OF:RCIAL DOCUMENTh, Supplemental Letter No. 2 (Assumed Loan Agreement) PUBLIC ENTERPRISE FOR STATE ROADS July 12, 2013 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Loan No. 7532-MK (Assumed and Amended Loan Agreement) Regional and Local Roads Program Support Project Performance Monitoring Indicators Dear Sirs and Mesdames: This refers to paragraph A. 1 of Section II of Schedule 2 to the Assumed and Amended Loan Agreement of this date between the International Bank for Reconstruction and Development (the Bank) and the Public Enterprise for State Roads (PESR) (the Borrower). The Borrower hereby confirms to the Bank that the indicators set out in the attachment to this letter shall serve as the basis for the Borrower to monitor and evaluate the progress of the Project and the achievement of the objectives thereof. Very truly yours, PUBLIC ENTERP SE FO ATE ROADS By Authorized Representative Attachment A Attachment to Supplemental Letter No. 2 PUBLIC ENTERPRISE FOR STATE ROADS Loan No. 7532-MK Regional and Local Roads Program Support Project Performance Monitoring Indicators PDO Project Outcome Indicators Use of Project Outcome Information Vehicle operation costs on the roads Assessing road transport costs will result in better appreciation of the Reduce the cost of safe access to improved under the Project have benefits of road investments. markets and services for decreased by at least 10 percent. Application of the Road Asset Management System will lead to communities served by regional and Road Asset Management System has improved planning and decision-making on the road sector program. local roads in the Guarantor's been used to produce a Five-year territory, and to improve institutional Strategic Program. Application of EU guidelines will result in safer driving environment capacity for investment planning and EU guidelines successfully applied for road users. road safety. in the design of road signs and road markings on the regional road network. Intermediate Outcomes Intermediate Outcome Use of Intermediate Outcome Monitoring Indicators Improvement of the condition of Approximately 284 km of Regional Project Supervision and adjustment of procurement / implementation regional roads. Roads improved by the end of the plan. project. Improvement of the condition of Approximately 420 km of Local Project Supervision and adjustment of procurement / implementation Local Roads Roads improved by the end of the plan. project. Borrower has a proven capacity to Borrower has adequately managed Problems in management and implementation could be of different manage and implement road and implemented road investments types, and remedies would need to be adapted to type of problem. investments. in general and under the Regional and Local Roads Program in particular. Borrower has conducted a Road To be better informed on the condition of the road network and to Condition Survey on its core road determine required interventions. network and implemented a Road Asset Management System. Regular Technical Audits have confirmed that road works comply If not complied with, carry out forensic audit to find cause of non- with contractual specifications. compliance. Arrangements for results monitoring Data Collection and Reporting Project Outcome Indicators Baseline 2009 2010 2011 2012 2013 2014 2015 Frequency and Reports Data Collection Responsibility for 2008 Instruments Data Collection -90% for Once, end of project Economic Evaluation PESR Vehicle operation costs on the 100% (see life cycle period to be carried out (ex- roads improved under the econom analysis post) Project have decreased by ic at least 10 percent. analysis Road Asset Management No No No No No Yes Yes Annually. Road inventory and PESR System has been used to condition survey to be conducted to create produce updated Five-year needed database for Strategic Program. RAMS. Progress reports by PESR EU guidelines successfully No No No No No Yes Yes Once Progress reports by applied in the design of PESR road signs and road markings on the regional road network. Intermediate Outcome Indicators Approximately 284 km of 0 N/A 110 220 284 km 284km 284km 284km Annually Progress Reports by PESR Regional Roads improved PESR by the end of the project Approximately 420 km of Local 0 N/A 100 220 280 km 330km 380km 420km Annually Progress Reports by PESR Roads improved by the PESR end of the project. The PESR has successfully managed and implemented the investments under the N/A Yes Yes Yes Yes Yes Yes Annually in 2010-2015 Technical and PESR Auditor Regional and Local Roads Financial Audit Program reports Regular Technical Audits have confirmed that road works comply with contractual specifications.Y e es Annually in 2010-2015 Technical and Financial Audit Yes Yes Yes Yes Yes Yes reports PESR / Auditor Road Asset Management System N/A N/A No No No No Yes Yes Once Consultants PESR established and reports/Progres operational s reports by PESR Road Condition Survey on core N/A N/A No No No No Yes Yes Once Consultants PESR road network conducted reports/Progres s reports by PESR Design of traffic signs and road N/A N/A Yes Yes Once Consultants reports / PESR markings regional roads Progress completed and reports by implemented on regional PESR roads rehabilitated under the Project. Financial module of Enterprise N/A N/A No No No Yes Yes Yes Once Consultants PESR Resource Planning system reports/Progres operational s reports by PESR