Document of The World Bank Report No: ICR00003889 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-77410 IDA-51080) ON A LOAN IN THE AMOUNT OF SDR 94.7 MILLION (US$ 147 MILLION EQUIVALENT) AND A CREDIT IN THE AMOUNT OF SDR 27.7 MILLION (US$ 43 MILLION EQUIVALENT) TO GEORGIA FOR A THIRD EAST WEST HIGHWAY IMPROVEMENT PROJECT December 28, 2016 Transport and ICT Global Practice South Caucasus Country Unit Europe and Central Asia CURRENCY EQUIVALENTS (Exchange Rate Effective December 28, 2016) Currency Unit = Georgian Lari (GEL) 1.00 GEL = US$ 0.38 US$ 1.00 = 2.66 GEL FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank IBRD International Bank for Reconstruction and Development AF Additional Financing JICA Japan International Cooperation Agency CPS Country Partnership Strategy MRDI Ministry of Regional Development and Infrastructure CQS Consultant Qualifications NCB National Competitive Bidding EIRR Economic Internal Rate of Return PDO Project Development Objectives EWHIP-4 Fourth East-West Highway Improvement Project QCBS Quality and Cost-Based Selections FEWHIP First East-West Highway Improvement Project RAP Resettlement Action Plan FM Financial Management RD Roads Department FPU Foreign Project Unit RPF Resettlement Policy Framework GDP Gross Domestic Product SEWHIP Second East-West Highway Improvement Project GEL Georgian Lari SLRP-II Second Secondary and Local Roads Project GTU Georgian Technical University TEWHIP Third East-West Highway Improvement Project HDM-4 Highway Development and Management Model TRRC Transport Reform and Rehabilitation Centre HQ Headquarters WB World Bank Vice President: Laura Tuck Country Director: Mercy Miyang Tembon Senior Global Practice Director: José Luis Irigoyen Practice Manager: Juan Gaviria Project Team Leader: Mustapha Benmaamar ICR Team Leader: Oceane Keou GEORGIA Third East West Highway Improvement Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................ 1 2. Key Factors Affecting Implementation and Outcomes ........................................... 7 3. Assessment of Outcomes ....................................................................................... 14 4. Assessment of Risk to Development Outcome ...................................................... 19 5. Assessment of Bank and Borrower Performance .................................................. 20 6. Lessons Learned..................................................................................................... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 244 Annex 1. Project Costs and Financing .......................................................................... 25 Annex 2. A/Outputs by Component ............................................................................. 27 Annex 2. B/Updated indicators after the first restructuring.......................................... 31 Annex 2. C/Assessment of the Overall Outcome ......................................................... 33 Annex 3. Economic and Financial Analysis ................................................................. 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 37 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 40 Annex 6. List of Supporting Documents ...................................................................... 41 MAP A. Basic Information EAST-WEST Country: Georgia Project Name: HIGHWAY IMPROVEMENT 3 IBRD-77410,IDA- Project ID: P112523 L/C/TF Number(s): 51080 ICR Date: 12/20/2016 ICR Type: Core ICR Lending Instrument: SIL Borrower: GEORGIA Original Total USD 147.00M Disbursed Amount: USD 182.50M Commitment: Revised Amount: USD 190.00M Environmental Category: A Implementing Agencies: Roads Department of the Ministry of Regional Development and Infrastructure (RDMRDI) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 05/06/2009 Effectiveness: 11/03/2009 06/26/2012 Appraisal: 06/23/2009 Restructuring(s): 02/25/2015 Approval: 09/10/2009 Mid-term Review: 03/15/2011 09/19/2011 Closing: 06/30/2013 06/30/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Quality at Entry Project at any time No None (QEA): (Yes/No): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Public administration - Transportation 2 2 Rural and Inter-Urban Roads 98 98 Theme Code (as % of total Bank financing) Administrative and civil service reform 1 1 Infrastructure services for private sector development 33 33 Regional integration 32 32 State-owned enterprise restructuring and privatization 1 1 Trade facilitation and market access 33 33 E. Bank Staff Positions At ICR At Approval Vice President: Cyril E Muller Shigeo Katsu Country Director: Mercy Miyang Tembon Asad Alam Practice Juan Gaviria Henry G. R. Kerali Manager/Manager: Project Team Leader: Mustapha Benmaamar Christopher R. Bennett ICR Team Leader: Oceane Keou ICR Primary Author: Oceane Keou F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) (i) to contribute to the gradual reduction of road transport costs and improve access, ease of transit, and road safety along the central part of the Borrowers East-West corridor; and (ii) strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve traffic safety. Revised Project Development Objectives (as approved by original approving authority) (i) to contribute to the gradual reduction of road transport costs and improve access, ease of transit, and road safety along the central part of the Borrowers East-West corridor; and (ii) strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve road safety. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Transit time from Sveneti to Ruisi (minutes) Indicator 1 : Value 12 9 9 8.10 quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Target exceeded by 10% (incl. % achievement) Vehicle operating cost from Sveneti to Ruisi (cars in US$/km) Indicator 2 : Value 0.20 0.18 0.18 0.17 quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Target exceeded by 5% (incl. % achievement) Vehicle operating cost from Sveneti to Ruisi (trucks in US$/km) Indicator 3 : Value 0.76 0.72 0.72 0.71 quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Target exceeded by 1% (incl. % achievement) Transit time from Sveneti to the Agara Bypass (minutes) Indicator 4 : Value 27 20 21 quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 As low-speed vehicles are using the highway prior to the opening of local Comments parallel roads, the speed limit on that section is reduced to 90km/h from (incl. % achievement) 110 km/h. Target expected to be fully achieved upon completion of the local roads construction by April 2017. Vehicle operating cost from Sveneti to Agara Bypass (cars, USD/km) Indicator 5 : Value 0.20 0.18 0.18 quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Vehicle operating cost from Sveneti to Agara Bypass (trucks, US$/km) Indicator 6 : Value 0.76 0.72 0.72 quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Percentage reduction in road fatality rate per 10,000 vehicles on E60 Indicator 7 : corridor from Senaki to Tbilisi. Value 0 30 30 43 quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Target exceeded by 42% (incl. % achievement) Improvement in road capacity from Ruisi to Agara Bypass in passenger Indicator 8 : car space equivalent Value 2800 8000 8000 quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Roads in good and fair condition as a share of total classified roads Indicator 9 : (percentage) Value 85 85 91.30 quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments The definition and assessment of this indicator can be quite subjective, (incl. % creating significant changes in values reported. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Number of kilometers of road upgraded Sveneti-Ruisi Indicator 1 : Value 0 15 15 15 (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Endorsement by RD of Georgian road safety audit manuals for new and Indicator 2 : existing roads Value No Yes Yes Yes (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Percentage of E60 corridor Senaki to Tbilisi subject to road safety audits Indicator 3 : Value 0 100 100 100 (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) All new IBRD financed road sections subject to formal road safety audit Indicator 4 : using Georgian manuals Value No Yes Yes Yes (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Number of km upgraded Sveneti-Agara Bypass Indicator 5 : Value 0 34 34 (quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments Total of 34km: 15 km upgraded for the section Sveneti-Ruisi and 19km (incl. % upgraded or built for the section Ruisi-Agara bypass. achievement) Percentage of E60 Corridor Senaki to Tbilisi with road safety engineering Indicator 6 : improvements (defined under TEWHIP) completed Value 0 100 100 100 (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Annual road safety actions undertaken as specified by the Georgian Indicator 7 : National Traffic Safety Strategy Value No Yes Yes Yes (quantitative or Qualitative) Date achieved 08/09/2009 06/30/2013 06/30/2016 06/30/2016 Comments (incl. % Fully achieved achievement) Completion of framework for E60 performance based road maintenance Indicator 8 : Value No Yes Yes (quantitative or Qualitative) Date achieved 05/03/2012 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) Purchase/Development of the Road Crash Database Indicator 9 : Value No Yes Yes (quantitative or Qualitative) Date achieved 09/18/2013 06/30/2016 06/30/2016 Comments Fully achieved (incl. % achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 11/21/2009 Moderately Satisfactory Satisfactory 32.00 2 05/26/2010 Moderately Satisfactory Moderately Satisfactory 58.93 3 01/24/2011 Satisfactory Moderately Satisfactory 80.15 4 07/05/2011 Satisfactory Moderately Satisfactory 80.15 5 06/08/2012 Satisfactory Moderately Satisfactory 142.11 6 12/26/2012 Satisfactory Moderately Satisfactory 155.93 7 06/26/2013 Satisfactory Moderately Satisfactory 160.95 8 12/23/2013 Satisfactory Moderately Satisfactory 164.75 Moderately 9 06/28/2014 Satisfactory 167.76 Unsatisfactory 10 12/08/2014 Satisfactory Moderately Satisfactory 171.99 11 06/24/2015 Satisfactory Moderately Satisfactory 176.48 12 01/25/2016 Satisfactory Moderately Satisfactory 182.84 13 06/27/2016 Satisfactory Satisfactory 186.72 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Changes: Revision of the PDOs, indicators, components, additional credit of US$43 million total, extension by 2 years. Reasons: To complete the 06/26/2012 Y S MS 142.11 civil works activities of the parent project and scale up the project scope to include the following road section (Ruisi-Agara bypass road link) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Changes: Extension by 12 months, revision of the target dates. Reasons: To complete 02/25/2015 S MS 176.48 the outstanding civil works and three remaining road safety activities. If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Satisfactory Against Formally Revised PDO/Targets Satisfactory Overall (weighted) rating Satisfactory I. Disbursement Profile 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Georgia had undertaken deep and rapid economic, social, and governance reforms since the Rose Revolution of 2003. Growth was made possible by substantial inflows of foreign direct investments. The August 2008 conflict with Russia and the global financial crisis resulted in shocks to the key pillars of economic development of Georgia, but the Government’s policy response was appropriate to the circumstances. Despite the success in diversifying the economy, Georgia relied heavily on agriculture that was responsible for 53 percent of employment but only 10 percent of GDP. In addition to agriculture, especially grape cultivation and winemaking, tourism was considered to have a significant potential especially for Kakheti region at the time of project preparation. 2. Georgia was ranked as having the poorest infrastructure in the region, based on a 2006 study1. While most international roads were in good or fair condition, most of the secondary roads and local roads were in a deteriorated state and lacked maintenance funding. The Government of Georgia (GOG) implemented significant changes in the transport sector between 2004 and 2008. The objective was to upgrade infrastructure to international standards of serviceability and gradually bridge the rehabilitation backlog of secondary and local roads. At the time of project preparation, the World Bank operations in the transport sector in Georgia had focused primarily on the upgrading of the East-West highway network2. 3. Along with the proposed Development Policy Operation (DPO) series, supporting investments in essential infrastructure and service delivery represented the central component supporting Georgia’s reforms and development under the Country Partnership Strategy (CPS) covering 2009-2013, presented to the Board on the same day as this project. The CPS at the time of project preparation proposed a two-pillar approach to the Bank’s engagement with Georgia: (i) Meeting Post-Conflict and Vulnerability Needs; and (ii) Building Long Term Competitiveness. These overarching objectives in the 2009-2013 CPS reflected the objectives of the Government’s reform program under the economic environment, where upgrading road infrastructure was and still is a priority. This was also consistent with the 2006-2009 Country Partnership Strategy, and with the CPS Progress Report approved in May 2008. 4. One of the key economic and social priorities proposed by the CPS was a countercyclical response to the August 2008 conflict and the global financial crisis. This 1 Ben Shepherd and John S. Wilson, Road Infrastructure in Europe and Central Asia: Does Network Quality Affect Trade? World Bank Policy Research Working Paper 4104, December 2006 2 First East-West Highway Improvement Project (FEWHIP); Second East-West Highway Improvement Project, (SEWHIP); and Third East-West Highway Improvement Project (TEWHIP). 1 response also needed to be accompanied by a shift in the composition of spending towards higher priority infrastructure. 5. The project supported the above priorities in two principle ways: (i) upgrading the transport corridor and increasing connectivity; and (ii) promoting economic stability. By contributing to the improvement of the country’s priority road network, specifically the sections with the highest traffic intensity on the East-West Highway, the project was expected to reduce travel time, vehicle operating costs, and improve traffic safety. This in turn would support the Government priorities of furthering its regional competitiveness and regional trade, developing a transit economy, and encouraging investment in growth sectors. The civil works were also expected to generate short-term employment while laying down the basis for increased permanent job and income growth. 1.2 Original Project Development Objectives (PDO) and Key Indicators 6. The Project Development Objectives (PDO) were: (i) to contribute to the gradual reduction of road transport costs and improve access, ease of transit, and road safety along the central part of the Borrowers East-West corridor; and (ii) to strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve traffic safety. Progress towards the attainment of the PDO was to be assessed through the following indicators: (i) Original Project Outcome Indicators:  Transit time from Sveneti to Ruisi (minutes)  Vehicle operating costs from Sveneti to Ruisi (cars in US$/km)  Vehicle operating costs from Sveneti to Ruisi (trucks in US$/km)  Percentage reduction in road fatalities on E60 East-West Highway from Senaki to Tbilisi (ii) Original Intermediate Outcome Indicators:  Number of kilometers upgraded Sveneti-Ruisi  Endorsement by the Roads Department (RD) of Georgia road safety audit manuals for new and existing roads  All new IBRD financed road sections subject to formal road safety audit using Georgian manuals  Percentage of E60 Corridor Senaki to Tbilisi with road safety engineering improvements completed  Annual detailed implementation plans for priority investments from National Road Safety Action Plan  Completion of framework for E60 performance based road maintenance contracts 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 7. The Level-I Restructuring/Additional Financing of the Third East West Highway Improvement Project was approved by the Bank Board of Directors on June 26, 2012 in 2 order to successfully complete activities planned under the project including the upgrading of the E60 highway section from Sveneti to Ruisi, as well as to provide additional funding to upgrade the E-60 highway section from Ruisi to Agara (including the Agara bypass) and to carry out additional institutional strengthening activities. 8. Only a minor change in the Project Development Objectives was introduced in the text from improving “traffic” safety to improving “road” safety, reflecting the broader impact of project activities. As the road segment added (Ruisi to Agara bypass) was part of the same East-West corridor, a modification of the PDO was not required for adding this road segment. The revised Project Development Objectives (PDO) were: (i) to contribute to the gradual reduction of road transport costs and improve access, ease of transit, and road safety along the central part of the Borrowers East-West corridor; and (ii) to strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve road safety. 9. The Results Framework and associated monitoring indicators were updated as well to reflect the expanded scope of the Additional Financing, considering the new section to be rehabilitated from Ruisi to Agara in addition to the section from Sveneti to Ruisi. Five new PDO indicators and three intermediate indicators were added. One intermediate indicator was revised. The updated indicators are listed in Annex 2. B. 1.4 Main Beneficiaries 10. The primary target group included road users who were expected to benefit from (i) reduced transport costs, (ii) reduced travel time, and (iii) safer travelling on the improved road sections through the provision of road safety measures. The Project was also expected to support the Government’s priority of furthering regional competitiveness and trade, developing a transit economy, and encouraging investment in growth sectors. 11. The secondary target group included government institutions that were expected to benefit from strengthened operational effectiveness of the Roads Department (RD, Implementing Agency) and from the holistic approach to road safety improvements. The Transport Reform and Rehabilitation Center (TRRC), in charge of project financial management, was also expected to benefit from the institutional support. 1.5 Original Components (as approved) 12. The original Project was approved by the Board on September 10, 2009 and became effective on November 3, 2009. The project consisted of three components: (i) civil works, (ii) institutional strengthening, and (iii) project management and implementation. 13. Component A: Sveneti-Ruisi Road Link (15km) – US$180.8 million including contingencies (US$144.3 million Bank Financing). Upgrading the existing E60 East- West Highway from Sveneti to Ruisi to a dual carriageway road including: (i) partial rehabilitation of the existing road; (ii) realignment and construction of new carriageways; (iii) surface drainage, culverts and underpasses; (iv) bridges, including road approaches, 3 particularly a bridge of about 877 meters long over the Liakhvi River and an existing railway line; (v) two tunnels of about 800 meters long; (vi) safety barriers, road signs and marking; (vii) demolition of existing structures and relocation of various utilities; (viii) construction supervision services; and (ix) design services for future investments in the road sector, all through the carrying out of works and the provision of goods and consultants’ services. 14. Component B: Institutional Strengthening – US$2.7 million including contingencies (US$2.2 million Bank Financing). The institutional strengthening component builds upon activities from the earlier projects, with a particular emphasis on road safety and improving the management of the road network. The specific activities to be undertaken are: a) Strengthening the capacity of RD to improve its operational effectiveness through: (i) carrying out a functional analysis for establishing the appropriate organizational structure for RD to meet its current and anticipated future needs; (ii) improving the capacity of RD to plan, design, manage and maintain the road network; and (iii) strengthening RD capacity in environmental monitoring, through provision of goods, consultants’ services and training. b) Developing a framework for the introduction of performance based contracts (PBC) for main roads’ maintenance, through provision of consultants’ services. c) Improving road safety along the entire E60 East-West Highway corridor by preparing and implementing a corridor road safety management plan to cover engineering, enforcement, emergency response and publicity campaigns, through the provision of goods, consultants’ services, and training. d) Strengthening the curriculum and training at the technical university including provision of training for lecturers, twinning with overseas universities, as well as provision of consultants’ services and goods. 15. Component C: Project Implementation – US$0.6 million (US$0.5 million Bank Financing). Institutional support to RD and the Transport Reform and Rehabilitation Center (TRRC) related to Project implementation, audits and Project monitoring and evaluation. 1.6 Revised Components Changes were made to the components to reflect the increased scope of the restructured TEWHIP incorporating the AF. The revised components are as follows: 16. Component A: Sveneti-Ruisi-Agara Road Link (19km) a) Upgrading the existing E60 East-West Highway from Sveneti to Ruisi to a dual carriageway road including: (i) partial rehabilitation of the existing road; (ii) realignment and construction of new carriageways; (iii) construction of surface drainage, culverts and underpasses; (iv) construction of bridges, including approach roads, particularly a bridge of about 877 meters long over the Liakhvi River and an 4 existing railway line; (v) construction of two tunnels of about 800 meters long; (vi) installation of safety barriers, road signs and marking; (vii) demolition of existing structures and relocation of various utilities; (viii) construction supervision services; and (ix) design services for future investments in the road sector, all through the carrying out of works and the provision of goods and consultants’ services. b) Upgrading the existing Ruisi-Agara road section and the construction of the Agara bypass as a dual carriageway road and conducting a technical quality review of such works through the carrying out of works and the provision of goods and consultants’ services. 17. Component B: Institutional Strengthening a) Strengthening the capacity of RD to improve its operational effectiveness through: (i) carrying out a functional analysis for establishing the appropriate organizational structure for RD to meet its current and anticipated future needs; (ii) improving the capacity of RD to plan, design, manage and maintain the road network; and (iii) strengthening RD capacity in environmental monitoring, through provision of goods, consultants’ services and training. b) Developing a framework for the introduction of performance based contracts (PBC) for maintenance of main roads, through provision of consultants’ services. c) Improving road safety along the entire E60 East-West Highway corridor by: (i) preparing and implementing a corridor road safety management plan to cover engineering, enforcement, emergency response and road safety campaigns; and (ii) establishing a road crash database, through the provision of goods, consultants’ services, and training. d) Strengthening the curriculum and training at the technical university, including provision of training for lecturers, twinning with overseas universities, as well as provision of consultants’ services and goods. 18. Component C: Project Management a) Institutional support to RD and TRRC related to Project management, financial audits and Project monitoring and evaluation. 1.7 Other significant changes 19. The Project underwent two restructurings. The first Level-I Restructuring/Additional Financing was approved by the Board of Directors on June 26, 2012 as mentioned above, extending the closing date from June 30, 2013 to June 30, 2015. A Level-II Restructuring was then approved on February 25, 2015 to extend the closing date of the project by 12 months from June 30, 2015 to June 30, 2016. The extension was required to complete civil works on the Ruisi-Agara section of the East West Highway (19 km). The civil works contract was indeed delayed due to contractual disputes (resolved at the time of restructuring) between the contractor and the Roads Department (RD). 5 20. Schedule. The Project’s Closing Dates were extended twice, which brought the total extension period to 36 months and the total implementation period to 6 years and 8 months instead of 3 years and 8 months. 21. Implementation arrangements. The same implementation arrangements used for previous or then on-going projects were suggested for the TEWHIP and TEWHIP AF. These arrangements did not change throughout implementation of the project: RD within the Ministry of Regional Development and Infrastructure (MRDI) was in charge of the overall Project implementation, including procurement and project M&E, and TRRC was providing support to RD in accounting, disbursement, financial reporting, auditing arrangements. This was a cost-effective and logical approach, inasmuch as both RD and TRRC were familiar with WB policies and processes as a result of the implementation of previous WB projects such as the First and Second East West Highway Improvement Projects and Secondary and Local Roads Projects. 22. Funding allocations. The Government’s co-financing for the parent project represented 20 percent of the total project costs. The original Project total cost was US$ 184.12 million equivalent including the Government counterpart funding of US$ 37.12 million equivalent. The Government’s co-financing for the first restructuring/AF represented 20 percent (US$ 10.75 million equivalent) of the total originally approved (US$ 53.75 million equivalent) as well. 23. There was no co-financing from other donors for this Project. However, there is close coordination between the Bank and other donors who finance separate road projects aiming at upgrading the E60 East-West Highway in Georgia. These donors include the European Investment Bank (EIB), the Asian Development Bank (ADB), and the Japan International Cooperation Agency (JICA). Table 1. Summary of Project Restructurings No Type of Approving Date of Major Changes Reasons for Change Restructuring Authority Approval 1 Level-I/AF Board of June 26, Revision of the To complete civil Directors 2012 PDOs, indicators, works activities of the components, parent project and scale additional credit up the project scope to of US$43 million include the following total, extension by road section - Ruisi- 2 years Agara road link (19km) 2 Level-II Country February Extension by 12 To complete the Director 25, 2015 months, revision outstanding civil works of the target dates and three remaining road safety activities 6 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 24. Soundness of the background analysis. The preparation of the Third East-West Highway Improvement Project (TEWHIP and TEWHIP AF) aimed at continuing the Bank’s support of the Government’s priority of improving its major East-West transit corridor: the E60 Highway. The sections upgraded under the Project run over a total of 34 km from Sveneti to Ruisi (TEWHIP) and from Ruisi to Agara bypass (TEWHIP AF). The entire highway corridor spans a distance of around 410 km. Since 2004 the Government has requested the Bank’s assistance as the leading development partner in this effort. The Bank supported the program of upgrading of the E60 started in 2006 with the US$19 million First East-West Highway Improvement Project (FEWHIP) which also introduced a road safety program. In 2007 the Bank financed the US$35 million Second East-West Highway Improvement Project (SEWHIP), and the SEWHIP Additional Financing of US$20 million in 2008. These two projects financed the two most congested road sections (37 km total) and upgraded the E60 East-West Highway from two lanes to four lanes. The SEWHIP also further strengthened the road safety activities with the adoption of a first National Road Safety Strategy. 25. Assessment of Project Design. The Project design was straightforward in terms of components, geographic dispersion, involved organizations, and safeguard policies. There was an adequate number of components (three), which were not burdened by complex contents. The PDO might be considered to be complex because it is comprised of two sub- objectives with several elements for each sub-objective. The PDO was however consistent with the PDOs for the entire series of previous East- West Highway Improvement Projects. Such consistency was a higher priority for the GOG and the Bank team than the level of complexity of the PDO definition. The results framework reflects properly the objectives and content of the Project components (Section 2.3). 26. Geographically, the Project was not spread across the country, as it was on the same highway corridor considered under the then on-going FEWHIP and SEWHIP projects. The Project supported a couple of innovative technologies for slope stabilizing and greening, which enabled the exposure of RD to new environmental management practices in road projects, and built the necessary capacity in the country during implementation. The extent of the applicable Bank safeguard policies was similar to the ones contained in the FEWHIP. During project preparation, the capacity of the Implementing Agency was considered adequate with staff having relevant experience. 27. The Project preparation and Project design were built on the lessons drawn from the previous/then on-going road projects — the FEWHIP and the SEWHIP— in Georgia. The main lessons that were identified and highlighted in the PAD were: a) Financing of Project Preparation. To ensure rapid implementation of investment projects, the previous projects included funding for the preparation of feasibility studies and detailed designs. This approach has been followed in the TEWHIP, which allowed 7 the preparation of the feasibility studies and detailed design of the Ruisi-Rikoti and other road sections for future investments. In terms of project readiness, the engineering design documents for the first year’s activities were complete and ready prior to Board presentation. The procurement documents for the first year’s activities were also complete and ready for the start of Project implementation. In addition, the Project Implementation Plan was finalized prior to negotiations. b) Technical Supervision. With the Government significantly scaling up their road investment program, RD was challenged to effectively manage the projects. Drawing from Bank experience in other countries, the need to hire a Technical Auditing team was emphasized. This Technical Auditing team would include one international specialist supported by at least two Georgian engineers, to bring the requisite technical skills to enable RD to properly manage the project. c) Review of Detailed Designs. As deficiencies in the detailed design often delay implementation not only in Georgia, but also in the region, a key activity of the supervision consultant, with inputs from the Technical Auditing team, would be an early review of the designs to identify any major deficiencies. d) Design of Road Safety Activity. Road safety was identified as a growing problem in Georgia, and the Bank has a role in building awareness and capacity in road safety. The Bank team also learned from the past that the reform efforts are measured and incremental. As the next step in improving road safety, the Project would finance preparation and implementation of a road safety management plan for the E60 corridor. This would be an opportunity for the application of a multi-sectoral approach to road safety along the E60 corridor from Senaki to Tbilisi. The Project would also assist the Government in implementing the key elements of their national road safety strategy as then approved by the Cabinet of Ministers. An Action Plan being under preparation and the Project would contribute to ensure adequate implementation. e) Social safeguards. During project preparation (PAD), social safeguards challenges were taken into consideration - particularly the issues of proper and timely compensation of affected people, raised during the FEWHIP and SEWHIP implementation. The PAD of the parent project thus stated that the owners and users of the land where said works are to be implemented should be fully compensated in accordance with the provisions of the RAP. f) Roles and Responsibilities of RD and TRRC. TRRC supported RD for financial management, procurement and reporting, with RD having final responsibility for all activities. To improve implementation and reporting, it was decided to clearly delineate the responsibilities between the two agencies. TRRC would remain responsible for FM functions, while all other functions would be the responsibility of RD. Existing TRRC procurement and technical assistance staff shall transfer to a new Foreign Projects Unit (FPU) in RD. 28. Adequacy of the Government’s commitment, stakeholders’ involvement and participatory processes. The Government’s strong commitment to the Project was 8 demonstrated in highlighting the completion of the corridor as a priority. In addition, the Government contributed a 20 percent share of co-financing of the project. The Government also prepared the detailed design and launched the tender for original works components of the road prior to project appraisal. There was active participation of RD in designing the road safety activities to be supported under the Project. Besides, during project preparation, key stakeholders including the general public were consulted through participatory discussions. In order to minimize the risk of tension among communities directly or indirectly impacted by the project, the preparation indeed involved some formal consultations and social preparatory work – which were carried out during implementation as well. 29. Assessment of risks. All risks were properly identified and mitigation measures were adequately developed during project preparation. The overall risk rating of this Project was assessed as Significant before mitigation in light of the sector-specific issues, technical complexity of the project, weak technical oversight/implementation capacity, increasing driving speeds with considerable impacts on traffic safety, and risks related to safeguards as this was a Category A project. However, with the development and consideration of the mitigation measures (safeguards framework, involvement of international technical experts or consultants for technical audits and civil works supervision, provision of adequate support to improve or implement key activities from the first National Road Safety Strategy), the overall risk of project implementation for the parent project TEWHIP was rated as moderate. 30. The additional financing was considered straightforward, scaling up activities of the parent project. Considering the proposed mitigation measures, most risks were deemed low or moderate and the overall risk of the TEWHIP AF was rated as moderate. 31. One of the main issues faced during the implementation of the TEWHIP AF was the need to re-design a subsection of the highway between Ruisi and the Agara bypass around a lake area. This implied some implementation delays and raised environmental/resettlement issues. Based on the elements in possession of the team during preparation of the additional financing, the Project road design related to the section of the TEWHIP AF was described as straightforward or not complicated, as the AF didn’t comprise the construction of large structures. The technical difficulty related to the design around the lake area (requiring a proper evaluation of water depth) had not been identified as a significant risk. A different risk assessment may have helped in re-emphasizing the need to hire the right technical expert and consolidate the initial design. 2.2 Implementation 32. Implementation was rated Moderately Satisfactory in the Bank’s Implementation Status and Results (ISR) reports throughout almost the entire project life. However the last ISR rated it as Satisfactory considering the final progress and achievements. Below are the main factors affecting project implementation of (i) the parent project TEWHIP and (ii) the additional financing TEWHIP AF. 9 33. Initial financing (Sveneti – Ruisi). The implementation of three civil works contracts (3 lots) progressed at a slower pace than initially planned. Contract management showed difficulties and major delays were experienced, due to initially poor quality construction, supervision issues (late mobilization of the Supervision Consultant) and initial poor compliance with environmental guidelines/EMP requirements. Later during project implementation civil works gradually progressed for lots 1 and 2, but outstanding works were to be done under lot 3. Besides, compliance with the EMP improved and was eventually satisfactory. The project was rated Moderately Satisfactory (MS) for the IP throughout implementation. The contract extension allowed for the completion of civil works, consideration of defects and strengthening of RD’s staff to better manage the project, justifying upgrading the IP rating to Satisfactory in the end. 34. Additional financing (Ruisi – Agara bypass). At project inception the performance was rated Satisfactory with both contracts for construction and supervision signed on time in August 2012. The quality of civil works was good, but the IP rating was then downgraded to MS (and once to MU, i.e. Moderately Unsatisfactory) throughout implementation. This was due to a very slow implementation of civil works as the contractors unilaterally decided to stop the works for several weeks halfway through implementation, as they were facing financial management and project management performance issues. The bid price of the civil works contract was 15% below the engineering estimate. The contractor had put unrealistic claims to cut down losses. Moreover a large sub-section of the 19km section had to be redesigned delaying the commencement of the works for that section. These issues required to extend the civil works contract as well as the project closing date by one year to satisfactorily achieve the PDO. This extension was granted with the approval of the second restructuring and allowed satisfactory completion of all project components. The overall technical quality of civil works completed under the project was good. Hence the IP rating was rated Satisfactory in the last ISR. 35. Institutional strengthening components. The Project comprised numerous institutional strengthening activities as described in Component B. The status of achievement of these activities is discussed in section 3.2. and Annex 2.A. Overall the large number of capacity building activities, related to road safety and to RD’s organizational/training needs, included in the Project made the implementation challenging. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 36. The parent project had well defined PDO indicators (four) which encompassed most of the project activities. The first three PDO indicators capturing the first part of the PDO and the fourth PDO indicator capturing both parts of the PDO. One might argue that another PDO level indicator should have been added to actually capture the desired outcome linked to the first element of the second part of the PDO. The first element of the second part of the PDO being specifically related to supporting capacity strengthening of relevant government entities in planning and managing the road network. 10 37. During the first restructuring, the Results Framework underwent some changes, required in order to take into account the upgrading of the Ruisi-Agara road section and the construction of the Agara Bypass. All changes made were relevant and were required to include the additional institutional strengthening activities, and reflect the decision made to further implement the road safety activities. The second restructuring and project closing date extension did not imply any changes to the indicators, as only the target dates were revised. The updated indicators are listed in Annex 2.B. 38. On the Implementing Agency side, the FPU within RD was responsible for the collection of project’s performance indicator data and analysis of the results. A specific Monitoring Unit was established as part of the FPU. Progress towards the achievement of the final targets was monitored through regular project progress reports by RD and Bank’s ISRs. Most indicators were regularly updated without major issues. The main issue impeding project implementation and monitoring was related to delays in reporting resettlement activities and in updating the Resettlement Action Plan. The consultant hired under the Bank-financed projects in charge of reporting resettlement activities was overloaded as she was covering different donor-funded projects beyond Bank. This justified a consistent Moderately Satisfactory rating for the project’s M&E. 39. The FPU and its Monitoring Unit also suffered from staff departures in 2015. Actions were taken in early 2016, as the capacity of RD's FPU units, including the Monitoring Unit, were strengthened by filling vacant positions which in turn improved the data collection and reporting process. Hence, the project's Monitoring and Evaluation was rated Satisfactory in the last ISR. Adequate staff capacity should nevertheless be maintained in the long-term. 2.4 Safeguard and Fiduciary Compliance 40. The Environmental Assessment (OP/BP 4.01), Involuntary Resettlement (OP/BP 4.12), and Physical Cultural Resources (OP/BP 4.11) policies were triggered under the TEWHIP, which was assessed as Environmental Category A. There was no change to the environmental category under the AF - and no new safeguard policies were triggered. 41. Environmental Safeguards. The project was classified as environmental Category A, as it financed the widening of the existing carriageway from a two-lane into four-lane motor road and the construction of a four-lane section in a new alignment, reconstruction and construction of bridges and construction of a new double-tube tunnel all having significant, complex and irreversible environmental impacts. Full scale Environmental and Social Impact Assessments (ESIAs) were carried out for works proposed both under the original project and for the AF project as well. The ESIA report for works between Sveneti and Ruisi financed from the original project was disclosed in July 2009; and the ESIA report for works between Ruisi and Gomi covered with the AF was disclosed in-country on and in Infoshop in February 2012. In 2010, a supplemental ESIA was carried out to cover additional works required for the construction of a two-lane bypass road and a bridge over Liakhvi River that would be used as a detour during construction of the highway section and as a local road after completion of works. Improvement of highway sections under TEWHIP and TEWHIP AF were also covered by the Regional Environmental 11 Assessment and the Environmental Management Framework developed in 2009 for a larger section of East West Highway between Sveneti and Rikoti Tunnel. 42. The Project had once a Moderately Unsatisfactory rating in 2009, and then had Moderately Satisfactory to Satisfactory ratings on environmental performance throughout its life. The main environmental issues under TEWHIP were related to works in the waterway. Construction of bridges over Liakhvi River implied diversion of stream and installation of bridge piles in the river bed. Mitigation measures were not applied to the full extent during construction, and cleaning of the river bed from piles of excess material and construction waste was delayed for months. Weak national regulations for material borrowing caused problems during works on Ruisi-Agara section of the highway. Licenses for extraction were issued by the national authority without preliminary environmental assessment and environmental requirements for license holders lacked specificity. Hence some sites allocated for borrowing under AF to TEWHIP had a very high water table and were prone to water logging. Chance finds were encountered at one of the allocated borrowing sites. The find of a major graveyard at the beginning of the additional financing was treated thoroughly. Finally, reinstatement of a few borrowing sites did not include sufficient compacting of slopes and provision of effective drainage. Weakness of the country systems was partially offset by mandatory application of safeguard documents prepared in accordance with the Bank policies. 43. Social Safeguards. The TEWHIP Resettlement Policy Framework (RPF) was prepared in 2009 providing fundamental principles and standards for the Project TEWHIP. For the purpose of TEWHIP AF, the RPF document was updated and disclosed on February 7, 2012. A Resettlement Action Plan (RAP) for the Ruisi-Agara bypass road section was prepared in December 2011, in accordance with relevant Georgian laws and regulations, and with the World Bank Operational Policy 4.12 on Involuntary Resettlement. The finalized RAP, after public consultation, was disclosed in country on February 9, 2012 and submitted for publication through the InfoShop on February 21, 2012. 44. As some additional land acquisition was required for civil works that were not envisaged in the RAP developed/disclosed in 2012 for the Ruisi-Agara bypass road section, the RAP needed to be updated. The additional civil works include landslide rehabilitation (seven private land parcels affected), river protection works (mainly state owned land within the public water good) and construction of two parallel roads - a paved 3.5 km long road on the right side of highway and a gravel 9 km long road on the left side of highway. As this decision was made late in the project life (December 2015) the loan proceeds of the Fourth East-West Highway Project are used for financing civil works on the two parallel rural access roads which will enable the residents of the Ruisi area an easy access to their agricultural land. 45. The updated RAP was disclosed on December 4, 2016 on RD’s website reflecting the latest changes in the affected land area and associated changes in number of project- affected people, costs, budget and revised timeline. In terms of impact, the latest updated figures show that 2393 people (617 households) have been affected and in total, 736 land plots (land area of 1.318.448m²) have been acquired. Though the Project was closed on 12 June 30, 2016, resettlement activities are still not completed. The RAP implementation has been going beyond the project closing date (a paved road has been completed in November 2016 and a gravel one is expected to be completed in April 2017). 46. Compliance with the Bank’s OP/BP 4.12 on Involuntary Resettlement was mainly rated as satisfactory. Based on the findings of the field verification visits, progress reports and issuance of compliance reports (all six sub-sections of the Ruisi-Agara-Agara bypass road section of E60 Highway were adequately prepared and approved by the Bank), resettlement activities were carried out in line with the provisions of the approved RPF/RAP documents. However, due to major delays in updating the RAP of February 2012, lack of reporting and inconsistencies in reported data, as well as the lack of adequate staffing capacity to manage social safeguards, the compliance was downgraded to Moderately Satisfactory towards the end of the Project. 47. Procurement. The overall procurement risk was moderate to substantial throughout the life of the project. Most contracts were subject to the Bank’s prior review. Procurement of civil works was carried out without major issues, however in 2015, RD suffered from staff departures, impacting directly the procurement team, slowing down procurement of major activities of the TEWHIP AF before its original closing date. Indeed, while the project supported the improvement of procurement arrangements and training activities for RD’s procurement staff, RD has not been able to attract/maintain qualified staff essential to improve and streamline procurement and contract management process. The Implementing Agency Risk Rating was increased to “Substantial” around that period. In addition, the position of Chairman of Roads Department had been vacant for more than 9 months, which had also led to delays in procurement and overall decision making process. The overall procurement performance is thus rated Moderately Satisfactory. 48. Procurement was carried out in accordance with the World Bank’s “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants” published in January 2011, revised in July 2014; the “Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA Credits & Grants by World Bank Borrowers” published in January 2011, revised in July 2014; and also in accordance with provisions stipulated in the Loan Agreement. 49. Procurement of works was carried out through ICB for most civil works contracts and through NCB for smaller civil works contracts. Various methods were used for procurement of consultant services (QCBS, SS, CQS, etc.) depending on the scope of services. As of the closing date of the project, there were no unresolved procurement issues falling under the direct responsibility of RD. 50. Financial management. Overall, during implementation of the TEWHIP and TEWHIP AF, the internal control procedures applied by TRRC were acceptable to the Bank. The FM systems were adequate for implementation of the projects and for providing timely reporting, considering that TRRC was adequately staffed following the requirement of one covenant to hire additional financial auditors by July 2012. RD was in compliance with the audit covenant: the audit reports on the projects have been received by their due 13 dates and acceptable to the Bank. The FM rating for the projects was consistently satisfactory. 51. Disbursements. The final project amount (after restructurings) is US$187.8 million equivalent as of December 5, 2016 (including IBRD loan of US$ 147 million equivalent and IDA credit of XDR 27.7 million, i.e. US$ 40.8 million equivalent as of December 5, 2016). The IBRD loan was fully disbursed. At project close, the total disbursed amount of the IDA credit was XDR 23.8 million, i.e. US$ 35.5 million equivalent as of December 5, 2016. 97% of the total project costs were thus disbursed. XDR 3.8 million, i.e. US$ 5.3 million equivalent or 3% of the total project costs, will have to be cancelled as these funds were not committed. 2.5 Post-completion Operation/Next Phase 52. All project activities planned and financed by the TEWHIP and TEWHIP AF were completed before the project closing date. The ICR team notes that efforts are made to ensure that the results achieved through this project will be sustained through the next/now ongoing highway and secondary road projects carried out in Georgia under Bank financing. 53. The Bank team shall continue monitoring the implementation of the civil works related to the parallel road, which is financed by EWHIP-4 to ensure completion and opening of the gravel road in due time by April 2017. The speed limit on the Ruisi-Agara section will then be raised to 110 km/h as initially planned. 54. The Bank team will also continue monitoring some of the actions under Component B specifically related to road safety. For instance, the Bank advised RD to pursue the road safety campaign financed under the TEWHIP AF beyond the project in order to increase the long-term positive impact of the campaign on the East-West Highway Corridor. This will be done by continuing to distribute the prepared materials, brochures/leaflets with educational information and videos, in public places such as rest stops and gas stations. More details about the achievement of the Project’s objectives and activities including road safety activities are in Section 3.2. 55. Given the changed timeline for the completion of land acquisition activities by end December 2016, the preparatory work on the RAP post-implementation evaluation can only be initiated in January 2017. The evaluation report will follow the provisions of the Resettlement Policy Framework (RPF) and its monitoring indicators. A draft evaluation report shall be prepared by mid-February 2017. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 56. The relevance of the objectives is rated High. At the project closing date, the Project remained highly relevant to the country’s current development priorities and 14 Bank’s engagement. The Bank has been involved in the Georgian road sector since the early 1990s. In 2004, the Bank started to support the upgrade of the East-West Highway, as improving road infrastructure has since been the Government’s priority. The current 2014-2017 Country Partnership Strategy (CPS) identifies two strategic pillars: (i) strengthening public service delivery to promote inclusive growth; and (ii) enabling private sector led job creation through improved competitiveness. This Project approved in 2009 is still fully in line with the strategic directions, as it contributes to both strategic pillars by providing infrastructure to facilitate transit and growth, and strengthening the capacity and accountability of RD in road infrastructure management. 57. The relevance of the design is rated Substantial because the project components were found to be consistent with the PDOs. All activities contributed to the achievement objectives of the two sub-objectives. The additional financing allowed the design to remain relevant to the PDOs as of the project closing date. Component A supporting the upgrading of the Sveneti-Ruisi highway section and Ruisi-Agara bypass highway section contributed to the first sub-objective of the PDOs. Component B financing the implementation of institutional strengthening activities contributed to the second sub-objective of the PDOs. Component C contributed to both sub-objectives. This is not rated High, as the project could have considered ensuring local connectivity by including in the components the design and construction of local roads in the vicinity of the highway infrastructure. 3.2 Achievement of Project Development Objectives 58. The achievement of the Project Development Objectives (against both the original PDOs and revised PDOs) is rated as Substantial. The rating was determined based on the ratings given to each sub-objective (below) considering the components and indicators defined after the first restructuring to cover both TEWHP and TEWHIP AF. It is important to stress that the original and revised PDOs used for the AF were very similar, almost identical. 59. The objectives of the Project, that closed on June 30, 2016, were to (i) contribute to the gradual reduction of road transport costs and improve access, ease of transit, and road safety along the central part of the Borrowers East-West corridor; and (ii) strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network and to improve road safety. The Project Development Objectives were reached, considering that all project indicators were substantially achieved. 60. The achievement of the first part of the first sub-objective – to contribute to the gradual reduction of road transport costs and improve access along the central part of the Borrowers East-West corridor – is rated as Substantial. This was mainly covered by the first component. Key project results include a significant reduction of more than 20% (up to 33%) in travel time from Sveneti to Agara bypass through Ruisi and reduction of vehicle operating costs. The main civil works for the sections Sveneti-Ruisi (15km) and Ruisi- Agara bypass (19km) were completed in November 2012 and December 2015 respectively in compliance with construction standards. All targets but one related to transit time and vehicle operating costs are achieved. The target related to the decrease in transit time from Sveneti to the Agara bypass is partially achieved: considering that local traffic and low- 15 speed vehicles are using the highway prior to the opening of all local parallel roads (opening expected by April 2017), the speed limit on the Ruisi-Agara section is reduced to 90km/h instead of 110 km/h, which explains why the target related to this travel time indicator will not be fully reached until completion of the local roads. 61. The achievement of the second part of the first sub-objective – to improve ease of transit along the central part of the Borrowers East-West corridor – is rated as High. This PDO element was captured by the following indicator “Improvement in road capacity from Ruisi to Agara bypass in passenger car space equivalent” – indicator introduced during the first restructuring. The related target (8000 PCSE) was achieved. 62. The achievement of the third part of the first sub-objective – to improve road safety along the central part of the Borrowers East-West corridor – is rated as Substantial. Indeed, the implementation of road safety improvement works along the completed sections of the highway contributed to a reduction in road crashes, as the road fatality rate per 10,000 vehicles on E60 corridor from Senaki to Tbilisi was reduced by 43%, exceeding the final target of 30%. This is not rated as High, considering the fact that local traffic and low-speed vehicles have to use the highway for a short period of time prior to the opening of all local parallel roads. It is important to stress that this traffic safety issue is being addressed with the reduction of the speed limit to 90km/h instead of 110 km/h. This issue will be resolved by April 2017 upon completion of the local roads civil works. 63. The achievement of the first part of the second sub-objective – to strengthen the capacity of the Roads Department and relevant government entities to plan and manage the road network – is rated as Substantial. Most of the institutional activities planned to support relevant government entities were successfully implemented. As captured by the relevant indicator, RD developed a new framework for the Design and Implementation of Concessions (Contracts) for the E60 Performance-Based Road Maintenance, learning along the way new methodologies to better manage and maintain the road network. The consultant hired to develop this framework assessed the capacity of the contracting industry, RD’s organization, staffing and skills, developed contract formats, quality assurance and partnering arrangements. This framework is to be used on the entire road network (international and secondary roads) where appropriate. The proposed approach is being piloted under a subsequent Georgia road project focusing on the secondary road network rehabilitation. The choice was made to pilot this new PBC framework on the secondary network first (under SLRP-II) and not on the primary network, as the project scale seemed more appropriate to test the implementation of such a new practice. 64. In addition, during project implementation, RD’s staff from various functional units attended trainings and seminars on topics such as procurement of goods and works, financial management, contract management and disbursement monitoring. Senior environmental specialists also attended overseas trainings on World Bank safeguard policies. Lastly, equipment including computers and printers were purchased for RD. This part is thus rated Substantial and not High, considering that one of the planned activities (not linked to an indicator), i.e. carrying out a functional analysis to establish the appropriate organizational structure for RD, was not implemented. Indeed it turned out that 16 a larger institutional reform at the ministry level was expected to be carried out by the government itself. 65. In terms of indicators, the actual percentage of roads in good and fair condition (indicator added to capture this part of the PDO) considerably varied throughout project implementation. The definition and assessment of this indicator can be quite subjective and it was difficult for the Implementing Agency to evaluate it (considering the important number of then ongoing road projects and maintenance works). A robust methodology is required and should be developed to ensure a regular and thorough tracking of road sections condition status based on a poor/fair/good scale, if it is the scale chosen. 66. The achievement of the second part of the second sub-objective – to strengthen the capacity of the Roads Department and relevant government entities to improve road safety – is rated as Substantial. Major strides were made through the Project with regards to the road safety agenda: (i) road safety audits are now institutionalized, (ii) in collaboration with the Ministry of Internal Affairs (MIA), improvements to the road crash database used by the Police and RD were made in terms of system and access; (iii) a study tour to Finland to share experience about road crash statistics analysis and road safety best practices, involving RD, the MIA and Ministry of Economy, was successfully completed in May 2016; (iv) a road safety awareness campaign along the highway was successfully completed in June 2016. RD disseminated the relevant materials from the campaign (brochures, videos) on their website. RD also plans to continue distributing the remaining brochures/booklets to targeted audiences (at bus stops, gas stations, etc.). As regards road safety interventions planned for the Rikoti tunnel, it was agreed in the end that static cameras (x2) and radars (x2) would not be purchased under the TEWHIP-AF. These static cameras were indeed installed in the tunnel with the support of the Police (MIA). In addition, the MIA plans to gradually install cameras and radars on selected sections of the entire Georgia road network in 2017, including some sections of the East-West highway. 67. This item could have been rated High, but a few activities (not linked to indicators) included in Component B were not fully implemented: (i) a corridor road safety management plan was not prepared, but priority road safety actions were implemented as described above based on an agreement with the government on the priorities; (ii) the strengthening of the curriculum and training at the Georgian Technical University (GTU) was not achieved due to a lack of timely collaboration. Through the project, RD supported the refurbishment of GTU study rooms and equipped classrooms with appropriate furniture and computer equipment, following an agreement reached with GTU in 2012. 68. All indicators related to road safety were achieved. The indicator “purchase/development of the road crash database” was also achieved, as a new database was developed for the entire country. Strong collaboration processes had to be put in place between RD and MIA during project implementation to define the database, obtain the authorization for RD to access the database (RD has now 24/7 access) and ensure transparent communication between the Police and RD. The new database is well appreciated by the Police and RD, as the new database has more details required to determine the cause of a crash and develop adequate mitigation measures. But this new 17 database continues to be piloted only for 3 regions plus the capital Tbilisi, due to the lack of equipment for all police officers to collect the data for the new database. In parallel, the Police thus continues to use the old database using a paper-based data collection. 3.3 Efficiency 69. Efficiency in achieving the current/slightly revised PDOs in terms of EIRR is rated Substantial. The ex-post economic analysis (see Annex 3) shows that the actual EIRR of the overall project is higher than the EIRR at appraisal stage. The ex-post economic analysis of both projects was done using the HDM-4 model adopting the same methodologies employed at appraisal and the same key assumptions regarding the without project alternative, maintenance policies with and without the project, and road user costs. 70. The table below presents the ex-post economic evaluation results for both projects. The ex-post economic evaluation for upgrading the Sveneti to Ruisi section yielded and EIRR of 20.9 percent. The ex-post economic evaluation of the upgrading of the Ruisi to Agara Bypass section yielded and EIRR of 24.4 percent. The ex-post EIRRs are higher than the appraisal estimates, on average 24 percent higher, due to the lower actual construction costs and higher actual traffic growth rates observed on the project roads. Overall, both projects yield an ex-post EIRR of 21.7 percent, which is an indication that the program has a robust economic justification despite delays in the implementation of civil works. Table 2. Ex-Post Economic Analysis Results Ex- Ex- Ante Post Ex-Post EIRR EIRR per Project Section (%) (%) Ex-Ante TEWHIP Sveneti-Ruisi Section 16.3 20.9 1.28 TEWHIP-AF Ruisi-Agara Bypass Section 21.6 24.4 1.13 Total 17.5 21.7 1.24 3.4 Justification of Overall Outcome Rating Rating: Satisfactory 71. When considering the project current relevance, achievement of PDOs, and efficiency as described above, the achievement of the overall outcome can be rated Satisfactory. The summary of the ratings of each aspect is presented in Annex 2.C. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Institutional Change/Strengthening 72. At the beginning of the project in 2009/10, RD’s capacity was put to test, as RD initially faced severe difficulties during the procurement process and supervision/monitoring of the civil works contracts (3 lots between Sveneti and Ruisi) 18 financed under the parent project. The Project overall supported capacity building activities to strengthen RD’s capacity by financing several training activities in procurement, FIDIC rules, project management and road safety. Additionally, the Project supported the hiring of consultants with specific skills (contract manager, social/environmental consultants, financial specialist, and IT/data management expert). 73. Three of the key institutional development achievements of the Project are the development of a new framework for E60 performance based road maintenance, the establishment of systematic road safety audits along the road network, and significantly improved collaboration/communication between the different stakeholders in charge of ensuring road safety (Ministry of Internal Affairs/Police, RD and emergency services). The Third East West Highway Improvement Project has contributed significantly in building the capacity of RD through gaining experience in implementing the project activities (civil works contracts and institutional components), continuous policy dialogue and targeted trainings. (b) Other Unintended Outcomes and Impacts (positive or negative) 74. Local economy and safety of farm produce sellers. Before the launch of the construction works to upgrade the highway sections covered under the project, local farm produce sellers would settle down along the roadbed. This posed severe safety issues during the construction phase. A social response had to be found to allow these sellers to continue selling their products after completion of the construction works, thus maintaining the local economy. Thanks to the consultation process put in place during the project, RD succeeded in securing the support of Gori municipal government to construct proper and safe markets at the Gori intersection of the East-West Highway. This was initiated in response to the Bank’s request to provide safety for both transit traffic and farm produce sellers who used to settle down along the construction sites of the TEWHIP AF. At the time of this ICR, construction of two markets on both sides of the Gori intersection was completed. 4. Assessment of Risk to Development Outcome Rating: Moderate 75. The risk that the achieved development outcomes will not be sustained is moderate. The Third East West Highway Improvement Project has contributed to meeting the main objective to support RD shift its focus from development to management and maintenance of the road network as a strategy for sustainability. The development of an adequate framework to institutionalize performance based contracts for road maintenance in Georgia is the right step in that direction. This framework is now being consolidated as the first OPRC is being piloted in Kakheti under the Second Secondary Roads Project. In addition, ongoing highway projects support the development of relevant strategies to further enhance operations and management practices (road sector financing strategy, Communication and ITS strategy), of relevant road safety actions (update of the National Road Safety Strategy), and strengthening RD capacity through targeted training. Considering the achievements 19 made through the course of this particular project, the development objectives are highly likely to be sustained. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 76. The Bank performance in ensuring the quality at entry is rated moderately satisfactory (MS). On the one hand, the Bank Team prepared an important project with adequate components to support the GOG’s priorities and met all Bank requirements. The project was designed with appropriate physical investments and technical assistance activities. The project interventions were essential to upgrade the existing infrastructure up to current international standards and to support the improvement of the client’s practices to manage and maintain the road network. The objectives of the Project remain relevant today. 77. The PAD was especially articulate regarding the background analysis and rationale behind the project. Project design of the parent project properly underlined the lessons to be learned from the FEWHIP and SEWHIP. During project preparation the team also successfully handled procurement with a growing transport portfolio and larger contracts. Project preparation was carried out with adequate technical and financial resources, being fully consistent with the World Bank’s fiduciary and safeguards requirements. Extensive consultations were conducted with relevant partners (within and outside the Government) to present the proposed project and to make sure it was aligned with other ongoing initiatives at that time. 78. However the rating considers: (i) the ambitious design related to Component B, which included numerous road safety activities, as the team did not necessarily include at design stage relevant tools or mechanisms to ensure the commitment of multiple stakeholders expected to be involved in the implementation phase (Police, MIA, other ministries, emergency services, Georgian Technical University, etc.), (ii) the lack of additional indicators capturing the first element of the second part of the PDOs in the parent project, (iii) the risk related to the infrastructure design (for TEWHIP AF) and level of readiness (with engineering designs not systematically complete at the end of the project preparation phase), and (iv) the absence of sub-component to finance the design and construction of parallel access roads for local residents in the vicinity of the Ruisi-Agara highway section during the preparation of the additional financing, to ensure local connectivity before the completion of the highway construction works. (b) Quality of Supervision (including of fiduciary and safeguards policies) 20 Rating: Satisfactory 79. The project was closely supervised by the World Bank team and sufficient budget and staff resources were allocated. Regular supervision missions and technical visits, including site visits, were conducted throughout the project implementation. Team composition reflected the project supervision needs, including transport experts, engineers, financial, and procurement and safeguards specialists, both from Washington, D.C. and from the field. Mission aide memoires and implementation status and results reports (ISRs) were well-written, reflecting progress, delays, and challenges and including honest ratings on the project implementation objectives and implementation progress. Also Bank supervision was proactive as illustrated by the decision to positively respond to the need for the additional financing and to restructure the Project two times, ensuring the achievement of all development objectives. 80. The team supervised and supported the completion of high-profile civil works contracts with high pressure from the government. This Project was indeed a major scale- up to the previous ones, which had followed a pattern of 30-50 million USD in 2007/2008 while this Project was closer to 200 million due to the larger size of the civil works. Besides this Project comprised major structures work with two 800 m tunnels and several bridges, sometimes using new technologies (such as a 1100 m pushed bridge, which was the first in the region of this type), required constant attention from the supervision team. Other critical implementation issues that the missions had to address through close supervision included the need to re-design a sub-section of the highway, the important delays in the implementation of civil works, management of environmental compliance, management of social safeguards compliance. Delays in RAP implementation were experienced during the project. RD’s lack of capacity to adequately cover social safeguards activities including reporting and revisions of social safeguards documents (RAPs) proved to be an impediment to carry out fully the project implementation support activities. 81. Apart from the regular supervision activities, it is worth mentioning the special efforts that the World Bank team put in to work hand in hand with the Government and Implementing Agency to resolve the contractual issue when the contractor had discontinued implementation for six months due to unmet requests for unjustified claims. The Bank provided support to the Implementing Agency by facilitating training of the project manager in FIDIC. The Bank also facilitated the mobilization of relevant internal or external expertise when necessary. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 5.1.5 The overall MS rating was based on the Bank’s MS performance in ensuring quality at entry, and on its S performance during Project implementation. 5.2 Borrower Performance (a) Government Performance 21 Rating: Moderately Satisfactory 82. The moderately satisfactory (MS) rating is given to the Borrower for the overall Project period performance. Indeed, the Government proved commitment to the project objectives since its preparation, as outlined in project documents. Nevertheless, it should be noted that more active involvement of the Government during project implementation, namely through (i) an early re-appointment of the RD Chairman (vacant position for about 9 months), (ii) an early replacement of the vacant procurement specialist position, and (iii) scaling up RD’s social safeguards capacity, could have mitigated the delays in implementation of some activities. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 83. RD faced some issues during the implementation of the Project, but was able to resolve them to support project implementation and achieve the PDOs to a substantial degree. RD technical and project management capacity has tremendously improved throughout the course of the Project. RD proved their ability to handle important workloads and achieve expected outcomes despite a lack of staff or capacity at times in some important areas, such as procurement or safeguards as mentioned in the relevant sections above. The lack of capacity sometimes weakened project implementation, as for example: (i) RD did not undertake effective monitoring or did not apply effective sanctions towards the Contractor during the period when the Ruisi-Agara road construction was stopped; and (ii) RD allowed partial to poor compliance with the Project’s covenant related to implementation of the EMP and the RAP during the course of Project implementation, as reported in the ISRs – which was eventually addressed. The moderately satisfactory (MS) rating is thus given to the Implementing Agency. 84. As regards the safeguards and fiduciary issues, considering the potential risks involved with mismanagement, RD should be careful to attract and retain qualified staff. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 85. The overall MS rating is assigned due to the MS performance of the Borrower as described above. 6. Lessons Learned 86. Importance of the engineering designs review. Considering the importance of preparing good engineering designs (major implication on works implementation and project costs), there is a need to ensure that qualified engineers (international or local) are hired by the Implementing Agency during the preparation of road designs. These engineers 22 should supervise the preparation and/or review the draft designs. This lesson is already taken into consideration during the preparation of a proposed highway project in Georgia. A design review and supervision consultant is being hired to review the detailed engineering design under preparation. 87. There is a need to consider the reinstatement of access to local traffic during project design stage. During the preparation of a highway construction project, it is critical to consider ways to accommodate for local traffic. The TEWHIP/TEWHIP AF required the upgrading of road sections from a two-lane road to a 2-lane dual carriageway accommodating high-speed traffic, mostly transit traffic. The Project had cut off the accessibility to local traffic within the immediate project influence area such as direct access to agricultural land. The provision/construction of access roads for local residents should be considered at the design stage. 88. The Implementing Agency should acquire and retain adequate capacity. One of the main issues encountered during project implementation was the very high staff turnover (the pay scale difference between staff and consultants is one of the reasons) within the Foreign Projects Unit, almost no one from the FPU staff employed by RD when TEWHIP project started, were on the job during the implementation of TEWHIP-AF. There are a lot of disadvantages associated with excessive staff turnover, as it decreases the overall efficiency of the team and time invested into employees through training and education are lost and overall productivity of the project team tends to decrease. 89. There is a need to re-assess risks and put adequate mitigation measures to address project safeguards management capacity issues. During the implementation of TEHWIP and TEWHIP AF construction contracts, it became apparent that land acquisition and resettlement procedures take longer than expected and therefore the Implementing Agency is unable to provide contractors with full access to the sites. To minimize claims from contractors, the Implementing Agency provides partial access to sites but this also requires additional efforts to keep the safeguards documents revised/updated, approved, disclosed and correctly implemented. RD needs to increase its social safeguards capacity, which should be commensurate with the increasing highway investment program. This has been an ongoing problem for the sector in Georgia, which any current projects should focus on addressing. 90. A clear framework for multi-sectoral approaches, in particular for road safety, should be established during project preparation. When a component is designed based on a multi-sectoral approach, a clear roadmap of how to work with and engage the different stakeholders in a structured way should be designed at appraisal stage. This would help preventing some of the difficulties experienced by the supervision team during project implementation, as various stakeholders (enforcement, education and emergency services) were expected to collaborate on road safety matters while not being directly part of the project implementing agency. 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 7.1 Borrower/implementing agencies 91. On November 15, 2016, the Borrower submitted to the Bank their Project Completion Report for the Third East West Highway Improvement Project. This report is attached without any editing or modifications in Annex 5 of this ICR. 92. The main comment provided by the Borrower on the Bank ICR was related to the safeguards section, adding information about the completion date of land acquisition activities under TEWHIP AF (by end of December 2015). The Borrower highlighted its agreement with one of the main points mentioned in the ICR on the need to reinforce the social safeguards management capacity. The Borrower informed the ICR team that a decision had just been taken by RD’s management to hire in 2017 permanent staff in the Resettlement Unit to manage and work with the current consultant. 7.2 Cofinanciers Not applicable. 7.3 Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not applicable. 24 Annex 1. Project Costs and Financing TEWHIP (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component A: Sveneti-Ruisi 157.06 179.29 114% Road Link Component B: Institutional 1.40 3.78 270% Strengthening Component C:Project 0.62 0.92 148% Management Total Baseline Cost 159.08 183.99 Contingencies (Physical/Price) 24.32 0 Total Project Costs 183.40 183.99 100% Front-end fee PPF 0 0 Front-end fee IBRD 0.37 0.37 Total Financing Required 183.77 184.36 100% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 37.12 37.35 101% International Bank for Reconstruction 147.00 147.00 100% and Development TEWHIP-AF (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component A: Ruisi-Agara Road 51.08 41.04 80% Link Component B: Institutional 1.16 6.50 560% Strengthening Component C:Project 0.42 0.32 76% Management Total Baseline Cost 52.66 47.86 91% Contingencies (Physical/Price) 1.09 0 Total Project Costs 53.75 47.86 89% Front-end fee PPF 0 0 25 Front-end fee IBRD 0 0 Total Financing Required 53.75 47.86 89% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 10.75 12.35 115% International Bank for Reconstruction 43.00 35.50 83% and Development 26 Annex 2. A/Outputs by Component Project Outputs Changes and Activities Current Status Original Project, approved in 2009 Component A: Sveneti – Ruisi Road Link Upgrading the (i) Partial rehabilitation of the existing Completed. 15km of existing E60 road; (ii) Realignment and construction of roads were East-West new carriageways; (iii) Construction of rehabilitated and Highway from surface drainage, culverts and underpasses; upgraded under the Sveneti to Ruisi (iv) Construction of bridges, including Project. to a dual approach roads, particularly a bridge of Besides, the carriageway about 877 meters long over the Liakhvi implementation of River and an existing railway line; (v) road safety Construction of two tunnels of about 800 improvement works meters long; (vi) Installation of safety along the completed barriers, road signs and markings; (vii) sections of the Demolition of existing structures and highway contributed relocation of various utilities; (viii) to a reduction in road Construction supervision services; and (ix) crashes, as the road Design services for future investments in fatality rate per the road sector, all through the carrying out 10,000 vehicles on of civil works and the provision of goods E60 corridor from and consultants' services. Senaki to Tbilisi was reduced by 43%, exceeding the final target of 30%. Component B: Institutional Strengthening Strengthening (ii) Training for RD’s staff provided; Partially Completed. the capacity of Computer equipment for RD procured; (ii) RD’s staff from RD to improve (iii) Training for RD’s environmental various functional its operational specialists provided; units attended effectiveness Additional environmental consultants hired trainings and through: (i) to provide support to RD in implementing seminars overseas, carrying out a EMPs. focusing on: regional functional fiduciary training for analysis for financial establishing the management, contract appropriate management, organizational disbursement structure for RD monitoring, to meet its procurement of goods current and and works and others. anticipated Computers, printers future needs; (ii) and other equipment improving the 27 capacity of RD were purchased for to plan, design, RD; manage and Senior environmental maintain the specialists attended road network; overseas trainings on and (iii) World Bank strengthening safeguard policies; RD capacity in Additional environmental environmental monitoring, consultants were through employed under the provision of Project. goods, consultants' services and training. Developing a Preparation of a Framework for the Design Completed. framework for and Implementation of Concessions Consultant Roughton the introduction (Contracts) for Performance- Based Road International Ltd was of performance Maintenance. hired for the based contracts assignment. (PBC) for Consultant assessed maintenance of the capacity of main roads, contracting industry, through the RD’s organization, provision of staffing and skills, consultants' developed contract services. format, quality assurance and partnering arrangements and produced required framework. Improving road Capacity of the road safety unit Partially Completed. safety along the strengthened by providing on the job Advisory assistance entire E60 East- training and technical support; were provided to the West Highway Road safety manuals developed and road road safety unit of corridor by safety audits conducted; RD. preparing and Road safety study tour to Finland Recommendations implementing a completed; were given on corridor road East West Highway road safety campaign undertaking road safety implemented. safety inspections and management developing plan to cover appropriate engineering, countermeasures. enforcement, 28 emergency Road safety audits response and were carried out for road safety the detailed designs campaigns, of the Ruisi – Agara through the – Agara by-pass provision of section and SLRP-II goods, roads. consultants' A study tour to services, and Finland focusing on training. road crash database management and a road safety campaign to raise awareness among drivers in particular were completed mid-2016. Strengthening Classrooms in Georgian Technical Partially Completed. the curriculum University refurbished and equipped with RD using shopping and training at necessary furniture and computer procurement method the technical equipment. acquired necessary university, goods for the including refurbishment of provision of Georgian Technical training for University lecturers, classrooms and twinning with acquired required overseas computer universities, as equipment/furniture. well as the provision of consultants' services and goods. Component C: Project implementation Institutional Hiring procurement consultants to carry Completed. support to RD out procurement activities for assigned Procurement, social, and TRRC portfolio of projects as well as analysis of community related to Project systemic and other procurement issues, resettlement liaison, management, procurement planning, implementation and financial consultants financial audits management. and independent and Project Hiring social and community resettlement auditors, were monitoring and liaison consultants to provide assistance to employed during the evaluation. RD with RAP implementation. project lifetime. Hiring financial manager and accountants for establishing and operating financial system for the project. 29 Financial audit services, to enable independent external auditor to express an opinion on project’s financial statements. Additional Financing, approved in 2012 (additional activities) Component A: Sveneti – Ruisi – Agara Road Link Upgrading the Upgrading the existing Ruisi-Agara road Completed. existing Ruisi- section and the construction of the Agara 10km of roads were Agara road bypass as a dual carriageway road and rehabilitated and section and the conducting a technical quality review of upgraded and the construction of such works through the carrying out of 9km Agara bypass the Agara bypass civil works and the provision of goods and was constructed consultants' services. under the project. The speed is currently limited at 90km/h instead of 110km/h until completion of the local parallel roads. Component B: Institutional Strengthening Improving road Design, supply and installation of a road Completed. safety along the crash database. The Police supplied entire E60 East- the road crash West Highway database. corridor by RD collaborated with establishing a the Police (MIA) to road crash improve and obtain database, access to the road through crash database owned the provision of by the Police. goods, consultants' services, and training. 30 Annex 2. B/Updated indicators after the first restructuring Project Outcome Indicators Status Comment Transit time from Sveneti to Ruisi No change (minutes) Vehicle operating costs from Sveneti No change to Ruisi (cars in US$/km) Vehicle operating costs from Sveneti No change to Ruisi (trucks in US$/km) Percentage reduction in road fatalities No change on E60 East-West Highway from Senaki to Tbilisi Transit time from Sveneti to Agara New Reflecting the expanded scope bypass (minutes) Vehicle operating costs from Sveneti New Reflecting the expanded scope to Agara bypass (cars in US$/km) Vehicle operating costs from Sveneti New Reflecting the expanded scope to Agara bypass (trucks in US$/km) Improvement in road capacity from New To capture the “ease of transit” Ruisi to the Agara Bypass measured in element of the PDO terms of passenger car space equivalent (PCSE) per hour International roads in good or fair New To capture the second part of condition as a share of total the PDO (“strengthen the international roads (percentage) capacity to plan and manage the road network”) Revised Intermediate Outcome Status Comment Indicators Number of kilometers upgraded No change Sveneti-Ruisi Endorsement by the Roads No change Department (RD) of Georgia road safety audit manuals for new and existing roads All new IBRD financed road sections No change subject to formal road safety audit using Georgian manuals Percentage of E60 Corridor Senaki to No change Tbilisi with road safety engineering improvements completed Number of kilometers upgraded New Reflecting the expanded scope Sveneti-Agara bypass 31 Percentage of E60 corridor Senaki to New Focus of road safety audits on Tbilisi subject to road safety audits Bank financed road sections managed by RD Purchase/Development of the Road New For new institutional Crash Database development activity Annual road safety actions undertaken Revised Replace “Annual detailed as specified by the Georgian National implementation plans for Traffic Safety Strategy priority investments from National Road Safety Action Plan” 32 Annex 2. C/Assessment of the Overall Outcome Level -1 Amount Disbursed at Percent of Total Weight (% disbursed Restructuring Restructuring (USD Disbursements ($187.8m) before/after PDO Date millions) at closing change) 06/26/2012 142.11 76% 0.76 Against Against Original Revised Aspects Rated PDOs PDOs Overall of PDOs High High Relevance of Design Substantial Substantial (1.1) to contribute to the gradual reduction of road transport costs and improve Substantial Substantial access along the central part of the Borrowers East-West corridor (1.2) to improve ease of transit along the central part of the High High Borrowers East-West corridor (1.3) to improve road safety Achievement along the central part of the Substantial Substantial of PDOs Borrowers East-West corridor (2.1) to strengthen the capacity of the Roads Department and relevant government entities to Substantial Substantial plan and manage the road network (2.2) to strengthen the capacity of the Roads Department and Substantial Substantial relevant government entities to improve road safety Efficiency in the outcomes achieved Substantial Substantial Overall rating Satisfactory Satisfactory Rating value 5 5 Weight (% disbursed before/after PDO 0.76 0.24 change) Weighted value (#2x#3) 3.8 1.2 5 Overall Outcome Rating Satisfactory 33 Annex 3. Economic and Financial Analysis The economic analysis done at appraisal for the TEWHIP covered the main component of the project, which represents the quasi totality of its costs (98 percent): the upgrading to four lanes of the 15 km section of the E60 East-West Highway from Sveneti to Ruisi. The upgrading included the construction of a bridge of about 877 meters long over the Liakhvi River and an existing railway line and two tunnels of about 800 meters long. The appraisal economic analysis was done using the Highway Development and Management Model (HDM-4), which simulates life-cycle predictions of road deterioration, road works effects and their costs and road user costs, and provides economic decision criteria for road construction and maintenance works. HDM-4 analyses projects by computing costs and benefits of different investment options in terms of savings in road maintenance costs, vehicle operating costs, travel time costs and accident costs. The analysis was done for an evaluation period of 20 years and a discount rate of 12 percent. Allowing for a three-year construction period, the economic analysis yielded an Economic Internal Rate of Return (EIRR) of 16.3 percent. The economic analysis done at appraisal for the TEWHIP Additional Financing covered the upgrading of the 19 km section of the E60 East-West Highway from Ruisi to the Agara Bypass, representing 95 percent of the TEWHIP-AF project costs. The upgrading of the Ruisi-Agara road section (10 km) and the construction of the Agara Bypass (9 km) raised the existing road from a two lane road to a motorway standard - i.e., to a four-lane road. The economic analysis was done using the HDM-4 model following the same methodology adopted on the TEWHIP economic analysis. Allowing for a three-year construction period, the economic analysis yielded an EIRR of 21.6 percent. The following table summarizes the original project and the additional financing economic analysis results. Overall both projects yielded an EIRR of 17.5 percent. Table 1. Ex-Ante Economic Analysis Results Estimated Length Cost EIRR Project Section (km) (US$ Million) (%) TEWHIP Sveneti-Ruisi Section 15 180.80 16.3 TEWHIP-AF Ruisi-Agara Bypass Section 19 51.08 21.6 Total 34 231.88 17.5 The ex-post economic analysis of both projects adopted the same methodologies employed at appraisal and the same key assumptions regarding the without project alternative, maintenance policies with and without the project, and road user costs. The ex-post economic analysis of both projects considered: (i) actual construction costs, (ii) actual timing of the construction, and (iii) actual traffic growth rates observed during the 2009 to 2015 period. The table below presents the estimated construction cost at appraisal, the contract construction cost, and the actual construction cost for both projects. Overall the contracts cost were 98 percent of the estimated costs at appraisal and the actual costs were 90 percent of the estimated cost at appraisal. 34 Table 2. Construction Costs Estimated Contract Actual Actual Actual Cost Cost Cost per per (US$ Million) (US$ Million) (US$ Million) Contract Estimated Sveneti-Ruisi Section 180.8 170.3 169.2 0.99 0.94 Ruisi-Agara Bypass Section 51.1 42.6 39.1 0.92 0.76 Total 231.9 213.0 208.3 0.98 0.90 The table below presents the estimated and actual disbursements for both projects. The appraisal estimate of upgrading the Sveneti to Ruisi section considered construction duration of three years from 2010 to 2012. The actual disbursements were from 2009 to 2014 with the 91 percent of the disbursements occurring from 2010 to 2012, thus one can consider that the appraisal estimate for the timing of the road works was achieved. The appraisal estimate of the of the Ruisi to Agara Bypass section considered construction duration of four years from 2012 to 2015 with the majority of disbursements occurring from 2012 to 2014 (95 percent). The actual disbursements were from 2012 to 2016 with the 92 percent of the disbursements occurring from 2013 to 2015, thus one can consider that the actual timing of the road works was one year later than the appraisal estimate. Table 3. Construction Costs Disbursements 2009 2010 2011 2012 2013 2014 2015 2016 Sveneti-Ruisi Appraisal 0.0 63.2 81.3 36.3 0.0 0.0 0.0 0.0 Section Estimate 0% 35% 45% 20% 0% 0% 0% 0 Actual 3.7 38.3 94.6 20.8 9.6 2.2 0.0 0.0 2% 23% 56% 12% 6% 1% 0% 0 Ruisi-Agara Bypass Appraisal 0 0 0 12.8 23.0 12.8 2.6 0 Section Estimate 0% 0% 0% 25% 45% 25% 5% 0% Actual 0 0.0 0.0 0.6 6.2 14.5 15.0 2.7 0% 0% 0% 2% 16% 37% 38% 7% The table below presents the estimated and actual traffic annual traffic growth rates for both projects. The estimated annual traffic growth rate from 2009 to 2015 for upgrading the Sveneti to Ruisi section was 7.4 percent per year, while the actual traffic growth rate is 10.8 percent per year. The estimated annual traffic growth rate from 2011 to 2015 for the upgrading of the Ruisi to Agara Bypass section was 5.7 percent per year, while the actual traffic growth rate is 6.3 percent per year. Table 4. Traffic Projections Sveneti-Ruisi Appraisal 2009 2015 Growth per year Section Estimate 9,238 14,208 7.4% Actual 2009 2015 Growth per year Traffic 9,238 17,049 10.8% Ruisi-Agara Bypass Appraisal 2011 2015 Growth per year Section Estimate 12,578 15,700 5.7% Actual 2011 2015 Growth per year Traffic 11,023 14,089 6.3% The table below presents the ex-post economic evaluation results for both projects. The ex- post economic evaluation for upgrading the Sveneti to Ruisi section yielded and EIRR of 35 20.9 percent. The ex-post economic evaluation of the upgrading of the Ruisi to Agara Bypass section yielded and EIRR of 24.4 percent. The ex-post EIRRs are higher than the appraisal estimates, on average 24 percent higher, due to the lower actual construction costs and higher actual traffic growth rates observed on the project roads. Overall, both projects yield an ex-post EIRR of 21.7 percent, which is an indication that the program has a robust economic justification, thus the economic efficiency of the project is rated Substantial. Table 5. Ex-Post Economic Analysis Results Ex- Ex- Ex- Ante Post Post EIRR EIRR per Ex- Project Section (%) (%) Ante TEWHIP Sveneti-Ruisi Section 16.3 20.9 1.28 TEWHIP-AF Ruisi-Agara Bypass Section 21.6 24.4 1.13 Total 17.5 21.7 1.24 36 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Team Leader during Christopher R. Bennett Lead Transport Specialist GTI02 preparation of TEWHIP ECSSD - Coral Daphne M. Bird Program Assistant Project support HIS Jacques Bure Lead Transport Specialist GTI03 Transport Specialist Elena Y. Chesheva Sr Transport. Spec. GTI06 Transport Specialist Team Leader during Rodrigo Archondo-Callao Senior Highway Engineer GTI03 preparation of TEWHIP AF Social Development Satoshi Ishihara Senior Social Development Spec GSU02 Specialist Environmental Darejan Kapanadze Senior Environmental Specialist GEN03 Specialist Olivier P. Le Ber Lead Transport Specialist GTI05 Transport Specialist Environmental Wolfhart Pohl Lead Environmental Specialist GEN02 Specialist Mirtha Susan S. De Pokorny Consultant GTI06 Consultant ECSO2 - Procurement Jesus Renzoli Senior Procurement Specialist HIS Specialist David T Silcock HQ Consultant ST GTI01 Consultant Tamar Sulukhia Program Leader ECCU6 Program Leader Arman Vatyan Sr Financial Management Specia GGODR FM Specialist Elizabeth C. Wang Senior Financial Officer GTI03 Financial Officer Supervision/ICR Elena Y. Chesheva Sr Transport. Spec. GTI06 Transport Specialist Asif Faiz Consultant GTIDR Consultant Social Development Satoshi Ishihara Senior Social Development Spec GSU02 Specialist Environmental Darejan Kapanadze Senior Environmental Specialis GEN03 Specialist Olivier P. Le Ber Lead Transport Specialist GTI05 Transport Specialist ECSTR - Alejandro Lopez Martinez Junior Professional Associate JPA HIS Joseph Melitauri Senior Operations Officer GEE03 Operations Officer ECSTR - Jiangbo Ning E T Consultant Consultant HIS ECSO2 - Procurement Jesus Renzoli Senior Procurement Specialist HIS Specialist Social Development Helen Z. Shahriari Sr Social Scientist GSU07 Specialist David T Silcock HQ Consultant ST GTI01 Consultant Tamar Sulukhia Program Leader ECCU6 Program Leader Arman Vatyan Sr Financial Management Specia GGODR FM Specialist 37 Elizabeth C. Wang Senior Financial Officer GTI03 Financial Officer Team Leader during Jean-Francois Marteau Program Leader ECCU5 implementation of TEWHIP Michael Butler Junior Professional Associate GTI03 JPA Geotechnical Marinos Skempas E T Consultant GTI03 Engineer Procurement Deepal Fernando Senior Procurement Specialist ECSO2 Specialist Infrastructure Vickram Cuttaree Senior Infrastructure Economist ECSTR Economist Team Leader during Mustapha Benmaamar Senior Transport Specialist GTI03 implementation of TEWHIP AF Procurement Sandro Nozadze Procurement Specialist GGODR Specialist Galina Alagardova Financial Management Specialist GGODR FM Specialist Natalya Stankevich Transport Specialist GTI03 Transport Specialist ICR Team Oceane Keou Transport Specialist GTI06 Leader Ari Johannes Kalliokoski E T Consultant GTI03 Transport Specialist Juan Gaviria Practice Manager GTI03 Practice Manager Environmental Darejan Kapanadze Senior Environmental Specialist GENDR Specialist Jose C. Janeiro Senior Finance Officer WFALA Finance Officer Marie Antoinette Laygo Program Assistant GTI03 Project support Militsa Khoshtaria Program Assistant ECCGE Project support Robert Charles Seekings E T Consultant GTI03 Highway Engineer Rocio Mariela Malpica Valera Senior Counsel LEGES Counsel Social Safeguards Vera Dugandzic Senior Social Safeguards Specialist GSURR Specialist 38 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No. of staff weeks (including travel and consultant costs) Lending FY09 28.55 223.31 FY10 19.56 93.29 Total: 306.60 Supervision/ICR FY10 16.47 91.61 FY11 23.80 96.92 FY12 19.29 87.00 FY13 19.49 109.81 FY14 26.31 110.36 FY15 26.22 104.06 FY16 21.12 101.64 FY17 2.46 17.49 Total: 718.89 Inputs from Safeguards FY16 (Environment) 0.80 1.20 FY16 (Social) 2.11 4.01 FY17 (Social) 0.23 1.33 Total: 6.54 39 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR The Borrower’s ICR submitted to the Bank on November 15, 2016 is attached to this report. 40 Annex 6. List of Supporting Documents ISRs - ISR dated November 2009; - ISR dated May 2010; - ISR dated January 2011; - ISR dated June 2011; - ISR dated May 2012; - ISR dated December 2012; - ISR dated June 2013; - ISR dated December 2013; - ISR dated June 2014; - ISR dated December 2014; - ISR dated June 2015; - ISR dated January 2016; - Last ISR dated June 2016. 41 MAP