The World Bank BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE (P147272) REPORT NO.: RES36061 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE APPROVED ON JANUARY 29, 2016 TO STATE OF BAHIA TRANSPORT LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez Country Director: Paloma Anos Casero Regional Director: Franz R. Drees-Gross Practice Manager/Manager: Juan Gaviria Task Team Leader(s): Gregoire Francois Gauthier, Satoshi Ogita The World Bank BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE (P147272) I. BASIC DATA Product Information Project ID Financing Instrument P147272 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-Jan-2016 30-Jun-2020 Organizations Borrower Responsible Agency State of Bahia Infrastructure Secretariat of State of Bahia Project Development Objective (PDO) Original PDO The Project Development Objective is to enhance, in a sustainable fashion, road accessibility and safety in selected regions of the State of Bahia territory. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-85800 29-Jan-2016 31-May-2016 15-Jul-2016 30-Jun-2020 200.00 86.90 113.10 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE (P147272) This Restructuring Paper seeks the approval of the Regional Vice President for a Level-2 restructuring of the Brazil Bahia Road and Rehabilitation and Maintenance Project – 2nd Phase (P147272, Loan 8580-BR). The proposed restructuring will not change the original Project Development Objective (PDO). The main purposes of this restructuring are: (a) to extend the Project closing date by 24 months, from June 30,2020 to June 30, 2022 to ensure consistency between the loan agreement and the Board-approved closing date; and (b) to reallocate loan proceeds among expenditure categories to accommodate a cost overrun in Component 2 (Highway Rehabilitation and Maintenance) and a cost underrun in Component 3 (Rural Roads and Municipal Access). 1. Proposed changes and rationale The following changes are proposed: a) 24-month extension of closing date, from June 30, 2020 to June 30, 2022. At loan negotiations and Board approval, the agreed loan closing date was June 30, 2022. Yet, at loan signing, the loan closing date was set to June 30, 2020; the reason was that the Senate resolution #26, dated April 27, 2016, authorizing the loan, was issued with the erroneous implementation closing date of June 30, 2020. The Project Appraisal Document (PAD) includes the correct closing date of June 30, 2022, while the loan agreement needs to be corrected to make the loan closing date consistent with the Board-approved closing date. This extension would result in a Project implementation period of six years, as initially intended, and is deemed critical for the Project to fully reach its intended objectives. b) Reallocation of loan proceeds among expenditure categories to accommodate a cost overrun in Component 2 (Highway Rehabilitation and Maintenance) and a cost underrun in Component 3 (Rural Roads and Municipal Access). The change would entail reallocating US$33m to Component 2: US$20m from Component 3 and US$13m from unallocated loan proceeds. 2. Project description The Bahia Road Rehabilitation and Maintenance 2nd Phase Project (P147272) is a US$300m operation, of which US$200m is financed from an IBRD loan (Loan 8580-BR) to the State of Bahia and US$100m is financed by the Borrower. The IBRD loan was approved by the Board of Directors on January 29, 2016, signed on May 31, 2016 and declared effective on July 15, 2016. The Project’s development objective is to enhance, in a sustainable fashion, road accessibility and safety in selected regions of the State of Bahia territory. The Project has five components: (1) Institutional Strengthening; (2) Highway Rehabilitation and Maintenance; (3) Rural Roads and Municipal Access; (4) Road Safety; and (5) Project Management. 3. Project Implementation Status Progress towards achieving the PDO and overall Implementation Progress have consistently been rated as Satisfactory in all ISRs, under the assumption that the project closing date will be extended to June 2022. Although some targets have not yet been fully reached, the project is expected to reach all related PDO indicators by the proposed loan closing date extension. The “Percentage of the State highway network managed by performance-based contract” PDO indicator is close to achieving its end-target. The other two indicators (“Percentage of the rural population with access to all-weather highways” and “Reduction in fatalities and serious injuries on the selected road safety corridors”) are still at the baseline, but underlying activities are moving forward. Further details regarding implementation progress are highlighted below. a) Progress under Component 1 (Institutional Strengthening, US$18m) is currently rated “Satisfactory”. This The World Bank BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE (P147272) component supports the sustainability dimension of the PDO. The State’s logistics plan update, the road management and monitoring systems (traffic-counting, speed-measurement, axle-load measurement equipment) and the roadworks impact evaluation are all moving forward. A few activities, such as building-up an economic tool for investment decision-making, are behind schedule - still in bidding process. The Project Implementation Unit is committed in speeding-up these activities and the loan closing date extension would allow them to be completed on time. b) Progress under Component 2 (Highway Rehabilitation and Maintenance, US$199.5m) is currently rated “Satisfactory”. This component supports the sustainability and road safety dimension of the PDO. This component has progressed substantially, with about 300 km rehabilitated/upgraded in 2019. Roadworks financial progress is 58 percent and physical progress is 63 percent (four on-going works contracts). Rehabilitation works on the first two contracts are completed. Works under the third contract are expected to be completed by January 2020. The fourth contract, however, did not show progress and works have been completely halted for the past six months, while the upcoming rainy season will make it difficult to carry out works in the next three to four months. Contracts related to the last roadworks group (Group V) were awarded in December 2019. c) Progress under Component 3 (Rural Roads and Municipal Accesses, US$55m) is currently rated “Satisfactory”. This component supports the accessibility dimension of the PDO. It improves road accessibility and resilience in Bahia by eliminating about 900 critical spots on rural roads in 64 municipalities. While the component was delayed by about six months due to a failed bidding process to contract out engineering designs, engineering designs are now being delivered. The first (of four) roadworks bid is scheduled for January 2020. Component completion within the proposed new closing date is achievable. d) Progress under Component 4 (Road Safety, US$15m) is currently rated “Satisfactory”. This component has progressed well. A few activities have been completed, e.g.: iRAP road safety surveys, acquisition of traffic laws enforcement equipment (speed cameras, bathometers). Others are still on-going; the engineering designs for road safety corridors on highways BA-052 and BR-420 are being finalized. e) Progress under Component 5 (Project Management, US$4m). This component support projects management, financing the Project Implementation Unit and is progressing as planned. 4. Disbursement Summary To date, about 43 percent of the US$200 million IBRD loan has been disbursed and two-thirds of the loan is committed. With the ongoing road works contracts, disbursements are expected to reach 50 percent by June 2020. 5. Social and Environmental Safeguards and Fiduciary aspects There are no significant safeguards issues and the Project is compliant with the Environmental Management Plans and other policies and regulations. The overall safeguards rating is “Satisfactory” due to the good quality of social monitoring reflected in reports, the detailed follow-up to feedback, and contract and project complaints mechanisms. The overall fiduciary rating is “Satisfactory”. There are no outstanding audit reports. The World Bank BAHIA ROAD REHABILITATION AND MAINTENANCE PROJECT - 2ND PHASE (P147272) II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-85800 Effective 30-Jun-2020 30-Jun-2022 30-Oct-2022 REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IBRD- CW,GO,CS,NCS& 18,000,000.00 1,630,252.44 18,000,000.00 100.00 100.00 85800-001 TR - Part 1 Currency: CW & CS - Part USD 99,500,000.00 62,175,318.35 132,500,000.00 100.00 100.00 2.1 CW,GO,CS&NCS 50,000,000.00 625,541.90 30,000,000.00 100.00 100.00 - Part 3 CW,GO,CS,NCS& 15,000,000.00 902,652.85 15,000,000.00 100.00 100.00 TR - Part 4 CS, TR & OP - 4,000,000.00 1,089,808.73 4,000,000.00 100.00 100.00 Part 5 UNALLOCATED 13,000,000.00 0.00 0.00 Total 199,500,000.00 66,423,574.27 199,500,000.00