Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 58304-LR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 43.1MILLION (US$67.7 MILLION EQUIVALENT)

AND

A GRANT FROM

THE LIBERIA RECONSTRUCTION TRUST FUND

IN THE AMOUNT OF US$108.9 MILLION

TO THE

REPUBLIC OF LIBERIA

FOR A

ROAD ASSET MANAGEMENT PROJECT

May 10, 2011

Transport Sector Country Department AFCW1 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective February 28, 2011)

Currency Unit = Liberia Dollar (LRD)

US$1 = 71.0 LRD US$1 = 0.636 SDR

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank CAS Country Assistance Strategy CE Contracting Entity CPA Comprehensive Peace Agreement DBOMT Design-Build-Operate-Maintain-Transfer DBST Double Bituminous Surface Treatment EC European Commission ECF Extended Credit Facility ECOWAS Economic Cooperation of West African States EIRR Economic Internal Rate of Return EITI Extractive Industry Transparency Initiative EMP Environmental Mitigation Plan EPA Environment Protection Agency EU European Union FDI Foreign Direct Investment FIDIC Fédération Internationale des Ingénieurs-Conseils (International Federation

for Consulting Engineers) FM Financial Management GDP Gross Domestic Product GEMAP Governance and Economic Management Assistance Program GOL Government of Liberia GTZ German Technical Cooperation HDM4 Highway Development and Management Version 4 HIPC Heavily Indebted Poor Countries HSEMP Health, Safety and Environmental Management Plan IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IFC International Finance Corporation IFR Interim Unaudited Financial Reports IIU Infrastructure Implementation Unit

IMF International Monetary Fund JSAN Joint Staff Advisory Note LOS Level of Service LRTF Liberia Reconstruction Trust Fund LIBRAMP Liberia Road Asset Management Project MC Monitoring Consultants MDRI Multi Lateral Debt Relief Initiative M&E Monitoring and Evaluation MOF Ministry of Finance MPW Ministry of Public Works NCB National Competitive Bidding NTGL National Transitional Government of Liberia NTPS National Transport Policy and Strategy OP Operational Manual OPRC Output and Performance-Based Roads Contracts ORAF Operational Risk Assessment Framework PCR Physical Cultural Resources PDO Project Development Objective PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Financial Management PFMU Project Financial Management Unit PIU Project Implementation Unit PPP Public Private Partnership PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper QBS Quality-Based Selection QCBS Quality- and Cost-Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework SBD Sample Bidding Document SDR Special Drawing Rights SIL Specific Investment Loan SIU Special Implementation Unit UNMIL United Nations Mission in Liberia URIRP Urban and Rural Infrastructure Rehabilitation Project

Regional Vice President: Obiageli Katryn Ezekwesili Country Director: Ishac Diwan

Sector Director: Sector Manager:

Task Team Leader:

Jamal Saghir Supee Teravaninthorn Emmanuel A. James

Table of Contents

I.  Strategic Context .............................................................................................................. 1 

A.  Country Context .................................................................................................................. 1 

B.  Sectoral and Institutional Context ....................................................................................... 2 

C.  Higher Level Objectives to which the Project Contributes ................................................ 4 

II.  Project Development Objectives (PDO) .......................................................................... 5 

A.  PDO..................................................................................................................................... 5 

1.  Project Beneficiaries ........................................................................................................ 5 

2.  PDO Level Results Indicators .......................................................................................... 5 

III.  Project Description ........................................................................................................... 6 

A.  Project components ............................................................................................................. 6 

B.  Project Financing ................................................................................................................ 6 

1.  Lending Instrument .......................................................................................................... 6 

2.  Project Cost and Financing .............................................................................................. 7 

C.  Lessons Learned and Reflected in the Project Design ........................................................ 8 

IV.  Implementation .............................................................................................................. 10 

A.  Institutional and Implementation Arrangements .............................................................. 10 

B.  Results Monitoring and Evaluation .................................................................................. 11 

C.  Sustainability..................................................................................................................... 12 

V.  Key Risks and Mitigation Measures .............................................................................. 13 

VI.  Appraisal Summary ....................................................................................................... 14 

A.  Economic and Financial Analysis ..................................................................................... 14 

B.  Technical ........................................................................................................................... 15 

C.  Financial Management ...................................................................................................... 18 

D.  Procurement ...................................................................................................................... 18 

E.  Social (including safeguards) ............................................................................................ 19 

F.  Environment (including safeguards) ................................................................................. 20 

G.  Policy Exception and Readiness ....................................................................................... 20 

Annex 1: Results Framework and Monitoring ............................................................................. 21 

Annex 2: Detailed Project Description ........................................................................................ 23 

Annex 3: Implementation Arrangements ..................................................................................... 36 

Annex 4 51 

Annex 5: Implementation Support Plan ....................................................................................... 54 

Annex 6: Team Composition ....................................................................................................... 56 

Annex 7: Economic and Financial Analysis ................................................................................ 57 

Map No. IBRD 38580 ................................................................................................................... 65 

i

LIBERIA

ROAD ASSET MANAGEMENT PROJECT - LIBRAMP

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTTR

Date: May 10, 2011

Country Director: Ishac Diwan Sector Director: Jamal Saghir Sector Manager: Supee Teravaninthorn Team Leader(s): Emmanuel Anthony James Project ID: P125574 Lending Instrument: Specific Investment Loan (SIL)

Sector(s): Roads and Highways (100%) Theme(s): Infrastructure Services for Private Sector Development (100%) EA Category: B Partial Assessment

Project Financing Data: Proposed terms: Standard IDA Credit terms with a maturity of 40 years, including a grace

period of 10 years [ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [X] Other:

Source Total Amount (US$M) Total Project Cost:

Co-financing: Liberia Reconstruction Trust Fund (LRTF)

Borrower: Total Bank Financing:

IBRD IDA

249.4 108.9 72.8 67.7

Borrower: Republic of Liberia Responsible Agency: Infrastructure Implementation Unit of the Ministry of Public Works

Contact Person: Akindele G. Beckley Telephone No.: +231-6-579053/+231-6-516-732 Fax No.: n/a Email: akindelebeckley444@hotmail.com; office@iiu-mpw.org

Estimated Disbursements (Bank FY/US$ m) (Aggregating IDA and LRTF) FY FY11 FY12 FY13 FY14 FY15 FY16-FY22 Annual 5.0 18.8 35.7 30.0 19.3 67.8 Cumulative 5.0 23.8 59.5 89.5 108.8 176.6

ii

Project Implementation Period: Start June 8, 2011 ; End June 30, 2022 Expected effectiveness date: December 15, 2011 Expected closing date: June 30, 2022; The LRTF Grant: June 30, 2020

Does the project depart from the CAS in content or other significant respects?

○ Yes ● No

If yes, please explain:

Does the project require any exceptions from Bank policies? Have these been approved/endorsed (as appropriate by Bank management? Is approval for any policy exception sought from the Board?

○ Yes ● No ○ Yes ○ No ○ Yes ● No

If yes, please explain:

Does the project meet the Regional criteria for readiness for implementation?

● Yes ○ No

If no, please explain:

Project Development objective. The objective of the project is to support the Recipient’s efforts to reduce transport costs along the road corridor from Monrovia to the Guinea border and to maintain the road in good condition over a 10-year period.

Project description. Component 1 – Design, Rehabilitation and Maintenance of Monrovia (Red Light) – Ganta – Guinea Border Road: This component will finance a 10-year OPRC contract for two road lots, Monrovia (Red Light) - Gbarnga (approximately 180 km) and Gbarnga - Ganta to the Guinea border (approximately 69 km). Component 2 – Consultant Services, Operating Costs, and Training This component will finance a consultancy services firm to perform as Monitoring Consultants (MC) for the OPRCs, and it will also finance the needed technical assistance for preparatory road feasibility studies and the development of sector institutions through hiring of skilled staff and firms, and staff training programs including the operating costs.

iii

Safeguard policies triggered? Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

● Yes ○ No ○ Yes ● No ○ Yes ● No ○ Yes ● No ● Yes ○ No ○ Yes ● No ● Yes ○ No ○ Yes ● No ○ Yes ● No ○ Yes ● No

Conditions and Legal Covenants:

Financing Agreement Reference Description of Condition/Covenant

Date Due

Article V, Section 5.01 The Co-financing Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it have been fulfilled.

Effectiveness

Sch. 2, Sec. I.B.1(a) The Recipient shall, not later than March 1 in each calendar year, prepare and furnish to the Association, for review and approval, a proposed annual work plan and budget for the forthcoming Fiscal Year, and proceed thereafter to implement such annual work plan and budget, as approved by the Association (Annual Work Plan and Budget).

March 31 (annually)

Sch. 2, Sec. I.D.4 The Recipient shall, not later than December 31, 2011, recruit a safeguards specialist,

December 31, 2011

Sch.2, Section II.B.4 The Recipient shall, not later than four months after the Effective Date, recruit an independent and qualified external auditor.

Sch. 2, Sec. III.E. The Recipient shall, not later than December 31, 2011, recruit two procurement specialists.

December 31, 2011

1

I. Strategic Context

A. Country Context

1. Since the Comprehensive Peace Agreement (CPA) in 2003 that ended the country’s 14-year civil war, Liberia has made important progress despite the considerable challenges and risks it faces. Liberia has maintained its political stability since the democratic election in 2005, which enabled reestablishment of the public financial management system, rebuilding of public sector institutions, delivery of essential public services, and foundation of a local government system. The country also has sustained strong growth since the end of its civil war, that slowed down marginally in 2009 due to the global economic downturn that lowered primary commodity prices.1 2. However, Liberia remains one of Africa’s poorest nations, with its gross domestic product (GDP) per capita of US$2102 in 2009. The new government established in 2006 inherited severely damaged infrastructure and serious challenges in governance and institutional capacity, which has incessantly posed impediments to the country’s development. With that understanding, its first Poverty Reduction Strategy Paper (PRSP) published in March 2008 articulated the Government of Liberia’s (GOL’s) priorities for re-establishing of basic infrastructure and institutional strengthening. In particular, through highly participatory processes, where hundreds of people across the nation were invited for consultation, the poverty reduction strategy (PRS) identified rebuilding of the road network as one of its top priorities. 3. The World Bank has actively supported the GOL’s efforts for recovery since the war ended, particularly in the areas of the PRS priorities through its International Development Association (IDA) resources. The Bank also has led donor coordination, fostering collaboration across sectors and administering a multi-donor trust fund, the Liberia Reconstruction Trust Fund (LRTF). Combining funds from IDA and LRTF, more than US$300 million has been invested in or committed for rebuilding of transport infrastructure. 4. At the last Country Portfolio Performance Review (CPPR), both the GOL and the Bank shared a common assessment that the country is gradually but surely moving out of an emergency recovery situation to a normal development path, albeit with various challenges. It was also noted that, once out of emergency status, higher standards will be required for implementation of development policy and projects. The GOL needs to have greater country ownership in planning, managing and supervising its investment, and to develop and sustain its institutional capacity, building upon the experience and lessons learned during this transition period. 5. Recognizing the recent progress in macroeconomic stability, public financial management, and debt management, the Executive Board of the IDA and the International Monetary Fund (IMF) agreed in June 2010 that Liberia had reached the completion point for the Heavily Indebted Poor Countries (HIPC) initiative. The assessment found that Liberia had made satisfactory progress also in implementing the reforms specified for reaching the completion

1 The real GDP has grown at 9.5 percent in 2007, 7.1 percent in 2008, and 4.9 percent (estimated) in 2009. 2 Market exchange rate basis; US$379 on the basis of purchasing-power-parity.

2

point. This included successful implementation of the PRS, as noted in the Joint Staff Advisory Note (JSAN), and strong performance under the Extended Credit Facility (ECF) supported program despite the global financial crisis. While not fully satisfactory, substantial progress has been made toward implementation of the Public Financial Management (PFM) law, including creation of a unified accounting system of the Ministry of Finance and appointment of the Debt Management Committee. 6. Since it reached the HIPC completion point, Liberia qualifies for IDA Credits instead of Grants. Liberia will remain qualified for additional support for debt relief 3, which will reduce nominal debt service on average by US$13.7 million annually over a 20-year period and cover all remaining debt service obligation on eligible credit balances to the IDA, the IMF, the African Development Bank (AfDB), and the European Union (EU). Liberia’s debt stock will decrease sharply after debt relief and the risk of future debt distress will be low. HIPC and Multilateral Debt Relief Initiative (MDRI) assistance will bring the present value of debt-to-exports in FY 2010/11, excluding new borrowing, to 22.9 percent from 266.3 percent in FY 2008/09. The debt ratio will be well below the policy related threshold. 7. Notwithstanding the positive progress and favorable indications, Liberia needs to continue enhancing its economic management in the face of its vulnerability to foreign direct investment (FDI) flows, expected lower GDP growth in the future, and lower concessional terms for new borrowing. Key areas of focus include careful management of new borrowing and further strengthening of public financial management, debt management capacity building, and management of public investment and public assets.

B. Sectoral and Institutional Context

8. During the war the extensive destruction of basic infrastructure, coupled with a lack of maintenance, contributed to the collapse of productive activities and a reversion essentially to a subsistence economy. In the transport sector, a vast majority of the country’s 10,000 km of existing roads were in extreme disrepair and often impassable during the rainy season. In addition, the airport and seaport had become dilapidated and operations were poorly organized, severely hampering international commerce. 9. In March 2008, the government published its first full Poverty Reduction Strategy (PRS). The PRS articulates the GOL priorities for re-establishing of the basic infrastructure, primarily rebuilding of the road network that was extensively damaged during years of war. Through the highly participatory process of developing the PRS (hundreds of people participated in consultations across the nation) Liberians overwhelmingly defined roads as their first priority for infrastructure rehabilitation - and even for development overall. The government has therefore made restoration of basic infrastructure, primarily roads, its priority.

10. The country’s overall transport sector recovery plans are guided by the National Transport Policy and Strategy (NTPS) that was started by the government in 2008 with Bank support. German Technical Cooperation (GTZ) supported the completion of this work and it was

3 This includes additional support under the Multilateral Debt Relief Initiative (MDRI), IMF beyond-HIPC assistance, and the European Union (EU) special debt relief initiative.

3

officially endorsed by the Government in 2009. The investment framework recommended by the GTZ study implies a cost of about US$1 billion to re-establish the country's basic roads and bridges network. 11. Adapting international good practices to the particulars of Liberia4, the NTPS set out the medium and long term goals for the road sector. The policies and strategies developed draw on good international practices and adapt these to the particulars of Liberia, such as the short season civil works can be executed because of the intense rains. The medium and long term goals pertinent to the road sector are:

(i) Institutional formulation. The Ministry of Public Works (MPW) will move from

the force account execution of the past to a more policy and strategy oriented ministry; road sector management will gradually be placed in the hands of an autonomous road authority with requisite capacities; a second generation road fund will be developed for financing road maintenance.

(ii) Contracting arrangements. Innovative contracting techniques and partnerships with the private sector will be deployed to achieve government's objective of restoration and long term preservation of road assets, including design-build (DB), design-build-operate-maintain, performance or outcome payments to contractor, possibly total-asset-management, build-operate-transfer, as well as the more traditional input type of contracts.

(iii) Maintenance strategy. Most of the road network needs to be first rehabilitated to bring it to a stable or maintainable status. Once in stable (in good or fair condition as defined by the roughness index) condition, the government has a multi-pronged strategy: maintenance through the above referred contracting arrangements (primary and secondary roads mainly), one or two year road maintenance contracting arrangements with local contractors and maintenance with community participation. In the shorter term, engagement of UNMIL engineering brigades for maintaining strategic roads is continuing as well as the use of force account units.

12. In order to improve capacity in the road sector, the government has put forward a comprehensive framework for implementation of donor funded projects. A Special Implementation Unit (SIU) was established under the MPW as a Project Implementation Unit (PIU) for the IDA and other donor-financed infrastructure projects across the sector in early 2006. The SIU was transformed subsequently into a self-standing Infrastructure Implementation Unit (IIU), with greater decision-making authority in 2009 under the new leadership of an internationally-hired program director. 13. During project preparation it was recognized that it is becoming necessary for government to provide adequate financing for the maintenance of stable roads across the entire network. A two stage approach seemed to be relevant. Firstly, the government in its annual budget would include funds that cover the routine and periodic maintenance needs of at least the 4 The key particulars of Liberia include: (i) severely deteriorated and long unattended infrastructure, (ii) fewer workable days limited by a long and intense rainy season, and (iii) difficulty in attracting reputable engineering companies and contractors due to the recent history of conflict and its inadequate business infrastructure.

4

stable roads. The MPW will annually prepare a matching implementation plan for carrying out this maintenance and submit it to the Bank for review and comments each March. The plan should be prepared prior to the annual budget formulation to ensure that funds are provided in the subsequent fiscal year. It is likely that a mixture of force account as well as contracting will continue to be used for implementing maintenance. The needs are modest now, but if well designed (and as the program grows) it will be possible to attract donor financing also for maintenance. 14. Secondly, as more roads are improved and the stable portion of the network expands, more reliable and greater funding will be required. For these needs, the setting up of a Road Maintenance Fund was discussed and the government confirmed that the institutional reforms study has already made recommendations in that direction. The Bank advised the government to consider the Road Fund an essential element in securing a sustainable stream of funding for maintenance needs in the medium term and beyond. As such it is expected that the government will continue working with Bank support towards setting-up a functioning Road Fund within the next five years. 15. The overall transport program in Liberia has evolved considerably since the Bank's re-engagement in 2005. On balance, despite Liberia's combination of a fragile/conflict state, an impressive program that contributed to the restoration of key segments of the transport network, as well as the development of the institutional arrangements needed to help ensure sustainability, has been carried out. The road program played a key role in Liberia's economic recovery as it facilitated the provision of key social and economic services by both the public and private sector, in a country that was emerging from a long war which had been particularly damaging to its infrastructure network. The proposed project will mark a further step forward because it requires commitment from all parties for the use of a long term, performance based contract (OPRC) that would ensure the rehabilitation and maintenance of the very important Monrovia - Guinea border road corridor. The arrangements proposed under this project may well allow Liberia a better chance to sustain a consistent and appropriate level of service for the road than a series of traditional contracts would be able to deliver.

16. It is worthwhile mentioning that in terms of implementing reforms in other sub-sectors, the Bank has supported an ambitious and so far successful government effort to reform the inefficient port sector and to gradually implement a Landlord Port system. The recent successful concessioning of Monrovia Port’s general cargo and container operations to APM Terminals (APMT) must be considered to be a remarkable achievement. This is the evidence that the government is, even under fragile state conditions, committed to pushing difficult sectoral and institutional reforms.

C. Higher Level Objectives to which the Project Contributes

17. In 2009, the IDA, International Finance Corporation (IFC) and AfDB jointly prepared the Country Assistance Strategy (CAS). The CAS recognized and responded to government’s core strategic areas of intervention as identified in the PRS, which includes peace and security, economic revitalization, strengthening governance and rule of law, and infrastructure and basic services. Fully aligned with these core areas, the CAS set out its three strategic themes: (i)

5

rebuilding core state functions and institutions; (ii) rehabilitating infrastructure to jump-start economic growth; and (iii) facilitating pro-poor growth. 18. Funded by LRTF, IDA and by government’s own resources, the proposed Liberia Road Asset Management Project (LIBRAMP) is aligned with the CAS. In light of the above three strategic themes of the CAS, rehabilitation of infrastructure and long-term management and preservation of the asset, the core of the LIBRAMP project, is viewed as the necessary precursor for reviving and sustaining economic development, delivering basic services, and hence, improving social conditions.

II. Project Development Objectives (PDO)

A. PDO

19. The objective of the project is to support the Recipient’s efforts to reduce transport costs along the road corridor from Monrovia to the Guinea border and to maintain the road in good condition over a 10-year period.

1. Project Beneficiaries

20. The primary beneficiaries of the project are road users whose travel time and transport cost will be reduced as a result of road improvement. Currently, much of the road corridor is severely deteriorated and some sections are not readily passable during the rainy season, thereby greatly undermining transport efficiency, reliability, safety, and comfort of road users. 21. Secondary benefits of the project are expected to be felt by the local and national economy, private sector, and the national construction industry. First, as the transport cost along a major road corridor reduces, prices of traded goods are likely to be lowered. This can create an enabling condition for trade facilitation and private sector development. Also, a 10-year road management project is likely to create jobs and sub-contracting opportunities related to road works and roadside development, providing income generating opportunities particularly for the rural population. The OPRC approach is expected to bring efficiency gains and administrative cost savings for the government (IIU), and has the potential to drive fundamental restructuring and performance improvement within the road sector. Under the contractual arrangements, sophisticated and competent contractors will manage the country’s key road infrastructure asset. A 10-year long involvement of internationally competitive contractors and monitoring consultants (MC) will provide opportunities for skills transfer and subcontracting of maintenance works. This can be expected to eventually lead to the capacity-building and growth of Liberia’s national construction industry.

2. PDO Level Results Indicators

22. Achievement of the above development objectives will be measured in terms of the following results indicators:

(i) Transport costs borne by road users, including vehicle operating costs and monetary value of travel time (measured through roughness, IRI rate in m/km),

(ii) Roads in good and fair condition as a share of total classified roads (percentage), (iii) Direct project beneficiaries (number), of which female (percentage), and (iv) Share of rural population with access to an all-season road (proportion).

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III. Project Description

A. Project components

23. The project consists of two components. Component 1: Design, Rehabilitation and Maintenance of Monrovia (Red Light)–Ganta–Guinea Border Road. This component will finance a 10-year OPRC contract for two road lots, Monrovia (Red Light) – Gbarnga (approximately 180 km) and Gbarnga – Ganta to the Guinea border (approximately 69 km), including design, rehabilitation, upgrading, periodic and routine maintenance, and control of road right of way. The Contracting Entity5 (CE) of the OPRCs for both road lots will carry out three interventions: (i) rehabilitation/upgrading during first two to three years, (ii) routine maintenance throughout the contract period, and (iii) periodic maintenance (i.e., resurfacing) in the eighth year (for detailed project description and a map of the corridor see Annex 2). 24. This road is vital to the nation’s reconstruction, connecting four of the country’s five largest cities6 and providing critical cross-border connection. Current surface condition of the road corridor varies by section, with the northernmost 70 km in the worst condition. In that segment, 68 km need full reconstruction along the existing right-of-way, and the final 2 km from Ganta to the Guinea border will consist of a new two-lane road constructed where there is presently an unpaved road. In Section VI other alternatives considered and the rationale for choosing the 10-year OPRC approach and the order of interventions are described in further detail. 25. Component 2: Consultant Services, Operating Costs, and Training. This component will finance a consultancy services firm to perform as MCs for the OPRCs, and it will also finance the needed technical assistance for preparatory road feasibility studies and the development of sector institutions through hiring of skilled staff and firms, and staff training programs including the operating costs. Details of this component and the proposed framework for staff training program are available in Annex 2.

B. Project Financing

1. Lending Instrument

26. The proposed lending instrument is a Specific Investment Loan (SIL). The Recipient is eligible for IDA credits as of July 1, 2010. The standard country terms for IDA Credit (Liberia being classified as LDC by the United Nations, and income category (i) under OP 3.10 Annex D) will apply for this project, with a final maturity of 40 years including a grace period of 10 years.

5 Under an OPRC, the Contracting Entity (CE) can be any type of firm or business venture which has the necessary technical, managerial and financial capacity to fulfill the contract. The CE is responsible for designing and carrying out the works, services and actions they believe are necessary in order to achieve and maintain the service levels stated in the contract. 6 Liberia’s largest urban settlements and their populations are: Monrovia (1,010,970), Ganta (41,106), Buchanan (34,270), Gbarnga (34,046), Kakata (33,945).

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2. Project Cost and Financing

27. The total cost of the two lots is estimated at US$220.0 million based on the conceptual design for the technical specifications. As they will be lump-sum and output-based contracts, physical contingencies will be covered in the bidding prices. The engineering cost was derived from the unit costs associated with the specific interventions selected, based on the current condition by road segment. On average, unit costs are approximately US$620,000 per kilometer for rehabilitation and upgrading, approximately US$6,100 per kilometer per annum for routine maintenance, and approximately US$165,000 per kilometer for periodic maintenance. Hence, of the total cost, about 73 percent is estimated to be used for rehabilitation and upgrading, seven percent for routine maintenance and 20 percent for periodic maintenance. For the consultant services and institutional development support, a total of US$16.2 million will be allocated (Table 1). Retroactive financing of up to US$5.0 million will be provided for eligible expenditures incurred under all categories of the credit, made prior to the signing of the financing agreement but on or after December 15, 2010.

Table 1: Project Cost and Financing Summary

Project Components Project Cost (US$ million)

Financing by Source (US$ million)IDA LRTF GOL

1. Civil Works - OPRC for Monrovia-Ganta-

Guinea Border Road 220.0 46.5 108.9 64.6

2. Consultant Services, Operating Costs and Training

16.2 16.2

Total Baseline Costs 236.2 62.7 108.9 64.6 Price contingencies† 13.2 5.0 8.2

Total Project Costs/Financing Required 249.4 67.7 108.9 72.8 † The OPRC is an output-based lump-sum contract; hence, the Employer is not liable for physical contingencies. Bidders will price physical contingencies in their bidding price.

28. At the moment, the total estimated project cost is US$249.4 million, of which about US$176.6 million is being provided from IDA (US$67.7 million) through its credit to the Recipient, and (US$108.9 million) from the LRTF. The Oversight Committee (OC) of the LRTF has approved the project concept and committed funds7 to co-finance the proposed project, through contributions and pledges received from the governments of Germany, Sweden, Ireland, the United Kingdom and Norway, the European Commission and the World Bank. Administrative Agreements have been revised and signed in September 2010, reflecting these pledges. The Recipient will provide the remaining counterpart funding of US$72.8 million. 29. Payment schedule. During the first three-year period, an estimated US$130 million (52 percent of total project cost) will be needed for payment toward rehabilitation and upgrading works, payment to the MCs, and technical assistance activities. The rest of the disbursement will be spread over the remaining project period for routine and periodic maintenance. For

7 The LRTF Oversight Committee actually authorized US$113.0 million and the project was approved on this basis. However, at this time the Bank’s legal commitment authority is limited to US$108.9 million.

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Component 1 (OPRC), Employer payments to the CE will be made based on the following key principles:

(i) Of the amount allocated for rehabilitation (estimated 54 percent of the total contract amount), 20 percent will be paid in advance shortly before the commencement of respective works. The remaining 80 percent will be paid proportionately to the progress of works, for example, at a pre-determined rate for every five completed kilometers. The repayment of the advance payment will be completed by the time of completion of rehabilitation works.

(ii) Routine maintenance payments will be made to the CE during the maintenance period on a quarterly basis upon confirmation by the independent Monitoring Consultant (supervisor) that maintenance standards were met.

(iii) Periodic maintenance payments will be made to the CE in the eighth-ninth year of the maintenance period based on the same payment mechanism and milestones of the rehabilitation period (i.e., 20 percent advance payment and, for the remaining 80 percent, proportionate payment to the progress).

(iv) All payments will be processed only after a certificate from the MC confirming that the outputs have met all required criteria. C. Lessons Learned and Reflected in the Project Design

30. Bank’s Engagement in Liberia. Restoration and rehabilitation of key transport infrastructure has been a top priority in the Bank’s re-engagement with the country that started in 2005. The Bank’s emergency recovery operations have been satisfactory in achieving their development objectives as the outputs show. During the earlier stage of emergency recovery in 2006-2007, labor-based road rehabilitation was effective in quickly restoring critical primary roads while enforcing peace as it created jobs for ex-combatants. Technical support provided by the UN peacekeepers enabled such an unusual operation. In 2007 and 2008, a total of 620 km of emergency rehabilitation of unpaved roads was completed and 27 Bailey type steel truss bridges were supplied to the government for installation at strategic small river crossings. After the immediate emergency operations, rebuilding efforts were geared not only toward infrastructure but also toward basic institutional functions within the government. The SIU was established under the MPW as a PIU for the IDA and other donor-financed infrastructure projects across the sector in early 2006. Under then SIU, and now the IIU, basic transport infrastructure has been rehabilitated, including roads from Monrovia to the main international airport, first sections of a primary road corridor from Monrovia to Buchanan, and a majority of Monrovia city streets, among others. 31. Results-based approaches have already been deployed for selected elements of the Liberia portfolio and the experiences, though varying with the CE selected, have overall been better technically and administratively than for the standard input based contracts. This consideration and others led to the design of the full OPRC approach, where the goal was to attain and sustain an appropriate level of service for this key trunk road over the medium term, and that at the same time would be attractive to truly capable firms. 32. In comparison under a standard input contract, during a similar period there would need to be at least three instances of selection and deployment of contractors and consultants (for

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rehabilitation maintenance, and overlay) which would be less efficient and more taxing on the IIU/government mechanisms. In terms of advantages furthermore, unlike the case of the proposed OPRC, there would be no single entity in a position to be held responsible continuously for sustaining the required level of service. 33. Important lessons drawn from previous operations are reflected in the project design:

(i) The Bank’s role is important in facilitating coordination among development partners and strategizing investment. The Bank has actively engaged with various development partners, facilitated multi-donor cooperation, and administered LRTF. This has helped achieve development goals while minimizing redundancy and waste of resources.

(ii) A design-build approach has been more successful than the widely utilized FIDIC8 approach in the country’s low-capacity and high-risk environment. Combining design and construction increases contract amount; hence, makes it more attractive to internationally reputable firms. Otherwise, because of higher mobilization costs and other risks in Liberia, selection of firms and procurement can be difficult and face delays. Also, by transferring the design responsibility to contracting entities, it has reduced transaction costs and delay, but increased the likelihood of timely delivery of quality product.

(iii) Success in the transport sector is largely interdependent with other sectors’ performance. The institutional reforms agenda that eased doing business in Liberia is considered to have contributed to attracting foreign direct investment. Also important has been the development of a transparent and competitive extractive industry, in compliance with the Extractive Industry Transparency Initiative (EITI), as one of the main drivers of transport demand.

(iv) Sustainability should be the key consideration in project design, as the country is moving out of emergency and entering a normal development path. It is critical to build institutional capacity with which the GOL can manage public assets efficiently. Efficient management of public resources is closely linked to macroeconomic stability and peace and security.

34. Bank’s OPRC Experience in other Countries. The Bank has promoted output and performance based contracts in a number of countries in Latin America (Argentina, Brazil and Uruguay), South Asia (India), and Africa (Chad, Zambia, and Botswana). Key lessons drawn from such experiences that are relevant to the project were incorporated in the project design:

(i) Rehabilitation and maintenance works are combined under one model and implementation strategy, thus making it easy to monitor and measure.

(ii) The project has defined all risks involved, quantified them, and proposed mitigation measures for each of the risks involved, proportioning them to the party best fit to mitigate it.

8 FIDIC stands for Fédération Internationale des Ingénieurs-Conseils (French for the International Federation of Consulting Engineers), and also refers to the FIDIC-established standard format of a more conventional contracting method that separates detailed design and civil works and awards each of them to separate entities (design consultants and contractors).

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(iii) For the entire financed works, the payment model will cover the rehabilitation/improvement works as well as maintenance works, making sure that the contractor has the required incentives to carry out the maintenance works after completion of rehabilitation works.

(iv) The rehabilitation solutions need to be closer to the economically optimum strategy recommended by life cycle cost analysis, such as by using the World Bank’s Highway Development and Management Version 4 (HDM 4) model, or equivalent.

(v) A corridor management approach should be adopted whereby the service provider is also required to manage road safety, axle-load control, roadside user facilities, right-of-way encroachment and traffic flow.

(vi) There should be increased consistency in the rehabilitation and maintenance activities through long term network management rather than short term interventions.

(vii) Success in the implementation of OPRC is highly dependent on: (i) good management of the programs at the responsible sector entity, and (ii) the government’s capacity to meet with their financial obligations, thus, regularly honoring the payments due to the contractors.

(viii) Longer duration of performance based contracts (up to 10 years) are prescribed to allow the contractor to spread the risks and provide for justifiable periodic maintenance cycles - and where OPRCs are being tried for the first time, it is preferable that the Bank remains involved throughout the contract period.

IV. Implementation

A. Institutional and Implementation Arrangements

35. The IIU will implement the project with support of the Project Financial Management Unit (PFMU) in the Ministry of Finance (MOF). The IIU will be responsible for procurement management and supervision of technical matters, as it is for all IDA-funded and administered infrastructure projects. The PFMU will oversee financial management of the project along with all IIU-implemented projects. The division in implementation responsibilities was designed when the Bank reengaged in Liberia specifically to provide checks and balances in a weak governance environment and this arrangement has functioned to date. However, as IIU capacity grows, it will be considered to transfer financial management responsibility for these and other IDA-financed transport projects from PFMU to IIU.9 Further details of such a prospective arrangement are available in Section VI. C. and Annex 3. 36. The IIU currently manages a total of about US$230 million of project activities including the recent design-build-transfer road projects. The MPW intends for the IIU to transform into a semi-autonomous road agency over the coming years. This reform will be governed by the overarching institutional reform agenda of the GOL, for which a review is being carried out by the Governance Commission to identify government departments/agencies’ responsibility overlaps and gaps. In line with that, a consultancy service was financed by the IDA-financed Urban and Rural Infrastructure Rehabilitation Project (URIRP) to review the institutional 9 This responsibility transfer will be a prerequisite for the envisaged transformation of the IIU into an autonomous or semi-autonomous road agency.

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structure of the transport sector, to recommend a reform and restructuring framework, and to prepare action plans. The project supports the recommendations of this consultancy service. Capacity-building activities under Component 2 are designed to fit into this bigger institutional restructuring effort (see Annex 2 C). 37. As the Governance Commission’s institutional reform agenda progresses, activities of other sectors will increasingly be handed over to the relevant line ministries and agencies, which then will have strengthened their capacities to manage donor funded activities in their sector. For example, a separate Project Management Unit is being formed in the agriculture sector that is expected to be operational by June 2011. Eventually, such a transition will allow the IIU, or then its successor, to focus more on strategic planning, scheduling and management of the project and other road projects, and management of road assets, by freeing up their resources. 38. As discussed under Section V, the limited implementation capacity of the IIU and its successor, or lack of such, is the main implementation risk of the project. Strong commitment, capacity improvement, and specialization of the IIU are key success factors for implementation of the project, also a prerequisite for its eventual transition to a road authority. Specifically, the OPRC approach will require institutional development of the IIU in the following aspects:

(i) First, the IIU needs to develop capacity to effectively manage long-term contracts. It will be critical for the IIU to establish a long-term vision and leadership, and hence to create an enabling environment for the private entities to foresee and respond to future opportunities and risks. Also, a 10-year contract will provide opportunities for the IIU to strengthen its institutional capacity by learning by doing, and scaling up good practices.

(ii) Second, in order to manage a performance-based contract, it is vital to build strong monitoring capacity within the IIU. In this respect, the project will support IIU in developing the monitoring framework and supplying adequate resources such as trained staff, equipment and financial supports.

39. The IIU, with support of the Bank and other donors, has made some progress in institutional capacity building, but still more is needed. The IIU is currently going through a hiring process for senior managerial and technical positions for Engineering, Administration and Finance, and Monitoring and Evaluation (M&E). Acquiring needed managerial and technical competencies is the first essential step to build implementation capacity. The project will support the IIU in acquiring and retaining competencies and skills through financial support for international recruitment and training programs.

B. Results Monitoring and Evaluation

40. The achievement of the project development objectives will be measured by output and outcome indicators against specific targets throughout the life of the project. The Results Framework defines each indicator, baseline, target values, frequency of data collection, data sources and methodology, and data collection responsibilities (Annex 1). These indicators will track intermediate and final project outcomes. The IIU is responsible for M&E. The list of performance indicators has been discussed and confirmed during negotiations. Output and outcome indicators are classified by their characteristics and measurement methodology: (i)

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development and performance of road network, (ii) economic and social impacts of the project on the livelihood of affected persons and local/national economy, and (iii) progress made toward institutional capacity building of the implementing agency and the road sector. 41. Development and performance of road network. Improvement of the physical condition of the road network will be measured by the length of roads in good and fair condition, transport costs borne by road users, including vehicle operating costs and monetary value of travel time (cents/vehicle-km). Baseline information for these indicators was collected from the conceptual design and previous studies. The IIU is responsible for monitoring these indicators as part of its broader M&E framework for performance and condition of the entire road network under its responsibility. The MCs will assist the IIU by regularly monitoring the compliance with service level criteria for performance and condition of the contracted roads. 42. Economic/social impacts indicators. The project will finance under Component 2 a consultancy service for baseline establishment and following regular monitoring of economic and social impacts of road network improvement. The IIU will manage this consultancy service. The consultancy service will monitor the project outcome/output indicators and other important indicators related with the welfare of affected persons and the local economy. Those include travel pattern information, agriculture prices, transport cost as a share of household income, access to health and education facilities, and other accessibility and mobility related information. These indicators will not be included as part of the Results Framework, but will be constantly monitored by the IIU and used for future planning and a broad assessment of investment impacts. 43. Institutional development. The progress and results of capacity building will be measured in terms of three intermediate indicators. First, staffing by competency areas will be monitored. The transport sector institutional reform consultancy will identify key staff competencies to be equipped within the IIU, and its successor. Whether the IIU succeeds to equip itself with those needed competencies by the preset time can be used as indicators. Second, delivery of training programs will be monitored, and measured in terms of staff-hours by training program. Component 2 will support the IIU to identify specific training needs and to finance development and delivery of training programs. Finally, the percentage of the staff whose performance surpasses a certain target will also be monitored. For this purpose, the IIU with assistance from the Bank will develop a framework for performance evaluation of individual staff that defines evaluation criteria and target values. Performance of every staff will be evaluated on a yearly basis.

C. Sustainability

44. The project design takes sustainability into consideration in a two-pronged way: sustainability of road infrastructure that is rehabilitated under the project and sustainability of the institution and system, within which the benefits of the project can be carried through. 45. Sustainability of road infrastructure. The Liberian counterparts are convinced that a 10-year OPRC approach of the project, which also incorporates the DBOMT10 concept, will be best

10 DBOMT stands for Design-Build-Operate-Maintain-Transfer, a variant of design-build contract. Unlike a traditional FIDIC contract, under a design-build contract the contractor assumes responsibility for designing as well

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to ensure sustainability of the road infrastructure that will be rehabilitated. Three key elements that are built in to the project design will maximize the likelihood that the rehabilitated roads will be sustained for their intended asset life. First, as the lessons from ongoing and previous road projects in Liberia suggests (Section III. C.), the design-build contracts will increase the chance to deliver the intended output with less delay and cost-overrun, as it substantially reduces transaction costs compared to a FIDIC-type contract. Second, the 10-year duration of the contracts would provide incentives to the CE to minimize life-cycle cost. Since now the CE will bear the long-term consequences of their first rehabilitation/upgrading works, it will allocate resources in a way that the road can be sustained at a low overall cost. Lastly, the hand-over condition would also ensure that the road infrastructure is in a condition that can sustain another 10 years of asset life by the time the contract ends and the road is handed over to the Employer. By that time, the proposed Road Maintenance Fund would have long been operational and would continue to fund the maintenance of the road. 46. Institutional sustainability. Sustainability of the “software”—institution, system, staff skills and knowledge—is a critical necessary condition for sustainability of the “hardware”—infrastructure. In this regard, the project design incorporates three elements to build and retain institutional sustainability. First, the project will help the knowledge and experience from the OPRC implementation reside within the country’s road sector and local industry. The MCs will most likely transfer all necessary skills for project management, performance monitoring, and other technical skills to the local staff and construction industry. Second, the project will support the IIU in forming a complete and self-contained organizational structure that is equipped with necessary competencies and skills. In the earlier stage, this means engaging internationally recruited professionals or firms that can fill up the gaps. With all necessary support, the project will ensure that the IIU is making steps to evolve into the next level and eventually becomes self-sustaining. Finally, the project will support very specific, targeted and job-based training program for the IIU staff. This will enable gradual transfers of responsibilities from international professionals/firm to local staff.

V. Key Risks and Mitigation Measures

47. Successful preparation and implementation of a 10-year OPRC would be conditional on various external factors, as well as sector institutions, implementing agency and project design. First, there should be sufficient competition in the market, which would lower the contract price, while ensuring output quality. This means not only the sufficient number of potential bidders, but also adequacy of their managerial and technical capacities. Second, success would also depend on political, economic, and social stability, which would substantially reduce the CE’s financial and operational risks of a long-term engagement. If the perceived risk of the operating environment is high, contractors will be deterred from participating in bidding, which would lead to low competition hence a high contract price and will potentially compromise the quality of the final product. 48. The risks relate mainly to the quality of CE and MC attracted, contract management skills of the IIU, agreement on the assessment of performance, and country facts e.g., disruption, force

as building/rehabilitating a road. Under DBOMT, the contractor is responsible for designing, building/rehabilitating the road, and also for the durability and performance of the roads over a relatively long period of time.

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majeure, and high costs. While failures may have occurred at the bidding stage usually once in place, contracts have a high rate of success. Unrealistic demands in terms of service level interpretations can also lead to implementation disputes with the employer. Therefore, even though the OPRC methodology is seen as more likely to help ensure that the project attains its objectives, this project is still categorized as high risk. Details of risk assessment and proposed mitigation measures are available in Annex 4. 49. To mitigate such risks, the proposed project is designed to make the tender more attractive and to overcome the country-specific constraints. Such mitigation measures include the large contract values, sufficiently long period of involvement, payment schedule that reduces the CE’s financial risks, and other risk-sharing schemes that balance risks of the Employer and the CE. The operating environment of the country has improved as the current administration has maintained political stability and accomplished reforms in various sectors. The extractive industry is growing, and this brings in more foreign direct investments and generates significant demand for transport. In addition, the development partners including the Bank have been assisting the GOL in building up confidence of the construction industry. One example was the Brussels Road Show in October 2009, where participants were informed of the improving business environment and upcoming opportunities in Liberia. 50. Furthermore, potential bidders’ actual appetite for the OPRC financed by the project was tested at the pre-bid conference (held in Monrovia from February 15-17, 2011). There, the Employer (i.e., IIU) received feedback on the terms and conditions of the contract and understanding of their specific concerns. Particular terms or conditions that could deter participation in the tender were discussed, and adequate modifications and adjustments were made to keep the tender attractive. 51. On the risk related to the implementing agency, as discussed, the capacity of IIU needs to be further improved particularly in the areas of engineering, procurement, contract management, and monitoring. The capacity risks will be substantial, but the proposed mitigation measures—support for staffing, training program, and skills transfer by MC—could reduce the potential impact. The Bank and donor community have consistently supported the GOL for its institutional capacity building through their engagement since the establishment of the current administration, and have begun to see impacts. While capacity building is still much needed, technical assistance and financial support will ensure that the project is successfully implemented.

VI. Appraisal Summary

A. Economic and Financial Analysis

52. The economic analysis focused on the reduction of vehicle operating costs and savings of passengers' travel time. Three alternatives were analyzed in comparison with the doing-nothing scenario: traditional road management, 10-year OPRC, and full life treatment. With traditional road management, it was assumed that the road will be rehabilitated; however, there is likelihood of no follow-up routine or periodic maintenance. The 10-years under OPRC will provide for rehabilitation, annual routine maintenance within the 10-year contract period and periodic maintenance at year 8-9 following the initial rehabilitation; however, from year 10-20, there will be traditional treatment of maintenance. The full life treatment assumes that after the first 10-

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years of OPRC, there will be follow-up routine and periodic maintenance throughout the 20-year life cycle of this road corridor. This treatment is not unrealistic given the plans to develop a road maintenance fund and to establish a road authority, both of which could prove to be particularly essential in the post-OPRC period. 53. The results showed that all three alternatives are economically viable. The traditional road management has an expected internal rate of return (EIRR) of 18 percent for Lot 1 (Monrovia (Red Light) – Gbarnga) and 12 percent for Lot 2 (Gbarnga-Ganta-Guinea border). The 10-year OPRC will generate an EIRR of 23 percent for Lot 1 and 18 percent for Lot 2. The full life treatment will have the highest EIRR with 27 percent for Lot 1 and 22 percent for Lot 2 respectively, which further highlights the value-added of having proper road maintenance for the full life of roads. 54. Sensitivity analysis was carried out on the full life treatment alternative: (i) 25 percent increase in cost, (ii) longer duration of rainy season to 160 days, and (iii) 20 percent decrease in benefits. The EIRRs for Lot 1 were between 21 percent and 37 percent, and Lot 2 between 17 percent and 30 percent; both lots are economically feasible even under the least favorable scenarios. Details for all scenarios are available in Annex 7. 55. In addition to the above quantified benefits, the OPRC approach also brings about significant non-quantified benefits. These include, but are not limited to, sustainable job creation related to road works and road side development as a result of a 10-year road management project; efficiency gains and administrative cost savings for the government (IIU) and a potential to foster restructuring and performance improvement within the road sector; and reduced potential for accidents given the improved road condition, etc. However, due to the complexity of the attribution and limitation of the information, these benefits were not quantified.

B. Technical

56. Rationale for a 10-year OPRC. The OPRC approach employed in the project would correct the mismatch of incentives between the Employer and the CE, as the two will now share the same goal: to minimize the life-cycle cost by appropriately selecting and timing interventions. Under the contractual arrangement of the OPRC, the CE would be paid an agreed amount only if the output of their activities, i.e., pavement strength and passability, meet the service-level criteria, regularly monitored throughout the contract period. Thus, the CE is incentivized to manage the road infrastructure in a cost-efficient and cost-effective manner, which would require adequate managerial and technical capacity of firms. Furthermore a long-term (10 year) contract would better align the CE’s financial interest with the public’s (road users’ and tax payers’) interests, as they both bear the long-term consequence of initial rehabilitation investment and subsequent maintenance activities. If successfully implemented, a long-term OPRC approach can bring in greater value-for-money than traditional contracts or shorter term performance-based contracts would do. 57. Level of Service. Under the OPRCs, the CE selects intervention types and input quantities, with which it can meet the contractual obligation, defined in bidding documents as required service level—the minimum required outputs of interventions and performance of the CE. The level of service (LOS) is defined as a measure that describes the operational condition

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of a road taking into account the road user’s point of view. A good LOS is simple and easy to evaluate, while fully capturing technical specifications that represent desirable quality of a road. In this project, LOS is defined in three categories: (i) road user service and comfort, (ii) road durability, and (iii) management performance. First, road user service and comfort measures are expressed in terms of roughness, width, rutting, skid resistance, vegetation control, visibility of road signs and markings, drainage off the pavement, and responsiveness to rectify defects that compromise user safety. Second, road durability is measured in terms of pavement strength, longitudinal profile, the extent of repairs permissible before a more extensive periodic maintenance treatment is required, and degree of sedimentation in drainage facilities. Finally, management performance measures are the information the employer requires both to manage the asset during the term of the contract, and to facilitate the next round of improvements. They include delivery of regular progress reports to the IIU, inventory updates and other data-sharing requirements, and maintenance history so subsequent Tenderers can price the works. 58. The condition for hand-over to the employer. The CEs will be required at the time of handing-over the roads to the Employer to comply with the requirement for residual pavement strength as defined in the bidding documents. The bidding documents require that the road be designed for a 20-year design life. However, estimation of the residual pavement strength at the end of the 10-year contract could become disputable. Therefore, the bidding documents require that the CE comply with the specific guidelines for design, rehabilitation, maintenance and monitoring, as follows: (i) design method and specifications are based on AASHTO11; (ii) detailed design will be presented to the MC for approval; (iii) during rehabilitation period deflection measurements will be carried out, assuring end results for each section, according to required durability parameter defined in the level of service tables; (iv) during maintenance period the same measurements will be taken each six months, assuring continuity of the required duration parameter; and (v) periodic maintenance in the eighth year shall be designed in accordance with AASHTO method and specifications, for additional residual life of 10 years; This design will have to get approval of the MC and the Client before implementation. 59. Axle-load control. A legal framework for monitoring and regulation of axle-load had been adopted in July 2010. However, enforcement of the regulation is too premature to ensure prohibition of vehicle over-loading; and this can result in the actual road condition becoming deteriorated more rapidly and severely than what is projected. In such a case, there may be a dispute over the responsibility for maintenance cost caused by excessive vehicle loads. To prevent a dispute, the bidding documents state that the CE will be entitled to financial compensation caused by over-loading of vehicles, provided they submit sufficient evidence to the Employer (IIU). This, in effect, will require the CE to install a weighing facility and to regularly monitor traffic. In addition, a consistent and enabling framework for enforcement is needed. Liberia currently is in the process of working with countries in the region to harmonize and to put into effectiveness the Economic Cooperation of West African States (ECOWAS) regional standards on permissible vehicle axle loading and dimensions. At present the ECOWAS standards are awaiting ratification by the member states, so this process is expected to take a while to deliver. Furthermore, the development of a framework and its enforcement will involve ministries and agencies other than the MPW alone. As such, it was decided that the more appropriate mechanism for support to this process should be provided addressed via the 11 The American Association of State Highway Transportation Officials

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Inter-ministerial Committee of the government under the Bank’s next Development Policy Operation (DPO) for Liberia. 60. Alternatives considered. In addition to the selected intervention, which consists of rehabilitation designed for a 20-year period (10-year for pavement), routine maintenance, and periodic maintenance in the eighth year, two other alternatives were considered.

(i) Alternative 1 (lighter than the selected option) – Considers a very light intervention at the beginning of the OPRC period, by a double layer chip seal surfacing (DBST), after patching and reshaping the section, taking into consideration that traffic level will be low at the beginning of the period. After five years, a considerable maintenance job will be performed and a new asphalt concrete layer constructed on top of the pavement, which considers the total traffic of the 10 years plus residual life duration of two years. This is a kind of progressive pavement construction which follows the traffic growth and allows it’s monitoring in order to adjust the structure to the real traffic model. This alternative requires intense routine maintenance; and

(ii) Alternative 2 (heavier than the selected option) – The initial investment would consider the total asphalt concrete thickness needed for a 20-year period, and only a maintenance overlay is considered for the pavement in the year nine for the total lifespan of 20 years.

61. Rationale for the selected alternative. The three options—the selected option and Alternatives 1 and 2—were reviewed and compared on the basis of the following selection criteria: (i) trade-offs between quality and cost, (ii) traffic disruption caused by the interventions, and (iii) attractiveness of the tender package to potential bidders.

(i) Trade-offs between quality and cost: The selected option is a better combination to achieve development objectives while managing the capital needs in the initial years, compared to the other two options. On the one hand, a heavier investment that attains a 20-year design life including pavement (Alternative 2) may not be justifiable given the relatively low traffic volume. On the other hand, considering that traffic volume has long been suppressed during the lengthy war, a design that responds only to the current volume, not to potentially rapid traffic growth in near future, might increase overall life-cycle costs, requiring intensive interventions in the later stage.

(ii) Traffic disruption caused by the interventions: The difference in time costs caused by work-zone delay was estimated at US$3 million or more, between the selected option (rehabilitation taking place first three years) and Alternative 1 (major resurfacing taking place year five and more intensive maintenance throughout project life). The difference between the selected option and Alternative 2 is minimal.

(iii) Attractiveness of the tender package: In order to attract experienced and professional foreign contractors, the size of the rehabilitation works cannot be too small, while initial capital needs cannot be too high. Compared to Alternatives 1 and 2, the selected option provides a better balance. In addition, the upfront investment alternatives (the selected option and Alternative 2) reduce financial risk for the CE, which can make the project more attractive to potential bidders.

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C. Financial Management 62. The financial management (FM) of the project will be provided by the PFMU in the MOF. The PFMU is headed by a Unit Manager/Head who is responsible for ensuring the overall direction of work at the unit. Under the direction and supervision of the Unit Manager, the entire PFMU accounting team consisting of four accountants and a number of support staff is responsible for all the day-to-day financial management functions for the projects under their management, including this project. The responsibilities include, budgeting, keeping adequate books and records, recording transactions correctly and ensuring that periodic management reports are produced to facilitate the payment process and management decisions. The staffing levels continue to be adequate for the functions undertaken and the internal controls in place are working in a satisfactory manner. The capability of the PFMU to prepare the required financial reports (IFRs) of the project is satisfactory as well as its ability to prepare annual financial statements and facilitate the audit process. The audits for projects under PFMU management are up to date. More details are available in Annex 3. 63. Prior to the decision to move project financial management from the PFMU to the IIU, the IDA will conduct an FM assessment to determine if IIU has adequate financial capacity and systems in place to undertake this function.

D. Procurement 64. Procurement of goods and works and selection of consultants would be carried out in accordance with the prevailing World Bank guidelines12 and the provisions stipulated in the Financing Agreement. All OPRC civil works contracts selection will be procured using International Competitive Bidding (ICB); and consultancy services will use mostly Quality-Based Selection (QBS) and Quality-and Cost-Based Selection (QCBS) (see more details in Annex 3). For each contract to be financed by the Credit and LRTF, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame as agreed between the government and the Bank project team will be expressed in the Procurement Plan. For each contract to be financed by the Credit and LRTF, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the government and the Bank project team in the Procurement Plan. A Procurement Plan for the first 18-months has been prepared and agreed with the government, which will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The procurement will be done using modified OPRC Sample Bidding Document (SBD) for International Competitive Bidding, and for all others National SBDs agreed or satisfactory to the Bank.

12 They include “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 2006, May 2010; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 2006, May 2010. "Anti-Corruption Guidelines” means the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006, and revised in January 2011".

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65. The Bank carried out a procurement capacity assessment of the IIU in June 2010. The IIU as an agency of MPW is subject to the national laws and, therefore, respects the Public Procurement and Concessions Act of Liberia, which was enacted in 2005, and provides a good legal framework for the conduct of transparent and comprehensive procurement. Its procurement rules respond to donor-funded requirements and the associated procurement and consultants' guidelines, like those of the World Bank. 66. The procurement staff of the IIU is currently made up nominally of two procurement and contract management officers supported by technical assistance from a specialist international individual consultant. The existing procurement staffs in IIU are consultants, and they have been encouraged to apply for the substantive posts at the IIU as recently advertised. The consultant specialist has been recruited recently. The procurement officers of the IIU have experience in handling projects financed by the IDA and other donors and are reasonably familiar with Bank Guidelines and procedures. They have also benefited from relevant courses and Bank funded training programs. However, there are still weaknesses and challenges in their delivery capacities, particularly in the quality of bidding documents and other reports. This has demanded significant guidance and assistance from the Bank team. To complement capacity deficiencies, the IIU proposes specific action plans, which include: (i) strengthening of the on-going technical assistance through a re-designed supporting consultancy firm by clearly defining and allocating staff responsibilities and monitoring performance, and (ii) completing the hiring of the two procurement staff by December 31, 2011.

E. Social (including safeguards) 67. The project will trigger Operational Policy (OP) 4.12, involving rehabilitation of existing roads and a short (2 km) section of upgrading works. The policy is triggered because there are several congested market areas along the road in which sellers have encroached on the right-of-way and will have to be relocated, either temporarily or permanently. The government prepared and disclosed, in-country and at the InfoShop, a Resettlement Policy Framework (RPF) for URIRP on October 10, 2009 and November 19, 2009 respectively, that covers the Monrovia (Red Light)-Ganta-Guinea Border road and is being applied to this project. An RPF was chosen as the resettlement instrument to be prepared prior to appraisal because the contract arrangements require final design to be done by the contractor, and deviation from the present alignment will probably be for engineering reasons or to avoid or minimize resettlement. Full Resettlement Action Plans (RAPs) will be prepared after effectiveness when contractors have been selected and designs have been done. The RPF includes the procedures for determining whether a RAP is necessary and the guidelines for preparing it, including consultations with potentially affected individuals, households and businesses; and it will be included in the bidding documents. The RAP prepared for the Cotton Tree-Yenwein Town road will serve as a model. 68. The project-specific RAP, if one is required, shall be reviewed by the MC and approved by the IIU, following which the Bank will give its no-objection. The RAP will be prepared, reviewed and approved prior to the commencement of civil works. The MC is responsible for day-to-day monitoring of the compliance of the Contractor's works with the RAP and for reporting on RAP implementation in its routine progress reports. The Consultant’s team will include an individual qualified to monitor RAP implementation.

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F. Environment (including safeguards)

69. The project will also trigger OP 4.01 and 4.11. The main component is rehabilitation works for existing roads for which the potential impacts are localized and not complex and can readily be managed through established good practices. Accordingly, the government prepared an Environmental Mitigation Plan for road repair and rehabilitation in May 2006, and it was disclosed initially for the Emergency Infrastructure Project in August 2007. The plan received approval from EPA prior to disclosure. It was supplemented with an addendum in connection with the URIRP and re-disclosed in-country and at the InfoShop on November 15 and 20, 2009, respectively. The plan specifically covers the Monrovia (Red Light)-Ganta-Guinea border road in which the works supported by the new project will take place. It is being re-designated as the Environmental Management Plan (EMP) for this project. It will be a part of the bidding documents in order to guide each CE's activity during detailed design and implementation phases, particularly in developing and implementing a Health, Safety and Environmental Management Plan (HSEMP) specifically for its contracted works. The project-specific HSEMPs shall be reviewed by the MC, approved by the IIU, and reviewed and cleared by the Bank prior to the commencement of civil works. The MC is responsible for day-to-day monitoring of the compliance of the Contractor's works with the HSEMP, and for reporting on implementation in its routine progress reports. Progress reports will include summaries of any environmental monitoring that the CE or the MC is required to conduct. The MC team will include a qualified environmental engineer or other specialist for these purposes. 70. The EMP consultant did not observe any physical cultural resources during reconnaissance of the corridor. However, OP 4.11 Physical Cultural Resources (PCR) is triggered for the project because there is always the possibility of an unexpected discovery of PCR during construction. The EMP makes protection of chance finds a responsibility of the CE. The CE will be required to present a chance finds procedure in the HSEMP.

G. Policy Exception and Readiness 71. There are no policy exceptions and the project is ready for implementation. A Procurement Plan for the first 18-months has been prepared and agreed with the government.

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Annex 1: Results Framework and Monitoring

LIBERIA: Road Asset Management Project Results Framework

Project Development Objective (PDO): The objective of the project is to support the Recipient’s efforts to reduce transport costs along the road corridor from Monrovia to the Guinea border and to maintain the road in good condition over a 10-year period.

PDO Level Results Indicators

Cor

e

Unit of Measure Baseline Cumulative Target Values

Frequency Data Source/ Methodology

Responsibility for Data

Collection

Description (indicator

definition etc.) YR 1 YR 2 YR 3 YR5 YR 9 YR10

1: Transport Cost borne by road users including vehicle operating costs and monetary value of travel time (measured in terms of roughness reduction, IRI rate)

Avg. IRI

m/km 12 12 10 6.5 3.0 3.0 3.0

At the end of Yr 3, 7, 10

Measurement of travel time,

surface deterioration

IIU

VOC and monetary value of travel time

(measured through

roughness, IRI rate). This

indicator is a proxy for

transport cost reduction

2: Roads in good and fair condition as a share of total classified roads (percentage)

percentage 1 5 17 34 34 34 34 Half-yearly

Total classified network of

primary paved roads, 734 km as

per National Transport Policy & Strategy 2009/ CE reporting, MC

inspection

IIU

Rehabilitation of 249 km of project road length as a share of total classified network of primary paved roads

3: Direct project beneficiaries (number), of which female (percentage)

Number

(percentage) 288,000

(51) 293,760

(51) 299,635

(51) 305,628

(51) 317,975

(51) 344,187

(51) 351,070

(51) Yearly

Based on national census data of

2008 (2% annual growth, 51%

females)/Yearly M&E surveys

IIU

Estimated actual number of direct

project beneficiaries

living along the road length of

249 km

4: Share of rural population with access to an all-season road (proportion)

percentage 5 5 7.5 10 10 10 10 Yearly

Based on national census data of 2008 (2% annual growth, 51% females)/Yearly

IIU

Number of rural people with access to an all-season road in respect of project

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M&E surveys length as a share of countries total rural population

INTERMEDIATE RESULTS

Intermediate Result (Component 1 – Design, Rehabilitation and Maintenance of Monrovia (Red Light) – Gbarnga – Ganta – Guinea Border Road):

1: Road rehabilitated km 0 245 247 247 247 Half-yearly CE reporting, MC inspection

IIU

2: Road constructed km 0 2 2 2 2 Half-yearly CE reporting, MC inspection

IIU

3: Road maintained km 0 40 120 247 249 249 249 Half-yearly CE reporting, MC inspection

IIU

Intermediate Result (Component 2 – Consultant Services, Operating Costs and Training):

1: Number of staff training hours by training program (P1-P3, see methodology column)

staff-hour P1: 0 P2: 0 P3: 0

P1: 500 P2: 500 P3: 500

P1: 500 P2: 500P3: 500

P1: 500 P2: 500P3: 500

P1: 500 P2: 500P3: 500

P1: 500 P2: 500P3: 500

P1: 500 P2: 500 P3: 500

Yearly

P1: supervision, P2: contract mgmt and admin, P3:

M&E

IIU Staff training hours for 3

training areas

2: On-the-job training provided by MC

staff-hour 0 500 500 500 500 500 500 Half-yearly MC reporting IIU

3: Increased share of qualified staff in key competency areas

percentage 10 25 50 75 100 100 100 Yearly

IIU self-assessment

assisted by the Bank

IIU

Of the 4 defined competency areas that are adequately

staffed

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Annex 2: Detailed Project Description A. Strategic Context 1. Context. Liberia's economy, institutions, and human capacity were devastated by the country's 14-year civil war, which ended in 2003. In August 2003, the warring parties ended hostilities with the signing of the Comprehensive Peace Agreement (CPA) in Accra, Ghana and a National Transitional Government of Liberia (NTGL) was established to administer the affairs of the country for a two-year interim period leading to national elections in October 2005. The United Nations Mission in Liberia (UNMIL) was created and was given the mandate to support the implementation of the peace process. The 2003 Accra Comprehensive Peace accord and the deployment of a United Nations peacekeeping force have provided much-needed space to lay a solid foundation for recovery. 2. Since the CPA, this country of 3.7 million people has made important progress despite the considerable challenges, difficulties and risks it faces. It has held elections, reestablished a public financial management system, begun rebuilding public sector institutions, reinitiated the delivery of some essential public services, and laid the foundations of a local government system. The World Bank has been assisting Liberia since the conflict ended, especially through a series of infrastructure projects amounting to a total of about US$230 million. 3. Liberia has experienced strong real gross domestic product (GDP) growth since the end of its civil war. However, Liberia remains one of Africa’s poorest nations, with its gross domestic product (GDP) per capita of US$21013 in 2009. Liberia reached Decision Point under the Enhanced Heavily Indebted Poor Countries (HIPC) initiative in March 2008, as a result of clearing its arrears to the World Bank and AfDB in December 2007 and those to the International Monetary Fund (IMF) in March 2008. Reaching this point enabled the government to benefit from interim relief under the HIPC initiative. Progress has continued and now Liberia has reached the HIPC Completion Point; this means Liberia is now eligible for IDA credits. 4. Improving fiscal trends reflect a wide range of measures taken by the government. The multi-donor Governance and Economic Management Assistance Program (GEMAP) has provided significant external support for reform of public financial management. The government has taken measures to improve tax and customs administration. It has improved the budget preparation process and implemented an interim commitment control system to ensure that spending does not exceed available revenues and that procurement practices adhere to new public procurement guidelines. Given the relatively low domestic revenue base, a major challenge for the government in the medium term will be to manage its spending in ways that maximize value for money, ensures transparency, and promote an equitable distribution of benefits. 5. The government inherited in 2006 a country with infrastructure that had not been attended to for decades. The road network was seriously deteriorated and numerous bridges had collapsed due to lack of maintenance, thus limiting people’s movement and access to services. Much of the network is lateritic gravel roads, subject to the annual cycle of damage and repairs 13 Market exchange rate basis; US$379 on the basis of purchasing-power-parity.

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due to the heavy six-month rains. A significant allocation of funds is needed to simply preserve the road and bridge assets of Liberia. 6. In terms of sector reform, the Bank is currently supporting an ambitious and so far successful government effort to reform the inefficient port sector and create a Landlord Port system. The recent successful concessioning of Monrovia Port general cargo and container operations to APM Terminals (APMT) must be considered to be a remarkable achievement. This is the evidence that the government is, even under fragile state conditions, committed to push difficult sectoral and institutional reform. 7. Nevertheless, governance and weak capacity remain a serious challenge in Liberia and therefore in addition to financing civil works, the IDA projects include support for institutional strengthening activities to help build the implementation capacity of the Ministry of Public Works (MPW). The government has put forward a comprehensive framework for implementation of donor funded projects in infrastructure which led in 2009 to the creation of a self-standing Infrastructure Implementation Unit (IIU) in the MPW and the abolishment of the former Special Implementation Unit (SIU). The government envisions that the IIU will have characteristics and organization resembling a road authority and that the IIU will evolve into one in due time. An eventual autonomous road authority is advisable to improve and professionalize management of the road network and create clear delineation with political decision-making. 8. In March 2008, the government published its first full Poverty Reduction Strategy (PRS). The PRS articulates the government of Liberia’s (GOL) priorities for re-establishing of the basic infrastructure, primarily rebuilding of the road network that was extensively damaged during years of war. Through the highly participatory process of developing the PRS (hundreds of people participated in consultations across the nation) Liberians overwhelmingly defined roads as their first priority for infrastructure rehabilitation - and even for development overall. The government has therefore made restoration of basic infrastructure, primarily roads, its priority. At the same time, the government is of the view that a broad strategic approach to the road sector is needed to ensure the sustainability of the investments. 9. With support of the Bank, the government prepared in 2008, a draft National Transport Policy and Strategies with Investment Framework. German Technical Cooperation (GTZ) supported the completion of this work and it was officially endorsed by the Government in 2009. The investment framework recommended by the GTZ study implies a cost of about US$1 billion to re-establish the country's basic roads and bridges network. 10. The policies and strategies developed draw on good international practices and adapt these to the particulars of Liberia, such as the short season civil works can be executed because of the intense rains. The medium and long term goals pertinent to the road sector are:

(i) Institutional formulation. MPW will move from the force account execution of the past to a policy and strategic oriented ministry; road sector management will gradually be placed in the hands of an autonomous road authority with requisite capacities; a second generation fund be developed for financing road maintenance.

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(ii) Contracting arrangements. Innovative use of contracting techniques and partnerships with the private sector to achieve government's objective of long term preservation of road assets, including design-build, design-build-operate-maintain, performance or outcome payments to contractor, possibly total-asset-management, build-operate-transfer, as well as the more traditional input type of contracts.

(iii) Maintenance strategy. Most of the road network needs to be first rehabilitated to bring it to maintainable status. Once in maintainable condition, the government has a multi-pronged strategy: maintenance through the above referred contracting arrangements (primary and secondary roads mainly), one-two year road maintenance contracting arrangements with local contractors and maintenance with community participation (feeder roads). In the shorter term, engagement of UNMIL engineering brigades for maintaining strategic roads is continuing as well as use of force account units.

11. The costs of initial road contracts in post-war Liberia were a concern as limited interest and negative perception of the country led to few reputable bids and high premium demand. This concern is now more tempered, as Bank financed contracts have attracted two major contractors to the country and interest by others. Recent bids have resulted in costs dropping about 45 percent from initial road contracts. 12. At a donor conference in Berlin in June 2008, the government presented a paper on Infrastructure Financing and requested that donors focus their contributions on infrastructure, particularly roads. In addition, the government requested that, where possible, donors contribute through the Bank-administered multi-donor Liberia Reconstruction Trust Fund (LRTF). The first two project concepts were approved in December 2008, including the US$9.2 million co-financing to the Urban and Rural Infrastructure Rehabilitation Project (URIRP) and also, the Bokay Town – Buchanan project will be financed largely under the LRTF. 13. In addition to the LRTF, two other formal donor coordination mechanisms exist, Liberia Reconstruction and Development Committee (LRDC) is a transitional mechanism that provides a platform for dialogue between the government and development partners. Located in the Office of the President, LRDC is organized around the four PRS pillar: (i) Peace and Security; (ii) Economic Revitalization; (iii) Strengthening Governance and Rule of Law; and (iv) Infrastructure and Basic Services. Cooperation among lead donors has been strong, but aid coordination with the government has been less so, however the government is making significant efforts to strengthen its capacity to monitor aid flows and interventions. More predictable sector strategies are expected to improve the government's control over its reconstruction resources and agenda. 14. PRS Pillars. In order to develop the PRS, the government organized its agencies and ministries around four pillars. Pillar IV focuses on infrastructure and basic services, and is chaired by the Minister of Agriculture. Development partners, line ministries, and other government agencies report monthly on progress against the priority actions identified in the PRS.

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15. Rationale for Bank Engagement. The IDA Country Assistance Strategy (CAS) jointly prepared with the International Finance Corporation (IFC) and AfDB (in 2009) recognizes and responds to government's emphasis on infrastructure and sector management. This Liberia Road Asset Management Project (LIBRAMP) operation will finance activities to rehabilitate infrastructure that deteriorated during the civil conflict. Rehabilitation of infrastructure, especially major urban and rural roads and bridges (as well as the new fuel unloading facility), is viewed as the necessary precursor for economic revival, delivery of basic services, and the resulting improvement in social conditions. 16. The government has provided a clear, strategic vision for the sector, and donors, under World Bank leadership, are addressing these in a systemic manner. Lessons from current projects have been taken on board, particularly regarding the use of output based contracts. 17. The project is in line with the government's expressed request for Bank support and leadership in the emergency rehabilitation of critical transport infrastructure nodes. The Bank has comparative advantage in the sector, both in terms of its IDA funding for investments and convener of other donor investments, and because of its technical expertise. It will also expand and deepen the use of results based approaches. 18. As current IDA funded infrastructure projects continue to address some of the immediate emergency activities, the proposed project is designed to move IDA involvement in the sector towards a comprehensive sustainable program of transport infrastructure investments and rebuilding institutional capacities. B. Rationale for the Output and Performance-based Road Contracting 19. Results based approaches have already been deployed for selected elements of the Liberia portfolio and the experiences, though varying with the Contracting Entity (CE) selected, have overall been better technically and administratively than for the standard input based contracts. This consideration and others led to the design of the full OPRC approach, where the goal was to attain and sustain an appropriate level of service for this key trunk road over the medium term, and that at the same time would be attractive to truly capable firms. 20. In comparison under a standard input contract, during a similar period there would need to be at least three instances of selection and deployment of contractors and consultants (for rehabilitation maintenance, and overlay) which would be less efficient and more taxing on the IIU/government mechanisms. In terms of advantages furthermore, unlike the case of the proposed OPRC, there would be no single entity in a position to be held responsible continuously for sustaining the required level of service. 21. The risks relate mainly to the quality of CE and Monitoring Consultant (MC) attracted, contract management skills of the IIU, agreement on the assessment of performance, and country facts e.g., disruption, force majeure, and high costs. While failures may have occurred at the bidding stage usually once in place, contracts have a high rate of success. Unrealistic demands in terms of service level interpretations can also lead to implementation disputes with the

27

employer. Therefore, even though the OPRC methodology is seen as more likely to help ensure that the project attains its objectives, this project is still categorized as high risk. 22. The project will finance a 10-year OPRC for a critical primary road corridor connecting Monrovia (Red Light) to Ganta and Guinea border. The project consists of two components as described in detail in Section D of this Annex. 23. Output and Performance-based Road Contracting. OPRC for roads is designed to: (i) increase the efficiency and effectiveness of road interventions during the project life cycle, (ii) improve effectiveness of maintenance activities, and (iii) provide for the asset management. The concept makes sure that the physical condition of the roads under contract is adequate for the needs of road users, as well as that the quality of the road/s are adequate to the requirements over the entire period of the contract, which is normally about 10 years for the asphalt concrete type of pavements, or about 15-17 years for Portland cement-based roads. This type of contract also significantly expands the role of the private sector, from the simple execution of works to the management and preservation of road assets. 24. Traditional contracting methods of works. In traditional road construction and maintenance contracts, a contractor is responsible for the execution of works which are normally defined by the Road Administration or the employer, and the contractor is paid on the basis of unit prices for different work items, i.e. a contract based on “inputs” to the works. The results of traditional road contracts are in many cases less-than-optimal. The problem is that the contractor has the incentive, to carry out the maximum amount of works, in order to maximize its turnover and profits. Even if the work is carried out according to detailed design and the resources spent, the overall service quality depends on the quality and accuracy of the designs given to the contractor, who is actually not accountable for any mistake or omission in the given designs. In many cases, the roads do not last as long as they have been designed for because of the deficiencies in the original design, aggravated by inadequate maintenance. Obviously, in this model of contracting, all project risks remain with the Road Administration, including those made before the construction started and those after the construction are completed. Traditional road contracts often have suboptimal results, because the incentives of the contractor and the employer are not always in line. 25. OPRC, an improved incentive framework. OPRC is a contracting method that addresses the issue of misaligned incentives by paying a contractor for its output. An OPRC consists of rehabilitation/improvement of a road and its maintenance at specified Service Levels that will be defined in the contract. Unlike traditional road contracting methods, in the OPRC bidding process, each contractor competes with its proposed lump-sum price, for which they are contractually obliged to bring the road to a certain service level and then maintain it for a relatively long period. In order to be entitled to the payment for services14, the contractor must comply with service levels defined in the contract throughout the contract duration. Thus, an OPRC provides a strong financial incentive for efficient and effective utilization of resources to attain a certain outcome, since this directly leads to profit maximization. The project risks are carefully identified, costed and appropriately shared among parties in the contract (employer and CE). 14 Payment schedule are specified and agreed with under a contract.

28

26. CE, its rights and responsibility. Under an OPRC, the contractor or CE can be any type of firm or business venture which has the necessary technical, managerial and financial capacity to fulfill the contract. The contractor is responsible for designing and carrying out the works, services and actions they believe are necessary in order to achieve and maintain the service levels stated in the contract. The service levels are defined in the contract in terms of: (i) benefits to road users, measured by average travel speeds, riding comfort, safety features, etc., and (ii) pavement strength, measured by residual strength of pavement, etc. If the service level is not achieved in any given period, the payment for that period may be reduced or even suspended. Within their financial scope, the contractor is entitled to independently define15: (i) what to do, (ii) where to do it, (iii) how to do it, and (iv) when to do it. Therefore, an OPRC requires a good management capacity for the contractor to define, optimize and carry out proper interventions on a timely basis. 27. Public Private Partnership (PPP) and risk sharing scheme. An OPRC is used as a form of PPP under which both parties share a long-term goal—maintaining the quality of, and preserving the asset value of, road infrastructure. In other words, this contracting method significantly expands the role of the private sector, from the simple execution of works to the management and conservation of road assets. This change also implies a shift of some implementation risks from the public sector to the CE, embedded in the “lump-sum” price. Therefore, it is important to provide an equitable risk-sharing scheme. For example, in the case of emergency works (e.g., floods) the contract limits the responsibility of the contractor, establishing that the employer will approve the execution of services and separate remuneration on a case-by-case basis. Similarly, as the contractor is responsible for maintaining the road’s service levels, a contractor should be entitled to implement an axle load control system, based on the legislation and in cooperation with local police authorities. 28. In sum, the proposed OPRC framework is not merely a contracting method, but also an “Asset Management System” (viewing road infrastructure as a public asset of an economy) over a specified time period. With this fundamental change in perspective, the OPRC framework can bring in the following advantages:

Cost savings in managing and maintaining road assets (according to the studies carried out by several countries, cost savings range from 20 to 45 percent)

Expenditure certainty (fixed price contracts with periodic regular payments avoiding unexpected variations)

Leaner road agencies (reduction of ministry’s in-house workforce and general administrative costs)

Improved and sustained condition of contracted road assets Higher satisfaction of road users Secured financing for multi-year maintenance program (long-term contracts) Better planning and use of resources, improved governance, and Reduced number of contracts in the overall long term contract life cycle, which otherwise

would need to be carried out and administered by the government during the same period.

15 Such freedom is within the contract limitations and other restrictions that are required to comply with local legislation, technical and performance specifications and environmental and social regulations.

29

C. Entities Involved and their Responsibilities under OPRC 29. Successful implementation of the project will require full responsibilities of four entities that will be managed by specific contractual agreements. A conceptual diagram for such an arrangement is depicted in the figure below. The main contract will be between the Client and the private CE, whose performance will be overseen by the external MC. An independent external audit will be carried out as necessary during the life of the contract to review all the processes and activities by all three entities. Responsibilities of each entity are described below.

30. The Employer (the IIU) will administer the contracts, particularly in light of all the new parameters included in OPRC projects. The employer is responsible for: (i) overall financial management of the project; (ii) payment after the recommendation from the MC; (iii) management of database updated by the CE through the MC; (iv) review of the Liberian Legal Framework and enforcement of the law, especially on resettlement, right of way and axle load issues; and (v) policy development. 31. The CE is responsible for: (i) management of the entire contract during rehabilitation, routine maintenance and periodic maintenance activities; (ii) management of bridges during rehabilitation, routine maintenance and periodic maintenance activities; (iii) quality control of the roads and bridges during rehabilitation, routine maintenance and periodic maintenance activities; (iv) quarterly data collection to evaluate the current condition of the road and fulfillment of service levels required; (v) detailed design of the project; (vi) preparation of Periodic Payment Reports-billing; (vii) creation and update of the asset database as required; and (viii) preparation of updated schedule of activities to carry out. 32. The MC is responsible for: (i) review of all designs prepared by CE and their full compliance with the contract standards and specifications prior to recommendation for Employer’s approval and World Bank concurrence; (ii) monitoring the accomplishment of the schedule programmed and presented by the CE; (iii) review and recommendations of road rehabilitation works and that CE maintains the service levels as designed; (iv) evaluation and monitoring of the fulfillment of EMP and RAP; (v) management of the quality assurance of the roads and bridges and monitoring the quality control of the CE; (vi) monitoring, review and recommendation of data collection reports submitted by CE; (vii) review and recommendation of

CLIENT ORGANIZATION 

(MINISTRY OF PUBLIC WORKS – IIU)

PRIVATE CONTRACTOR

(CONTRACTING ENTITY)EXTERNAL MONITORINGCONSULTANT

 monitoring

EXTERNAL

AUDIT

Figure 1: LIBRAMP Model for Implementation of OPRC

30

the periodic payment reports-billing presented by CE, including all related activities, such as review and confirmation of field investigations and testing advice and recommendations to Employer on penalties and other remedies, etc. 33. The External Auditor is an organization which will be in charge of monitoring and auditing the project during its lifespan. This entity will evaluate the process between the employer, the CE and the MC.

D. Detailed Description of Project Components

Component 1: Design, Rehabilitation and Maintenance of Monrovia (Red Light)–Ganta-Guinea Border Road

34. The project will finance a 10-year OPRC contract for a critical primary road corridor that connects Monrovia (Red Light), Gbarnga, and Ganta to the Guinea border. The Red Light – Gbarnga Road is the main transport corridor from the capital, towards the northeast of the country since it is the major highway for the movement of commodities, goods and services in both directions from the countryside to the capital (see Figure 2). This road is divided into two lots for the purposes of contracting under one package. Lot 1 starts at 2 km after the Red Light T-Junction in Montserrado County and continues to the northeast to Gate 15, Frelela Town and Gbarnga in Bong County, with a total length of approximately 180 km; and Lot 2 starts at Gbarnga in Bong County and continues to Ganta and Guinea Border at the end of the corridor with a total length of approximately 69 km. 35. The road is an existing two-lane single carriageway of width 7.0 to 7.4m, and 1.0 to 1.5m outer shoulders. Between Red Light and Gbarnga, the current pavement structure consists of 50 mm thick asphaltic concrete, sometimes covered by a thin slurry seal. This asphaltic layer overlies 100 mm of granular base and 150 mm thick laterite sub-base. From Gbarnga to Ganta there is a surface treatment, in very bad condition overlying 100 mm of granular base and 150 mm thick laterite sub-base course. Finally a gravel-surfaced section is present between Ganta and the Guinea Border.

36. The arrangements for meeting the cost of the road improvement and maintenance proposals are somewhat traditional in the sense that the GOL would use IDA and LRTF funding mainly for the road rehabilitation during the initial five years of the project and then primarily its own counterpart funds for maintenance during the follow-on years. The latter is not expected to be burdensome since the funding requirement is estimated to average about US$12.8 million per annum, a sum that is less than the current MPW budget (excluding donor funds) that ranges typically between US$30-40 million per annum. According to the IMF, Liberia is expected to have robust growth rates (5-10 percent per annum) for the medium term and hence GOL should be in a position in five years to continue allocating enough funds to the road sector to either meet the required level of counterpart funding or to mobilize additional donor finance if it so desires. In addition, it is expected by then that the Road Maintenance Fund will also be starting operations and be able to provide supplemental funding if needed. Hence, overall there is no inordinate risk associated with the counterpart funding and in a sense, the OPRC arrangements primarily ensure that the maintenance of the roads rehabilitated under the project will be accorded priority by the government when allocating its transport sector spending. Also, finally

31

the Bank would have advanced knowledge of counterpart situation given the arrangements as outlined in the paragraph 13 of main text of this PAD for MPW to send an annual implementation and budgeting plan to the Bank for comments each year.

Figure 2: Map of the Project Site

37. Stages of the Project. The CE will be responsible for design, rehabilitation works, routine maintenance and periodic maintenance works during the life span of the project of 120 months (10 years). The stages of the project during this period are:

(i) Mobilization period: Six months after start date, during this stage, the CE will carry out the following activities: (a) mobilize the majority of the required equipment, specifically for the rehabilitation works; (b) complete the detailed designs with all field investigations for at least first 50 km of the road; and (c) start to carry out routine maintenance along the road.

(ii) Rehabilitation Period: The total project completion time proposed for rehabilitation of the longer Lot 1 is 30 months after the six months of mobilization.

(iii) Routine maintenance purposes: The timing is 120 months after the start date.

(iv) Periodic maintenance should be carried out during the eighth year of the project.

38. Road Condition Assessment. The current road surface is asphalt concrete up to Gbarnga, from Gbarnga to Ganta the road is in very bad condition and a deteriorated surface asphalt treatment, over 15 mm laterite sub-base, was observed and finally a gravelly surfaced road is

32

present between Ganta and the Guinea Border. However, most of the bituminous surface shows acute age cracking. Some sections also exhibit fatigue cracking. The thickness is about 50 mm asphalt concrete, overlaying 100 mm granular base and 150 to 250 mm on laterite sub base. The riding surface is generally good to regular with dots of broken wearing course or cracks in some sections and some sections of almost totally destroyed pavement. Some sections show loss of aggregate or bleeding and some of them are also affected by potholes and cracking. There are no kilometer posts, vertical signals nor road markings. 39. Conceptual Design. For the effective assessment of the requirements for rehabilitation/new construction and maintenance, the road has been divided according to the current surface condition, into the following five main types of intervention:

(i) Intervention 1 – Good Surface condition: Some minor damaged sections are easily repairable by patching, previous to the final treatment. They constitute about five percent of the length of the corridor. The current structure needs to be patched and reinforced by an asphalt concrete overlay. Then, the solution for the new surface could be to build a new asphalt concrete overlay on top.

(ii) Intervention 2 – Good to Fair Surface condition: Their characterization shows at least 30 percent of the area affected by potholes, rutting and cracking. It constitutes nearly eight percent of the total length. For those segments, material recycling would be needed mixed with crushed aggregate base, taking into consideration a mechanical homogenization process (compaction). After compaction, this layer will undergo a sub base layer condition. Then, a new asphalt surfacing will complete the solution.

(iii) Intervention 3 – Fair Surface condition: This condition has been considered for the Gate 15 – Gbarnga link in which the current surface is in fair condition, over 15 to 20 mm laterite layer. For those segments, the current structure may be used as a sub-base layer without any additional treatment, considering the nature of its granular material and the thin and soft asphalt layer it has. Then, the solution for the new surface would be to build a new granular base layer, and asphalt surface layer on top of the existing structure

(iv) Intervention 4 – Bad condition: This condition has been considered for the Gbarnga – Ganta link in which the current surface is in very bad condition, as the surface treatment has washed away. The current pavement structure is equivalent to sub-base mechanical condition. So, a new granular base layer 150 mm thick and a new asphalt surface concrete layer are recommended.

(v) Intervention 5 – Unpaved Road: This condition has been considered for those segments in which the current surface condition is an unpaved surface requiring a new construction (Ganta – Guinea border link), and for the sections, which will have major geometry modifications.

40. At detailed design stage, the CEs will determine the type of intervention based on the updated investigation. At this conceptual design stage, the above provisional intervention types are proposed by road link based on their current conditions. This is subject to change when the CE carries out more detailed geotechnical investigation and current condition monitoring.

33

41. Bidding Process. Bidding documents were prepared based on the conceptual design and bids were invited on December 3, 2010 with an initial submission deadline of April 26, 2011. The bidding documents have adequately addressed (in the conditions of contract) critical aspects related to issues such as force majeure by clearly defining and allocating risks associated with events beyond the reasonable control of the employer or of the CE, and for the emergency works due to “unforeseen natural phenomena”. A clear mechanism was defined in the bid documents to address force majeure with adequate provisions kept for price contingencies in the project cost. Similarly, the bidding documents have defined procedure for dispute resolution by adopting a two-stage approach. In stage one, the dispute will be settled by the decision of the Dispute Review Board (DRB). In case of no amicable resolution, in stage two, the dispute shall be finally settled by arbitration conducted in accordance with the rules of arbitration of the appointed institution, if any, or in accordance with United Nations Commission on International Trade Law (UNCITRAL) arbitration rules (for all international contracts), at the choice of the appointed institution. And for contracts with domestic contractors, arbitration proceedings will be conducted in accordance with the laws of Liberia. 42. A pre-bid conference was held during February 15-17, 2011 in Monrovia that was attended by over 100 people including representatives from 20 of the firms that had purchased the bid documents, as well as representatives of consulting firms, senior officials from the Government of Liberia (Minister of Finance, Minister of Works, Chairman of the National Investment Commission), the private sector, the World Bank Country Manager and the Transport team. The potential bidders asked very constructive questions that were intended to improve their understanding of the bid documents and the evaluation process. It should be noted that the potential bidders seemed rather receptive to the 10-year OPRC package as designed for financing by the IDA, Liberian Reconstruction Trust Fund and the government.

Component 2 – Consultant Services, Operating Costs and Training

43. This component will finance a consultancy services firm to perform as MC for the OPRCs, and it will also finance the needed technical assistance for preparatory road feasibility studies and the development of sector institutions through hiring of skilled staff and firms, and staff training programs including the operating costs. 44. The MC for the above OPRCs will have two major roles: (i) performance monitoring and (ii) capacity building. First the MC will be responsible for monitoring the works, approval of the materials and the workmanship of the works, and provision of timely advice to them to ensure the quality of the final deliverables. This will be done in co-operation and consultation with the Employer, under the responsibility arrangement described in part C above. The MC’s responsibility and services are divided into three phases:

(i) Monitoring of performance during mobilization, design and rehabilitation stage,

(ii) Monitoring of performance and condition during routine/periodic maintenance stage, and

(iii) Network information/data collection and analysis.

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45. In addition, given the weak capacity of Liberia’s road sector as well as national construction industry, the MC for the above OPRCs will also assume responsibility for skills transfer to, and training for, local staff (IIU and other involving public entities) and local contractors (who might engage with the OPRC CE during the course of contract period). The MC will provide specific on-the-job training on project management, monitoring and evaluation, transactional and administrative skills, and other relevant subjects. IIU personnel will be assigned as counterparts to the MC to facilitate an on-the-job training program and ensure skills and knowledge transfer. Accordingly the MC will also be asked to organize seminars and workshops for Ministry of Public Works (MPW) and IIU staff based on periodic retrospective reviews of the challenges and accomplishments of the project. 46. This component will also finance the needed technical assistance for the development of the road sector and related institutions. In particular, it will support preparation of feasibility studies for future road projects and strengthen the IIU capacity throughout the project implementation in contract management, contract performance monitoring, handling of fiduciary and safeguards issues, and comprehensive road asset management. This will be done through financial support for hiring of skilled staff and consulting firms, and financial/technical support for developing and implementing staff training programs including the operating costs. Capacity building efforts will be made largely on the following two fronts:

(i) Staff recruitment. The project will provide financial support for recruitment of staff in four major competency areas: (a) planning and budgeting; (b) financial management; (c) procurement and contract management; and (d) monitoring and evaluation. The Bank will provide technical assistance to the IIU in developing detailed terms of reference for each competency area, evaluating and selecting qualified individuals, and monitoring their competencies. The Bank team will assist the IIU throughout the life of the project so that it acquires all needed competencies progressively, and maintains them for a successful transformation into a semi-autonomous road agency.

(ii) Development and implementation of staff training programs. The project will provide financial and technical support to the IIU in developing and implementing job-based staff training programs. The preliminary proposal for staff training program includes: (a) project supervision; (b) contract management, administration and other corporate functions of the IIU; and (c) monitoring and evaluation. The training program will be further specified using the inputs from the institutional reform study that is currently being carried out

(iii) Staff performance evaluation – development of framework and implementation: The project will provide technical advisory to the IIU in developing and implementing performance evaluation framework. The framework will define performance criteria and satisfactory target levels. Performance of each IIU staff will be evaluated under this framework.

47. The following chart shows the proposed organizational arrangement for the IIU that will be supported by the project.

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Chart 1

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Annex 3: Implementation Arrangements A. Project Administration Mechanism 1. This project will be implemented as an Asset Management System synthesizing all key entities to work in a triangle composed of the Employer, the Contracting Entity (CE), and the Monitoring Consultant (MC). These roles are explained in detail under Annex 2 and are critical during all the three stages of the project i.e., rehabilitation, routine maintenance, and periodic maintenance. 2. In the role of employer, the Infrastructure Implementation Unit (IIU) intends to use the following organization structure to carry out its responsibilities through a Project Control Team. The professional staff of the Project Control Team will be supported by the MC and shall be sufficiently structured to monitor and control the pre-contract activities, construction, and defect liability periods according to the arrangement shown below. The timing of the inputs for each professional member of staff shall be in accordance with the agreed Work Program for the needed services in accordance with the progress of the Works.

Figure 1: Organizational Chart – Project Control Team

3. Reporting arrangement. Full details of project (including outcome and results indicator data, analysis and recommendations) will be reported in regular quarterly reports, as well as audit reports.

(i) Quarterly progress reports (including financial and procurement status reports as well as assessing environmental and social management actions) will be established by the IIU and PFMU respectively on the basis of the project implementation plan;

(ii) On the basis of the quarterly reports, IIU will regularly compile and make available to the public annual reports for all its activities in a form and substance acceptable to the Bank. The annual reports shall use audited financial statements, if available at the time of publication. If not available, unaudited statements shall be used; however, when audited statements have been prepared, a local advertisement of their availability should be made;

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(iii) Bank supervision missions will be conducted (jointly with other donors as needed), and will in the first year take place four times a year; and

(iv) An Implementation Completion Report (ICR) will be prepared at the end of the project and presented within six months of the closing date of the Credit and the Grant (government’s contribution to the ICR is required within five months of closing date of the Credit and the Grant).

4. The monitoring activities will verify if program and project objectives are being achieved, as well as FM and procurement aspects. B. Financial Management, Disbursements and Procurement 5. Financial Management. A financial management assessment carried out by the Bank's FM country team in 2007 in accordance with the Financial Management Practices Manual issued by the Financial Management Board, concluded that the financial management arrangements at the MPW do not meet the Bank's minimum financial management requirements. The conclusion of this assessment is still valid to date based on information gathered through supervision of Bank funded projects under the purview of the Ministry of Public Works (MPW). 6. The objective of the assessment was to determine whether MPW has acceptable financial management arrangements, which will ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation of accurate, reliable and timely periodic financial reports; (iii) safeguard the entity's assets; and (iv) adequate fiduciary assurances are provided through an independent audit of the project. In view of the lack of satisfactory financial management arrangement at the MPW, the PFMU situated in the MOF will undertake the financial management functions of the project. The FM risk has been assessed as Medium-I in respect of MPW. But, with the articulated risk mitigation measures through the use of PFMU during implementation, this FM risk will residually fall to Medium-L. However, as part of the capacity building initiatives factored in the design of the second component of the project, the IIU of the MPW will be supported by incremental professional staff whose responsibilities will include the strengthening of its capacity, overtime, to render timely, reliable and comprehensive financial reports, based on improved expenditure management principles and practices as this constitutes a core requirement for implementing performance-based contractual arrangements under the project. 7. Country and Sector Issues. A PEMFAR was conducted in 2007 that included an analysis of Liberia's PFM strengths and weaknesses. The findings from the PEMFAR showed that the government has taken considerable actions to improve public financial management since 2006. Government revenues have increased several folds since 2002/03, and expenditure controls have been strengthened through the establishment of the cash management committee and the interim commitment control system. However, the government still needs to address weaknesses in its financial management systems, specifically within the areas of the legal and regulatory framework; internal and external audit functions; procurement and concessions; budget planning, formulation and execution; accounting, recording and reporting; human resources and payroll management; cash and debt management and aid management. The government's developmental and poverty reduction priorities are anchored in the PRSP which is generally aligned with the

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budget although there is no formal poverty reducing expenditure tracking systems. The budget cycle is coordinated by an inter-ministerial Budget Committee and spending ministries are consulted early in the budgeting process. All revenues are by law deposited into a revenue bank account at the Central Bank and expenditure from this account is strictly in accordance with annual cash plans and allotments. However, the majority of donor expenditure is project-based and not executed through the government budget. The country lacks a sufficient number of qualified accountants to serve the public and private sector. A PFMU/MOF provides centralized project financial management for donor projects. The PFMU is staffed with qualified consultants with experience in managing donor-funded projects. Fiduciary risks for donor-funded projects are mitigated by the use of the PFMU, which has internal controls and procedures and practices acceptable to the Bank. The lack of qualified PFM personnel is a major constraint to the implementation of PFM reforms to address the weaknesses identified in the PEMFAR. At the moment key agencies such as the MOF are staffed with foreign experts under the Governance and Economic Management Program (GEMAP) and World Bank's technical assistance provided to the Resource Management Unit. Notwithstanding capacity constraints, the government is making progress in PFM reforms. The Cabinet approved the Internal Audit strategy in June 2008 that will see the establishment of an internal audit cadre and a charter clarifying the roles and responsibilities for internal controls. The MOF has moved from a single entry recording system to an interim accounting system that is now used to prepare budget outturn reports. The interim system provides a foundation for migrating to IFMIS that will eventually handle all the accounting and recording for the consolidated funds with arrangements to capture and report on donor-funded projects. A PFM Law and its enabling regulations and manuals are being prepared that will further strengthen the legal and regulatory framework. In the area of procurement, the Public Procurement and Concessions (PPC) Act came into effect in January 2006, as Liberia's first significant step towards subjecting public sector contracts to transparency and meaningful competition. These measures in financial management and procurement will put in place appropriate structures and processes to promote transparency and accountability and mitigate the fiduciary risk in utilizing public funds both at the country and project level. 8. Overview of Project and Institutional Arrangements. The proposed LIBRAMP will strongly support the road sector's endeavor to achieve the NTPS objectives. The project will not only rehabilitate a strategically important road corridor that is severely destroyed, but also maintain it at desirable service levels for a 10-year period. The road corridor connects the capital city to areas with great agriculture and natural resource potentials, provides direct linkage to neighboring Guinea, and improves linkage to Cote d'Ivoire. In addition, the project will also finance needed institutional capacity building in areas of planning, monitoring and project management in the road sector. LIBRAMP's large scale and long-term perspective will be both an opportunity and a test for the IIU to capitalize on its recent experience and current resources and to step up to the next level in managing on-going projects, and ultimately, the country's road network. 9. Due to the weak FM capacity at MPW and the need to ensure an effective and efficient management of resources, it is proposed that a Project Financial Management Unit (PFMU) will be responsible for the financial management functions of the project. Created in 2006 with the assistance of the Bank, the PFMU is hosted in the MOF and is staffed with competent accounting professionals. It has been the centralized unit responsible for the financial management functions

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of donor funded projects in Liberia since 2006. It has a unit head and also has an internal audit unit that reviews supporting documents for payment requisitions and conducts periodic tests to ensure that internal control procedures are being followed. PFMU has strong budgetary, accounting, financial reporting and internal control arrangements that are satisfactory to the World Bank. Through the capacity building component of the project however, the IIU is expected to build financial management capacity within two years of effectiveness to take over project financial management responsibilities from the PFMU. A Bank financial management assessment will be conducted to determine the adequacy of financial management arrangements at IIU prior to the transfer of FM responsibilities. 10. Staffing. Although the current capacity of the PFMU is adequate to manage the FM arrangements of all existing transport projects as well as the LIBRAMP in their portfolio, there would be a need for one incremental FM staff to boost the Unit's capacity to take on this project given the list of projects it manages from the fiduciary angle. This additional staff is being recruited by the IIU and will be seconded to the PFMU. The related operational costs of maintaining the staff during the life of the project, including computer hardware, stationery, mailing withdrawal applications, and printing project FM reports should form part of the operational costs that the project will finance. 11. Budgeting. The PFMU and IIU will work together to prepare an annual budget for the project based upon the agreed program to be financed. Most of the activities of the key components are already known and these will be included in the project annual budgets. The annual project budget will be reviewed and agreed with the World Bank, and No objections will be issued by the World Bank for activities agreed upon in the budget. 12. Accounting. Accounting for the use of project funds, using a cash basis of accounting, will be carried out by the PFMU using a robust accounting system (SUN Accounting system) that provides for adequate segregation of functions and accurate recording of all accounting transactions of the project. The system is also capable of producing accurate periodic financial reports including interim un-audited financial reports (IFR) and annual project financial statements that are considered acceptable to the Bank. A project Fixed Assets register will be maintained at all times to correctly reflect assets acquired or created under the project. 13. Disbursements. Funds will be disbursed directly into a Designated Account set up and managed by PFMU. This account will be established in US Dollars at a commercial Bank acceptable to the IDA. PFMU will submit withdrawal applications for the initial deposit and subsequent replenishment as per the Disbursement Letter. Banking and payment processing will be managed centrally by the PFMU in order to ensure adequate control and financial monitoring. All expenditure approvals and initiation of processing of payments will be done at IIU and supporting documents transferred to the PFMU for effecting the payments to third parties. The report-based disbursement method (Interim Financial Reports) will be used as a basis for the withdrawal of credit proceeds. The project provides for the use of advances, reimbursements, special commitments and direct payments as applicable disbursement methods, and these will be specified in the disbursement letter. An initial advance will be provided for the implementing entity, based on a forecast of eligible expenditures against each component, linked to the appropriate disbursement category. These forecasts will be premised on the annual work plans

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that will be provided to IDA and cleared by the task team leader. Replenishments, through fresh withdrawal applications to the Bank, into the designated accounts will be made subsequently, at quarterly intervals, but such withdrawals will equally be based on the net cash requirements that are linked to approved work plans. Supporting documentation will be retained by the implementing agencies for review by the IDA missions and external auditors. Any advances made for contracts will be secured by a bank guarantee or performance-based bonds and a retention amount withheld. However, in view of the large dollar amounts of contracts envisaged under much of component one, the direct payment method will be used as the default method under this component. Nevertheless, smaller payments under the component may well be allowed for disbursements from the designated account. 14. Retroactive Financing: Retroactive financing of up to US$5.0 million will be provided for eligible expenditures incurred under all categories of the Credit, made prior to the signing of the FA but on or after December 15, 2010. Retroactive financing is permitted under the following conditions: (a) the activities financed are included in the project description; (b) the payments are for items procured in accordance with applicable Bank procurement procedures; (c) such payments do not exceed 20 percent of the credit amount; and (d) the payments were made by the borrower not more than 12 months before the expected date of Credit Agreement signing. . 15. Counterpart Funding. Counterpart funding from the Government of Liberia is to be remitted to the project account and pooled with IDA and LRTF funds after year 5. Where, however, such funding will be applied to finance discrete parallel activities under the project, the funds will be held in a separate project account but reported as part of the overall project financing activities. 16. Payment Schedule. During the first three-year period, an estimated US$130 million (52 percent of total project cost) will be needed for payment toward design, rehabilitation and upgrading works, payment to the MCs, and technical assistance activities. The rest of the disbursement will be spread over the remaining project period for routine and periodic maintenance. For Component 1 (OPRC), Employer payments to the CE will be made based on the following key principles.

(i) Of the amount allocated for rehabilitation (estimated 54 percent of the total contract amount), 20 percent will be paid in advance shortly before the commencement of respective works. The remaining 80 percent will be paid proportionately to the progress of works, for example, at a pre-determined rate for every five completed kilometers. The repayment of the advance payment will be completed by the time of completion of rehabilitation works.

(ii) Routine maintenance payments will be made to the CE during the maintenance period on a quarterly basis upon confirmation by the independent Monitoring Consultant/supervisor that maintenance standards were met.

(iii) Periodic maintenance payments will be made to the CE in the eight-ninth year of the maintenance period based on the same payment mechanism and milestones of the rehabilitation period (i.e., 20 percent advance payment and, for the remaining 80 percent, proportionate payment to the progress).

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(iv) All payments will be processed only after a certificate from the MC confirming that the outputs have met all required criteria.

17. Disbursement Summary. The project's two components will each serve as a disbursement category as defined in the table below.

Table 1: Disbursement Summary

Category

Amount of the Credit Allocated (expressed in US$)

Amount of the Grant Allocated (expressed in US$)

Percentage of Expenditure to be Financed by the Credit (inclusive of Taxes)

Percentage of Expenditure to be Financed by the Grant (inclusive of Taxes)

1) Civil Works - OPRC for Monrovia-Ganta-Guinea Border Road 46.50 108.90 30% 70%

2) Consultant Services, Operating Cost and Training 16.20 100%

3) Unallocated 5.00 100%

Total Amount 67.70 108.90 38% 62%

18. Financial Reporting and Monitoring. The PFMU will be responsible for preparing the quarterly interim unaudited financial reports. The financial reports will be submitted to the Bank within 45 days of each fiscal quarter after prior review by IIU. The constituents of the quarterly project IFRs, that will be submitted to IDA within 45 days of each calendar quarter, shall be as follows: (i) Actual and Forecast Cash Flow Statement according to Components, Sub-components and Activities; (ii) Summary Statement of Expenditures according to Disbursement Categories; (iii) Designated Account Reconciliation Statement; (iv) Physical Progress Report; and (v) Procurement Status Monitoring Report. 19. The project will also prepare annual financial statements at the end of each GOL fiscal year in accordance with International Public Sector Accounting Standards (IPSAS) - cash basis. The audited financial statements should be submitted to the Bank within six months of the end of the fiscal year. The financial statements will comprise, at a minimum, of: (i) sources and uses of funds (summary of Expenditures shown under the main program headings and by main categories of expenditures for the period); (ii) notes to the financial statements, including background information on the project, the accounting policies, detailed analysis and relevant explanation of the main accounts/major balances, etc. In addition, the project shall provide, as an annex to the financial statements, an inventory of fixed assets acquired according to asset classes, dates of purchase, location, and cost.

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20. External Auditing Arrangements. Independent and qualified auditors, acceptable to the Bank, would be selected to carry out the audit of the project. The selection of auditors shall be on a competitive basis and in accordance with the Bank's procurement guidelines and would be selected within four months of project effectiveness. The terms of reference of the auditors will be cleared by the Bank. The project financial statements including movements in the designated accounts will be audited in accordance with International Standards on Auditing (ISA) and a single opinion will be issued to cover the project financial statements in accordance with the Bank's audit policy. The auditors' report and opinion in respect on the financial statements, including the management letter, would be furnished to the World Bank within six months of the close of each GOL fiscal year. Since technical audits will also be carried out on Component 1 of the project (OPRC) in years 1, 4, 7 and 10 of project life, the financial statement audits will, accordingly, be further informed by the outcomes of these audits in order to provide a more comprehensive opinion on the use of project funds with economy and efficiency. 21. Project Risks and Mitigation Measures. The table below shows the risks that may hinder the achievement of project objectives, together with mitigating measures on how these risks will be addressed.

Table 2: Project Risk and Mitigation Measures

Inherent Risk Risk Rating

Risk Mitigation Measure Condition for Effectiveness/ Negotiations?

Residual Risk Rating

Country Level The 2007 PEMFAR identified weaknesses in the country financial management systems with specific reference to budget execution, external audit, legal and regulatory framework for PFM.

H The Bank and other donors are currently supporting the GOL through two core investment operations to enhance the public financial management system. The IFMIS will go-live in July 2011 to establish a readiness to manage budgeting and budget execution processes, and facilitate improved audit practices, among other things. Training is also being imparted on the implementation of the new PFM Law and Regulations (2009).

No H

Entity Level The political arm of the Entity Management may unduly interfere with, and/or override, project financial management controls.

H A strong and independent project financial management unit in existence (PFMU) and under the control auspices of the MOF will manage the fiduciary aspects of the project. An independent external audit will be carried out annually under the project.

No S

Project Level Given that MPW is implementing other Bank projects, this project may over stretch the unit’s absorptive capacity in the

H

As implementation of the fiduciary management arrangements under the project will be catered for under the direct control of the strong and independent PFMU, the otherwise

No

S

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absence of additional resources, and thus lead to delays in implementation of key components of the project.

resource constraints at the project implementation unit will be obviated by the recruitment of an incremental FM staff to the PFMU.

Overall Inherent Risks: H S Control Risk: Budgeting Delays in preparing detailed budget estimates and annual work plans.

M

The PFMU, tasked with FM responsibilities, will assist in finalizing the budgets.

No

L

Accounting The Ministry does not have a full complement of required accounting staff to supplement the independent PFMU team in rendering payments requests for PFMU processing.

S

PFMU is staffed with competent Project Accountants who will perform the accounting tasks of the project as well as support the PIU of MPW in submitting regular payment requests. In addition, the internal control arrangements at the PFMU in terms of segregation of duties and use of internal control tools are well matured. PFMU staff will train available government staff to improve their capacity during project implementation. Due to the additional work load to be generated by the project, PFMU will recruit an incremental staff accountant to assist with the accounting tasks for the project.

No

M

Fund Flows Possible delays in processing withdrawal applications leading to problems in honoring payments to third parties.

M

The PFMU will be responsible for preparing and submitting withdrawal applications, and there are acceptable service standards for settlement of bills.

No

L

Internal Controls Risk of non compliance with internal control procedures.

S

PFMU, managing the fiduciary aspects under the project, is staffed with a qualified Internal Auditor. The IA performs periodic internal control reviews and issues a report to the Deputy Minister of Finance (Administration), with evidence of follow up.

No

M

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External Audit Delays in the submission of audit reports and the timeliness of management follow up on audit issues.

S

To ensure timeliness of audit compliance, the engagement of an acceptable auditor will be done within 4 months of effectiveness, and the PFMU traditionally provides the draft accounts well in time for audits to be conducted

No

M

Overall Control Risk. S M

22. A description of the project's financial management arrangements above indicates that they satisfy the Bank's minimum requirements under OP/BP10.02. Nevertheless, the fiduciary environment in Liberia, while improving tremendously, is not without risks. The assessment of the overall FM risk therefore remains at 'Moderate'. This is particularly as a result of a series of PFM reforms that are ongoing, but gains on which are tempered by the apparent complexity of this first performance-based operation. 23. FM Supervision. The FM supervision missions' objectives will include that of ensuring that strong financial management systems are maintained for the project at the PFMU, and there is adequate FM implementation guidance provided to IIU by the PFMU throughout project life. Equally, annual field visits to PFMU and IIU will be conducted to ensure that their internal control procedures remain robust. The supervision will include desk reviews of IFRs, testing of expenditures, review of audit reports, and evaluation of the efficiency of the payment processing, internal control processes, and funds flow arrangements. A major focus of supervision will be to review the implementation progress in the setting up and strengthening of the financial management wing of IIU as a key project component. 24. Procurement. Procurement of goods and works and selection of consultants would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 2006, May 2010; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 2006, May 2010, and the provisions stipulated in the Financial Agreement or any other method accepted by the Bank. All OPRC civil works contracts of the project will be procured using International Competitive Bidding (ICB) method. The following methods, other than Quality- and Cost-based Selection, may be used for procurement of consultants’ services for those assignments which are specified in the Procurement Plan: (i) Quality Based Selection (ii) Selection based on Consultants’ Qualifications; (iii) Least-Cost Selection; (iv) Fixed Budget Selection; (v) Procedures of Selection of Individual Consultants; and (vi) Single Source Selection Procedures. The Procurement Plan will specify the circumstances under which such methods may be used. For each contract to be financed by the Credit and LRTF, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the government and the Bank project team in the Procurement Plan. A Procurement Plan for the first 18-months has been prepared and agreed with the government, which will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The procurement will be done using modified OPRC Sample Bidding Document

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(SBD) for International Competitive Bidding, and for all others National SBDs agreed or satisfactory to the Bank. 25. Contracts below US$3,000,000 but above US$100,000 equivalent per contract will be procured under National Competitive Bidding (NCB). Specifically, under NCB, it shall be ensured that: (i) for procurement of goods and works, foreign bidders are allowed to participate in National Competitive Bidding procedures without restriction of any kind; (ii) bidders shall be given at least one month to submit bids from the date of the invitation to bid or the date of availability of bidding documents, whichever is later; (iii) no domestic preference shall be given for domestic bidders for goods and works; and (iv) in accordance with para.1.14 (v) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: (a) the bidders, suppliers, contractors and subcontractors shall permit the Association, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Association; and (b) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.14(a)(v) of the Procurement Guidelines in accordance with the pertinent World Bank’s guidelines. 26. Contracts estimated to cost less than US$100,000 equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where necessary, but will be subject to Bank’s No-Objection. 27. Contracts for consulting services, each estimated to cost US$100,000 equivalent or more, will be awarded following the procedure for Quality and Cost Based Selection (QCBS). Consulting services estimated to cost less than US$100,000 per contract under this project would be procured following the procedures of Selection Based on Consultants’ Qualifications (CQS), in accordance with the procedures as described under paragraphs 3.7 and 3.8 of the Consultants’ Guidelines. Fixed Budget Selection (FBS) and Least Cost Selection (LCS) will apply to the circumstances as respectively described under paragraph 3.6 of the Consultants’ Guidelines. For all contracts to be awarded following QCBS, FBS and LCS the Bank’s Standard Request for Proposals will be used. Procedures of Selection of Individual Consultants (IC) would be followed for assignments which meet the requirements of paragraph 5.1 to 5.3 of the Consultant Guidelines. LCS would be used for assignments for selecting the auditors. Procedure of Single-Source Selection (SSS) would be followed for assignments which meet the requirements of paragraphs 3.9-3.13 of the Consultant Guidelines and will always require the Bank’s prior review regardless of the amount. 28. Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines, if in-country capacity exists. Consultancy services estimated to cost above US$100,000 per contract for firms, and contracts for individuals for assignments estimated to cost above US$50,000 and single source selection of consultants (firms and individuals) will be subject to prior review by the Bank. The overall procurement risk rating for the project is High and hence it will be supervised closely.

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C. Environmental and Social (including Safeguards) 29. The IIU, with assistance by the Bank, has been working to improve its safeguards capacity from various fronts: to develop needed staff skills; to carry out prudent and frequent field supervision missions to assess and address issues early on, and to devise a framework to resolve potential conflicts and non-compliance with agreed safeguards policies. The unit includes one full-time safeguards specialist who has been actively and effectively involved with the Bank’s infrastructure portfolio in Liberia for the past three years. He is thus familiar with Bank safeguards policies and has himself prepared a RAP and an addendum to the original Environmental Mitigation Plan. A position for a second safeguards specialist has been approved, and recruitment will be completed by December 2011. Other Bank infrastructure projects are also supporting capacity strengthening within the Environmental Protection Agency (EPA), including equipment for staff in the county offices to improve their ability to monitor environmental impact management in the field. The MC will supervise implementation of the EMP and HSEMP by the contractors and cover its monitoring activities and the quality of environmental management work in its monthly reports. IIU’s safeguards specialists will conduct bi-weekly field visits. Bank safeguards specialists will participate in at least two supervision missions per year. D. Road Sector Governance and Anti-Corruption Action Plan 30. Country Background. As the country is being rebuilt from the ashes of the years-long conflict, Liberia’s institutional capacity is still weak, fiduciary aspect not being an exception. Capacities in public financial management, budgeting and procurement are weak, exposing the country to high fiduciary risks. Regulatory frameworks have been in place, but their implementation has been constrained by inadequate staffing and skills in various entities (e.g., General Audit Commission, investigation function within the Ministry of Justice, etc.), as well as systemic fraud and corruption. Nevertheless, some critical progress has been made towards mitigating fiduciary and fraud/corruption risks: In 2006, the MOF and University of Liberia, supported by the Bank, established a Public Financial Management Training school to build capacity in line ministries. The Liberia Anti-Corruption Commission (LACC) Act of 2008 was passed in 2008, leading to an establishment of the LACC in the same year. An enactment of the Public Financial Management Act (PFMA) of 2009 was a stride to improve the legal and regulatory environment and management of public finances. These positive turns and their outcomes were measured by the Transparency International’s Corruption Perceptions Index, in which Liberia moved up from 30th place in 2008 to 13th in 2009 out of 47 countries in Sub-Saharan Africa. 31. GAC Effort in Previous Bank-funded Projects. Since the Bank’s engagement in Liberia was resumed in 2006, its emphasis has been on rebuilding and restoration of the country’s destroyed infrastructure and institutions. Most projects until 2009 were prepared and implemented under the Bank’s Operation Policy for Rapid Reponses to Crises and Emergencies (OP 8.00), which aims to streamline procedures and expedite support. Due to very weak implementation capacity of the GOL and the need for rapid recovery from the war, the earlier projects depended primarily on unusually intense supervision and hand-holding implementation

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support by the Bank task teams in terms of Governance and Anti-Corruption actions. More recently, the Country Assistance Strategy in 2009 assessed governance issues and systemic fraud/corruption risks and spelled out country-level efforts for better governance and anti-corruption. Among the infrastructure investment projects, the Urban and Rural Infrastructure Rehabilitation Project (URIRP) included specific GAC-Lite actions that fit into the operational arrangement of an emergency operation. They consisted of relatively simple actions of which implementation is straightforward and does not demand high capacity or many resources, including: (i) more intense supervision and implementation support than is the norm in Bank operations, (ii) information transparency, appropriate disclosure of project information and progress of implementation, and (iii) support to the government in setting up a rudimentary reporting mechanism. 32. Changing Environment and Pursuit of Sustainability and Ownership. This project is the first in the transport sector that will be implemented under regular operational policy, instead of OP 8.00. In the recent joint Country Portfolio Performance Review (in February 2010), the GOL, the Bank and other development partners recognized that the country is exiting the emergency recovery stage and entering into a normal path to development. With that recognition, now the GAC strategy should move away from temporary measures that respond to individual incidents; and rather should foster reforms and capacity building that will sustain good governance in the long-term. During the course of such a fundamental shift in strategy, it is also critical that the public sector entities gradually take ownership on the governance agenda. 33. The Proposed GAC Actions. The key approach is while addressing the risks, to be realistic given limited institutional capacity. Hence, the action plan is limited to a few actions that are practical but highly effective, and will be financed through the project as necessary. At the same time, these actions should be a good first example that can be easily scaled up in the future operations as the country develops the institutional capacity. Details of proposed actions and their monitoring indicators are summarized in table below.

Table 3: LIBRAMP Governance and Anti-Corruption Action Plan

GAC Objectives Actions (by client and the Bank) Monitoring indicators To enhance internal accountability by reducing risks of fraud and corruption

Client Use post-qualification instead of pre-

qualification, to avoid advance knowledge of the firms invited to bid.

Establish contractual arrangement of the OPRC, under which an Independent entity will undertake audit that will help improve internal control; and

IIU in collaboration with the Bank provide specific procurement and financial management strategies as may be required or needed to enhance internal control

Bank Engage an independent consulting firm

supporting the IIU during bid evaluation and negotiations.

The contracts for 2 lots procured

using post-qualification.

Independent audit reports are produced in year 1, 4, 7 and 10 of project life.

To enhance information

Client Enhance information transparency through

Extensive archive of documents has

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transparency both within the government and for beneficiaries

proper documentation and information disclosure in both the print and electronic media as a policy with respect to project preparation and implementation, primarily throughout the procurement process;

Create an IIU website on the Internet where all project information is made available to the public;

Improve documentation and archiving system at the IIU by setting up a library and record room;

Host radio programs where project information is disseminated to the public in English and local languages;

Increase the beneficiaries and project affected peoples access to project activities and information by using cultural drama crews in villages, towns and cities where project impacts most felt

Bank Support the IIU in creating a website on the

internet; Assist IIU to devise strategies to enhance

information transparency during project preparation, implementation and monitoring level; and

Support the recruitment of a public relation officer within the IIU to disseminate project information

been created and is being maintained at the IIU;

Information disclosure in both the print and electronic media is achieved with respect to project preparation, Implementation and Monitoring;

IIU website is created by the March 2011; and

The Public Relations Officer at the IIU have prepared Radio programs on project information and activities and local newspapers advertisement and articles are launched in second quarter of 2011.

To encourage participation of the affected persons and communities

Client Encourage the involvement of beneficiaries

and affected communities by allowing them to participate in decision making during project preparation, implementation and monitoring;

Constitute project preparation, implementation and monitoring council involving the beneficiaries and affected communities;

Create grievance committee at the project level comprising IIU, the Bank, beneficiaries and affected communities to ensure beneficiary participation during project preparation, implementation and monitoring; and

Host project launch workshop inviting beneficiaries, affected communities and other stakeholders to provide project information and consult their view.

Bank Assist IIU to publish in local dailies

(Newspapers) the views and opinions of affected communities and beneficiaries;

Assist IIU to conduct regularly a consumer satisfaction survey;

Project launch workshop was hosted

and its discussions and findings are documented and implemented.

Project beneficiaries and affected communities grievance/complaint committee established and have regular meetings by the third quarter of 2011.

To strengthen oversight throughout

Client Create a citizen reporting system via suitable

Citizen reporting is being

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project life communication modes given community conditions, such as mobile phone hot-line, emails, mailing, etc.

Establish project civil society forum where project implementer, and civil society meet regularly to discuss information and data pertaining to project preparation and implementation at all levels. The view of the forum should be considered, documented and disseminated;

Establish project preparation and implementation board of inquiry to review project activities;

Put legislation into place to guard against bad governance and corruption activities during project preparation and implementation; and

Establish a checks-and-balance inter-ministerial and civil societies committee to monitor adequate supervision of project activities

Bank Continue close engagement and frequent

supervision and provide implementation support as needed.

Bank task team continues its regular visit to Liberia to inspect and review project preparation and implementation activities

Assist IIU to create a citizen report system to document and disseminate information and activities to the project beneficiaries, affected communities concerns and the public.

implemented and all affected communities have access to the reporting system.

Project civil society forum established, meets regularly and meeting proceedings are documented and disseminated;

Appropriate Legislation enacted to guide against bad governance and corruption in project activities; and

The Bank Task Team Continue its supervision and implementation support.

E. Monitoring and Evaluation 34. Data collection for the project outcome indicators will be done as detailed in the Results Framework (Annex 1). Currently the IIU does not have sufficient capacity to obtain all needed information to evaluate project results, particularly on the economic and social impact assessment. In order to supplement the current capacity the following measures will be put in place:

(i) Performance and condition of road network: MC will be responsible for collecting and reporting all necessary physical information about the road network. Throughout the project life, the MC will develop and maintain an extensive volume of road data, which will be transferred to and owned by the IIU. Furthermore, the Bank team will continue its assistance to the IIU in instituting the M&E framework for continuous data collection and evaluation.

(ii) Economic and social impacts indicators: Currently, the Bank team is supporting the IIU in selecting a consultant who will carry out baseline survey and monitoring of economic and social impact of road development. The collected baseline information will update the Project Results Framework.

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F. Role of Liberia Reconstruction Trust Fund

35. A multi-donor trust fund, the Liberia Reconstruction Trust Fund, co-finances a significant part of the project. The LRTF was established to pool donor funds so that key infrastructure projects could be executed. The LRTF is administered by the Bank as per Administrative Agreements between the Bank and each donor, which include Germany, Ireland, Sweden, Norway, Britain and the World Bank’s LICUS Trust Fund. For the medium term, it is expected that donors will continue funding the trust fund. Co-financing toward this project was agreed by the Oversight Committee of the LRTF in May 2010. The Bank will report to the LRTF Oversight Committee on a quarterly basis the progress of the project.

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Annex 4 Operational Risk Assessment Framework (ORAF)

Project Development Objective(s)

The objective of the project is to support the Recipient’s efforts to reduce transport costs along the road corridor from Monrovia to the Guinea border and to maintain the road in good condition over a 10-year period.

PDO Level Results Indicators:

1. Transport costs borne by road users, including vehicle operating costs and monetary value of travel time (measured through roughness, IRI rate in m/km) 2. Roads in good and fair condition as a share of total classified roads (percentage) 3. Direct project beneficiaries (number), of which female (percentage) 4. Share of rural population with access to an all-season road (proportion)

Risk Category

Risk Rating Risk Description Proposed Mitigation Measures16

1. Project Stakeholder Risks Stakeholder

L The Bank, Borrower, and Donors have kept a long-standing collaborative relationship in the infrastructure sector; with the proven effectiveness of the Bank’s role as a facilitator. General public perception of the Bank’s and other donor’s involvement in recovery is generally very positive.

N/A

2. Implementing Agency Risks 

H

The main risk is the still limited capacity of the IIU in contract management and performance monitoring. One of the most pressing issues is staffing in key technical and managerial positions. The Bank has been supporting, financially and technically, the IIU’s on-going effort to recruit qualified professionals in some key positions. Successful recruitment and following skills transfer to IIU staff will be essential for capacity building.

The project will finance specific capacity-building TAs for and operating cost of IIU. TA will be provided at minimum for the initial four years of the project. Specific TA programs will be determined during project preparation, subject to the recommendations of the URIRP-financed institutional reform study. Further TA support will be subject to IIU capacity assessment in year three of the project.

16 N/A = not applicable

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The Bank, under its previous and on-going projects, has helped the IIU in instituting key fiduciary requirements and procedures. This support will continue.

While the overall accountability of the government and various involving entities is reasonably high, the current transitional-status of the IIU may pose a risk on the stability of its leadership, and hence affect its decision-making and management capacity. In addition, the current arrangement of separate FM function under the PFMU may increase transaction cost and inefficiency during the implementation of OPRC. The likelihood of this risk will be substantially lowered, if the on-going capacity building efforts lead to tangible progress.

The capacity building TA will indirectly help mitigating such risks.

Under the ongoing IDA operation, there has been no allegation or conviction for fraud and corruption. The PFMU is staffed with qualified accountants, including one certified accountant, and has the internal controls and monitoring mechanisms. The unit’s ability to prevent fraud and corruption has been somewhat strengthened since the internal audit unit was established. PFMU’s quarterly Financial Reports have been rated satisfactory in terms of meeting WB requirements for financial reporting. In addition, certain features and design aspects of the project are expected to help mitigate such risks: lump-sum and output-based contracts, provision of independent monitoring consultants, and external and independent auditing. In a broader scheme, the Bank and other donors have assisted the government’s effort to tighten fiduciary management of investment projects, which should be continued.

A GAC Action Plan will be implemented under the project to enhance information transparency, internal control, and beneficiary participation. Specific actions to be included under the GAC Action Plan is being discussed and agreed during project appraisal. Embedded features of the project such as independent monitoring and external audit would minimize related risks.

3. Project Risks Design

M-L The proposed design does not entail excessive complexity in its technical, scope/size, geographical dispersion, and implementation aspects that would pose serious risk on project implementation.

N/A

Social & Environmental L The GOL has been consistently committed to Based on the guidance in the ESMF and RPF, EMPs

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addressing social and environmental issues in previous and on-going projects. The project safeguards arrangements will allow proper checks and balances to address potential risks: the IIU has already prepared a Resettlement Policy Framework (RPF) and is applying an Environmental Management Plan for roads (EMP) prepared for the Emergency Infrastructure Project. The contracting entity will be responsible for developing and implementing a project-specific Health, Environment and Safety Plan and a RAP based on the EMP and RPF, which will be closely monitored by the monitoring consultant.

and RAPs will be prepared as and when and necessary during implementation, and monitored by the Monitoring Consultant

Program & Donor

M The interdependency of the project on other programs/projects is limited. As assessed under Risk 1.1, multiple donors contributing to the LRTF have already formally committed to funding as decided at its Oversight Committee meeting.

N/A

Delivery Quality

M-I The project sets out clearly defined and measurable criteria to evaluate output and performance of the contracting entities. Under the proposed arrangement that requires independent monitoring by project manager, contract management by the IIU, and TA to support the IIU functions, the likelihood of such risks will be kept low.

The likelihood will depend on Risk 3.1. With expected improvement in IIU’s management and supervision capacity, this risk will be lowered.

Overall Risk Rating at Preparation

Overall Risk Rating During Implementation

Comments

High H

It was agreed at the ROC Meeting that the project’s preparation risks will be rated as high given the post-conflict operating environment, and impact of implementation risks will also be high.

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Annex 5: Implementation Support Plan 1. The Implementation Support Plan (ISP) describes how the Bank and other development partners will support the implementation of the risk mitigation measures (identified in the ORAF) and provide the technical advice necessary to facilitate achieving the Project Development Objectives (PDO) (linked to results/outcomes identified in the result framework). The ISP also identifies the minimum requirements to meet the Bank’s fiduciary obligations. Its content is as follows. 2. Currently, the capacity for road sector management is weak. This and existing Bank transport projects are implemented through an Infrastructure Implementation Unit (IIU) in the Ministry of Public Works (MPW), which will be converted eventually to a full-fledged Road Authority. Gradually it can be expected that the capacity of the IIU and later Road Authority will grow and that quality road sector management will be brought in place. 3. In the initial two to three years there will be, as has been so far, significant and direct Bank support to the execution of the project, while professional sector management capacities are being developed. This will require technical missions for the project every two to three months, staffed with team with extensive experience in contract management (particularly performance based contracts), seasoned engineers, safeguards, and less frequently procurement and financial management. During this initial period, the Bank will effectively act as augmentation to the IIU. The role of the Bank will only gradually evolve to a more normal supervision mode and only as development of sector capacities becomes adequate. 4. Concurrently, there will be extensive support to the development of IIU. A framework agreed on between the Bank and the government for the evolution of IIU and structure and needs of a Road Authority exist and will be used as a blueprint for Bank and other donor support. Emphases will be placed on attracting and retaining quality staff and where needed assist in the development of that staff. When achieved, the Road Authority will have relatively small but technically proficient and experienced staff in engineering, social-environment, and Monitoring and Evaluation (M&E). 5. The contractual arrangements envisioned in the project, i.e. two large Design-Build-Operate-Maintain-Transfer (DBOMT) road contracts under Output and Performance-based Road Contracting (OPRC) methodology take account of the capacity of the sector management. As compared with traditional contracting approaches, where numerous transactions are needed to bring about the road lifecycle interventions here packaged in each DBOMT, fewer staff will be required by IIU, albeit more experienced. Rather than managing multiple transactions – which has been the case in existing Bank financed transport project in Liberia – the responsible entity will be able to bring better focus on these two contracts. Further, because of the size of the contracts, the vast majority of payment will be through direct payment method. 6. The Bank team will provide specific support to implementation during each phase of the project life as laid out in the tables below:

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Table 1: Implementation Support

Time Focus Skills Needed Resource Estimate LRTF OC Role First twelve months

Successful procurement of OPRC contracts, monitoring consultancy

Procurement and Safeguards

Technical staff time (engineering, procurement, safeguards): 55 staff-weeks

Minimal

12-36 months Contract management and completion of rehabilitation works to the standards stipulated in contracts

Contract management, Monitoring and evaluation

Technical staff time: 45 staff-weeks per year

Minimal

36-120 months

Monitoring and management of output and performance of the road contracts

Road asset management, Monitoring and evaluation

Technical staff time: 30 staff-weeks per year

Minimal

Throughout project life

Institutional development of the implementing unit

Institutional reform and capacity building for road sector

Staff time: 5 staff-weeks per year

Some technical and institutional support

Table 2: Skills Mix Required

Skills Needed Number of Staff Weeks Number of Trips

TTL 60 25

Co-TTL (Field) 80 Field-based

Asset Management Specialist/Consultant

35 10

Procurement 60 Local

FM 20 Local

Environmental Safeguards

14 12

Social Safeguards 14 12

Support Consultant 35 10

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Annex 6: Team Composition

1. World Bank staff and consultants who worked on the project:

Name Title Unit Anne Njuguna Project Program Assistant AFTTR Anthony Mensa-Bonsu Procurement Specialist Consultant AFTPC Antoine Lema Senior Social Development Specialist AFTCS Emmanuel A. James Program Coordinator/TTL AFTTR Fang Xu Transport Economist AFTTR Gbangi Kimboko Project Procurement Assistant AFTTR Gylfi Palsson Lead Transport Specialist LCSTR Jeremy Jay Fischer Infrastructure Consultant AFTTR Jonathan Pavluk Senior Counsel LEGAF Christine M. Makori Counsel LEGAF Jung Eun Oh Transport Economist ECSSD Maxwell Bruku Dapaah Financial Management Specialist AFTFM Muhammad Zulfiqar Ahmed

Transport Engineer/Co-TTL AFTTR

Rajiv Sondhi Senior Finance Officer CTRFC Luis M. Schwarz Senior Finance Officer CTRFC Thomas Walton Consultant - Senior Environmental Specialist AFTEG Wycliffe Okoth Project Program Assistant AFTTR Yeyea Kehleay Nasser Project Team Assistant AFMLR Yitzhak Kamhi Consultant - Senior Transport Engineer &

Management AFTTR

Winter Chinamale Procurement Specialist AFTPC

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Annex 7: Economic and Financial Analysis

A. Economic Analysis of the Project 1. The approx. 249 kilometer Monrovia (Red Light) – Gbarnga – Ganta – Guinea Border road, is a strategically important road corridor, which connects the capital city, Monrovia, to areas with substantial agriculture and natural resource potentials, and provides direct linkage to neighboring Guinea. Currently, the corridor is severely deteriorated. The proposed OPRC treatment to this road corridor will not only improve the road to an all season, asphalt surfaced road, but also maintain it at desirable service levels for a 10-year period. The revival of this road corridor is critical to keep the momentum of the ongoing growth and recovery of the Liberian economy. The road users, local and national economy will all benefit from this project. Also, a 10-year road management project is likely to create some stable jobs related to road works and roadside development, providing income-generating opportunities particularly for rural population. The OPRC approach will bring efficiency gains and administrative cost savings for the IIU (Employer), and has the potential to drive fundamental restructuring and performance improvement within the government road sector. A detailed economic analysis was conducted for the project roads and is summarized below. 2. Scenarios and Assumptions. Three scenarios were analyzed: traditional road management, 10-year OPRC and full life treatment. With traditional road management, it was assumed that the road will be rehabilitated; however in the absence of a road maintenance fund, there is likely to be little or no follow up routine or periodic maintenance. The OPRC will provide annual routine maintenance within the 10-year contract period and periodic maintenance at year 8-9 following the initial rehabilitation; however, in year 10-20, there will be no maintenance. The full life treatment assumes that after the first 10-year OPRC, there will be follow up routine and periodic maintenances throughout the 20 year life cycle of this road corridor. 3. Main inputs/Data. The biggest benefit of road condition improvement and preservation is the lower vehicle operating cost, passenger time savings, and fewer accidents. There are also economic and social benefits associated with the project, however, due to the complexity of attribution, the economic and social benefits were not quantified. The main inputs/data includes:

(i) Traffic. A two-week traffic survey (24 hrs, over seven days) was conducted to assess the current traffic condition. The daily traffic information is shown in table below.

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Table 1: Traffic information Vehicle types Monrovia (Red Light)-Gbarnga (Lot 1) Gbarnga-Ganta-Guinea Border (Lot 2)

Section I Section II Section I Section II Km. 0.00-30.13 Km. 30.13-180.36 Km. 180.36-247.14 Km.247.14-248.97

Car Medium 1359 1281 803 390 Goods Vehicle 583 810 502 484 Bicycle 518 2111 1462 670 Bus 105 47 26 143 Truck Light 165 210 102 144 Truck Medium 29 59 27 88

Truck Heavy 18 34 10 77 Arterial Truck 5 10 0 0

(ii) Traffic Growth. Economic analysis suggests a strong connection exists between economic development and growth of motorized transport. The IMF projected that Liberia’s annual GDP growth rate from 2007-2013 will be around 15 percent. Taking into account the existing low level of the traffic, due to the difficulties of driving on these deteriorated roads on one hand, and the high potential for economic growth of Liberia on the other hand, the forecasted traffic growth levels used in the analysis are shown in Table 2. For 2010-2012, the relatively high traffic growth rate of 35 percent is expected to result from the combination of the restoration of an important road corridor, the urban/peri-urban nature of parts of the corridor, and the high economic growth forecast. The subsequent traffic growth assumption of 5-10 percent per annum as shown below reflects the continued rapid GDP growth expectations for the Liberian economy.

Table 2: Projected Traffic Growth (%) Vehicle type 2010-2012 2013-2014 2015-2019 2020-2029 All vehicles 35.0 10.0 5.0 5.0

(iii) Travel Cost. One of the direct benefits of the project is the time savings of

passengers. The number of passengers per vehicle type was observed by traffic counts taken by the Consultant, The value of passenger time was taken from a previous World Bank study performed in Liberia's neighboring countries.

(iv) Investment and Maintenance Costs. All scenarios will have the same initial capital investment. For traditional road management, there is no routine and periodic maintenance after year four. For OPRC and full life treatment scenarios, both maintenance regimes will be applied. However, for 10-year OPRC, periodic maintenance will happen between the eighth and ninth year. At year 10, the road would have a significant salvage value and useful life leftover. The salvage value assumed was 80 percent of the last periodic maintenance, and 50 percent of the value of the base and sub-base materials that were designed for 20 years. The road treatment costs are shown in the table below.

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Table 3: Investment and Maintenance costs (millions of US$) Monrovia (Red Light)-Gbarnga (Lot 1) Gbarnga-Ganta-Guinea Border (Lot 2)

Traditional Road Management Construction

Rehabilitation Routine

Maintenance Periodic

Maintenance Total Cost

Construction Rehabilitation

Routine Maintenance

Periodic Maintenance

Total cost

2010 24.7 0.0 0.0 24.7 14.8 0.0 0.0 14.8 2011 32.5 0.0 0.0 32.5 18.1 0.0 0.0 18.1 2012 39.2 0.0 0.0 39.2 0.0 0.0 0.0 0.0 2013-29

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

10-year OPRC Construction

Rehabilitation Routine

Maintenance Periodic

Maintenance Total cost

Construction Rehabilitation

Routine Maintenance

Periodic Maintenance

Total cost

2010 24.7 0.0 0.0 24.7 14.8 0.0 0.0 14.8 2011 32.5 0.0 0.0 32.5 18.1 1.0 0.0 19.1 2012 39.2 0.0 0.0 39.2 0.0 2.1 0.0 2.1 2013 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2014 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2015 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2016 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2017 0.0 6.8 15.5 22.3 0.0 2.1 12.1 14.2 2018 0.0 6.8 15.5 22.3 0.0 2.1 0.0 2.1 2019 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2020-29

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Full life Treatment Construction

Rehabilitation Routine

Maintenance Periodic

Maintenance Total cost

Construction Rehabilitation

Routine Maintenance

Periodic Maintenance

Total cost

2010 24.7 0.0 0.0 24.7 14.8 0.0 0.0 14.8 2011 32.5 0.0 0.0 32.5 18.1 1.0 0.0 19.1 2012 39.2 0.0 0.0 39.2 0.0 2.1 0.0 2.1 2013 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2014 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2015 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2016 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2017 0.0 6.8 15.5 22.3 0.0 2.1 12.1 14.2 2018 0.0 6.8 15.5 22.3 0.0 2.1 0.0 2.1 2019 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2020 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2021 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2022 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2023 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2024 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2025 0.0 6.8 15.5 22.3 0.0 2.1 12.1 14.2 2026 0.0 6.8 15.5 22.3 0.0 2.1 0.0 2.1 2027 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2028 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1 2029 0.0 6.8 0.0 6.8 0.0 2.1 0.0 2.1

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(v) Road Roughness (IRI). The IRI is used as an indicator of the road condition, both in the wet season and dry season. Duration of 90 days is assumed conservatively for the wet season. Under the do-nothing scenario, the IRI in the wet season will be much higher than the IRI in the dry season as sections of the road would be somewhat impassible in the wet season. When the road is treated and managed by OPRC or full life treatment, the routine and periodic maintenance provided by these two scenarios assure the same IRI between the wet and dry season, and a lower average IRI for the design period. Since traditional road management does not reliably provide maintenance, the average IRI for the traditional scenario is assumed to be the average between the do-nothing scenario and the other two scenarios. The road condition and IRIs of the different scenarios are shown in table below.

Table 4: Road Condition and IRIs of Different Scenarios

Monrovia (Red Light)-Gbarnga (Lot 1)

Gbarnga-Ganta-Guinea Border (Lot 2)

Section I Section II Section I Section II

Km. 0.00-30.13

Km. 30.13-180.36

Km. 180.36-247.14

Km. 247.14-248.97

Do-nothing IRI in dry season(m/km) 6.4 6.3 7.2 13.6 IRI in wet season (m/km) 12.5 12.5 12.5 15.0

Alternative 1: 10- year OPRC First 10- year IRI in dry season(m/km) 3.0 3.0 3.0 3.0 First 10-year IRI in wet season (m/km) 3.0 3.0 3.0 3.0

Second 10-year IRI in dry season(m/km) 4.8 4.8 5.2 8.4 Second 10-year IRI in wet season(m/km) 5.8 5.7 6.3 10.1

Alternative 2: Full Life Treatment IRI in dry season(m/km) 3.0 3.0 3.0 3.0 IRI in wet season (m/km) 3.0 3.0 3.0 3.0

Alternative 3: Traditional Road Management IRI in dry season(m/km) 4.8 4.8 5.2 8.4 IRI in wet season (m/km) 5.8 5.7 6.3 10.1

B. Results of the Economic Analysis 4. Alternative 1: Economic Feasibility – 10-year OPRC. The assumptions for this analysis include; Economic Analysis period of 20 years; including routine and periodic maintenance for the first 10 years, no maintenance in the second 10 years. The main economic results are presented in table below.

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Table 5: Economic Results for 10-year OPRC

Monrovia (Red Light) –

Gbarnga (Lot 1) Gbarnga – Ganta-

Guinea Border (Lot 2) Net Present Value (NPV) (in $M) 48.8 9.2

Internal Rate of Return (IRR) 23% 18%

First Year Benefit Ratio 32.2% 20.3%

Benefit Cost Ratio 1.5 1.2

Payback Period (in years) 7 8

5. The results show that both Lot 1 and 2 are economically feasible. 6. Alternative 2: Economic Feasibility – Full Life Treatment. The assumptions for this alternative analysis include Economic Analysis period of 20 years with routine and periodic maintenance. The main economic results are presented in table below.

Table 6: Economic Results for Full Life Treatment Monrovia (Red Light)-Gbarnga

(Lot 1) Gbarnga-Ganta-Guinea Border

(Lot 2) NPV (in $M) 128.4 28.5 IRR 27% 22% First Year Benefit Ratio 32.2% 20.3% Benefit Cost Ratio 1.9 1.5 Payback Period (in years) 7 8

7. As can be seen, both road sections are economically feasible, by all the classic economic indicators, including the First Year Benefit Ratio, which serves as a timing indicator, as to whether the first year return on the investment is economically worthwhile. It is also observed that full life treatment has higher IRR than 10-year OPRC, suggesting the benefit of providing regular maintenance to the road management. 8. Alternative 3: Economic Feasibility –Traditional road management. The assumptions for this analysis include; Economic Analysis period of 20 years; without routine and periodic maintenance; lower average IRI in comparison with Alternative 1 (10-Year OPRC) and Alternative 2 (full life treatment); 20 percent higher IRI in wet season than in the dry season. The main economic results are presented in table below.

Table 7: Economic Results of Traditional Road Management

Monrovia (Red Light) –

Gbarnga (Lot 1)

Gbarnga – Ganta-Guinea Border (Lot 2)

NPV (in $M) 24.7 0.3

IRR 18% 12%

First Year Benefit Ratio 27.9% 17.2%

Benefit Cost Ratio 1.3 1.0 Payback Period (in years) 8 8

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9. The results show that both Lot 1 and 2 have lower IRR than OPRC and full life treatment scenarios. The average IRR is about 9-10 percent lower than full life treatment and five to six percent lower than the 10-year OPRC scenario. 10. The comparison of 10-year OPRC with traditional road management, as summarized in table below, shows the advantage of OPRC.

Table 8: Comparison between 10 Year OPRC and 10-year Traditional Management

Scenarios Monrovia (Red Light) –

Gbarnga (Lot 1)

Gbarnga – Ganta-Guinea Border (Lot 2)

NPV(in $M) OPRC Traditional

48.8 24.7

9.2 0.3

IRR OPRC Traditional

23% 18%

18% 12%

FYBR OPRC Traditional

32.2% 27.9%

20.3% 17.2%

B/C OPRC Traditional

1.5 1.3

1.2 1.0

Payback OPRC Traditional

7 8

8 8

B. Sensitivity Analyses 11. Sensitivity analyses were conducted on Alternative 2, Full Life treatment scenario. 12. Scenario One: Cost Increase by 25 percent. In this sensitivity analysis, it assumed that the construction, routine maintenance and periodic maintenance costs would increase by 25 percent. The economic results are presented in the table below.

Table 9: Economic Feasibility– 25 Percent Cost Increase Monrovia (Red Light) –

Gbarnga (Lot 1)

Gbarnga –Ganta- Guinea Border (Lot 2)

NPV (12%, in $M) 92.9 15.2 IRR 21% 17% First Year Benefit Ratio (FYBR) 24.2% 15.0% Benefit Cost Ratio 1.5 1.2 Payback Period (in years) 9 12

13. All the economic indicators point toward economic feasibility for both Lot 1 and 2 (IRR between 17 percent and 21 percent). 14. Scenario Two: Lengthening the wet season to 160 days. One of the conservative assumptions utilized in the economic analysis was setting the duration of the wet season to 90 days. This sensitivity analysis relaxes this assumption and assumes a 160-day wet season. The economic results for this scenario are detailed in table below.

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Table 10: Economic Feasibility– Lengthening the Wet Season

Monrovia (Red Light) – Gbarnga

(Lot 1)

Gbarnga – Ganta - Guinea Border (Lot 2)

NPV (12%, in $M) 239.6 56.4 EIRR 37% 30% First Year Benefit Ratio 48.8% 29.6% Benefit Cost Ratio 2.7 2.1 Payback Period (in years) 4 5

15. The economic results under this sensitivity analysis show that both Lot 1 and 2 are economically feasible, with IRR ranging from 30 percent to 37 percent. The FYBR also points out that these projects should not be delayed. 16. Scenario three: Reducing Benefits by 20 percent. In this case, in addition to the already conservative assumptions, the economic benefits are reduced by an additional 20 percent. The results are summarized in table below.

Table 11: Economic Feasibility– Reducing Benefits by 20 Percent Monrovia (Red light)-Gbarnga

(Lot 1) Gbarnga-Ganta-Guinea Border

(Lot 2) NPV (12%, in $M) 74.3 12.2 EIRR 21% 17% First Year Benefit Ratio 24.2% 15.0% Benefit Cost Ratio 1.5 1.2 Payback Period (in years) 9 12

17. The economic results under this sensitivity analysis show that both Lot 1 and 2 are economically feasible, with EIRR ranging from 17 percent to 21 percent. The FYBR also points out that the project should not be delayed. C. Summary of Economic Analysis 18. The economic analysis was conducted under very conservative assumptions, including:

No deterioration in the existing roads for the duration of the economic analysis period; Shorter wet season (90 days instead of 160 days); Discount factor of 12 percent; Zero Road salvage value after the 20 year economic analysis period; No increase in the value of time due to economic growth; No additional economic impacts such as improving connectivity, additional jobs, etc.

19. Nonetheless, under these conservative assumptions, the road is economically feasible for all the scenarios: 10-year OPRC, full life treatment and traditional road management. 20. The full life treatment has the highest IRR, suggesting the benefit of ensuring regular road maintenance after the expiration of OPRC.

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21. The economic feasibility remains robust under several sensitivity analyses for full life treatment– additional costs of 25 percent, reducing benefits by 20 percent, lengthening the wet season to 160 days.

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Map No. IBRD 38580

S I E R R AS I E R R AL E O N EL E O N E

G U I N E AG U I N E A

C Ô T EC Ô T ED ’ I V O I R ED ’ I V O I R E

Wologiz

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onogizi

Mts

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Nimba M

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Mt. WuteveMt. Wuteve(1,380 m)(1,380 m)

L O FAL O FA

B O M IB O M IM A R G I B IM A R G I B I

B O N GB O N GN I M B AN I M B A

G R A N DG R A N DB A S S AB A S S A

R I V E R C E S SR I V E R C E S S G R A N D G E D E HG R A N D G E D E H

S I N O ES I N O E

G R A N DG R A N DK R UK R U

MA RY L A

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GRANDGRANDCAPECAPE

MOUNTMOUNT

BoBo

GelahunGelahun

VahunVahun

KolahunKolahun

KlayKlay

TototaTototaZienzuZienzu

PalalaPalala

BotataBotata

YopieYopie

YekepaYekepa

TapetaTapeta

GuataGuata

TradeTradeTownTown

GongleeGonglee

PynePyne

Kola TownKola TownPoabliPoabli

BabuBabu

KopoKopo

TawlokehnTawlokehn

PliboPlibo

NyaakeNyaake

JuazohnJuazohn

PelokehnPelokehn

KahnwiaKahnwiaTawakeTawake

BokoaBokoa

HartfordHartford GaamodebiGaamodebi

SagleipieSagleipie

GloieGloie

TobliTobli

ZorzorZorzor

HarbelHarbel

KakataKakataCareysburgCareysburg

Bong TownBong TownTubmanburgTubmanburg

BopoluBopoluGbarngaGbarnga

ZwedruZwedru

BarclayvilleBarclayville

SenniquellieSenniquellie

VoinjamaVoinjama

G B A R P O L UG B A R P O L U

R I V E R G E ER I V E R G E E

BensonvilleBensonville

Fish TownFish Town

GbalatuahGbalatuah

KarnplayKarnplayGantaGanta

Kongo

Bo

Gelahun

Vahun

Kolahun

Klay

TototaZeansue

Gbalatuah

Palala

Botata

Yopie

Yekepa

Karnplay

Tappita

Guata

TradeTown

Gonglee

Pyne

Kola TownPoabli

Babu

Nana Kru

Kopo

Tawlokehn

Plibo

Nyaake

Juazohn

Pelokehn

KanweakenTawake

Sasstown

Grand Cess

Bokoa

Sehnkwehn

Hartford Gaamodebi

Ganta

Sagleipie

Gloie

Tobli

Zorzor

Harbel

Careysburg

Bong TownTubmanburg

BopoluGbarnga

Buchanan

Cestos City

Greenville

Zwedru

Barclayville

Fish Town

Harper

Senniquellie

Robertsport

Voinjama

Kakata

BensonvilleMONROVIA

L O FA

G B A R P O L U

B O M I

MONTSERRADO

M A R G I B I

B O N GN I M B A

G R A N DB A S S A

R I V E R C E S S G R A N D G E D E H

R I V E R G E ES I N O E

G R A N DK R U

MA RY L A

ND

GRANDCAPE

MOUNT

S I E R R AL E O N E

G U I N E A

C Ô T ED ’ I V O I R E

Dube

Cestos

St. Joh

n

St. Paul

Nia

nda

Via

Loffa

Gbeya

Nuon

ATLANTIC OCEAN

To Buedu

To Irié

To Nzérékoré

To Lola

To Danané

To Toulépleu

To Tabou

To Zimmi

To Kenema

To Pendembu

Wologiz

i Rang

e W

onogizi

Mts

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Nimba M

ts.

Mt. Wuteve(1,380 m)

11°W 10°W 9°W 8°W

10°W

11°W

9°W 8°W

5°N

4°N

6°N

7°N

8°N

9°N

4°N

5°N

6°N

7°N

8°N

9°N

LIBERIA

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 20 6040 80

0 60 Miles4020

100 Kilometers

IBRD 38580

MAY 2011

LIBERIA

ROAD ASSETMANAGEMENT

PROJECT (LIBRAMP)PROJECT ROAD

SELECTED CITIES AND TOWNS

COUNTY CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

COUNTY BOUNDARIES

INTERNATIONAL BOUNDARIES