board Version ANNEX 4 MAP OF SRN BRIDGE PROGRAM BRIDGES 31