Document of The World Bank ReportNo: 17195-AR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$450 MILLION TO THE ARGENTINE REPUBLIC FOR A NATIONAL HIGHWAYS REHABILITATION AND MAINTENANCE PROJECT FEBRUARY 20, 1998 Finance, Private Sector, and Infrastructure Department Department for Argentina, Chile, and Uruguay Latin America and the Caribbean Regional Office -11- CURRENCY EQUIVALENTS (Exchange Rate Effective December 1, 1997) Currency Unit = Argentine Peso (A$) A$1.0O = US$1.00 FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS AC ... . Asphalt Concrete Overlay BOT .... Build, Operate, and Transfer GAS .... Country Assistance Strategy CEDEX .... Center of Public Works' Experimentation (Spain) COT .... Construir, Operar, y Transferir (a rehabilitation/maintenance program precursor to CREMA where the contract period is 10 years -not to be confused with BOT) CREMA .... Contrato de Recuperacion y Mantenimiento (Rehabilitation and Maintenance Contract) DNV .. ... Direccion Nacional de Vialidad (National Highways Directorate) DPV .... Direcci6n Provincial de Vialidad (Provincial Highways Directorate) EA .... Environmental Assessment EIB .... European Investment Bank FHWA .. .. Federal Highways Administration (United States) HDM .... Highway Design and Maintenance Standards Model IDB .... Inter-American Development Bank IERR .... Internal Economic Rate of Return IRI .... International Roughness Index Kms .... Kilometers NPV .. .. Net Present Value PCU .... Project Coordination Unit TOR .... Terms of Refernece VOC .... Vehicle Operating Cost WDR .... World Development Report Vice President: Shahid Javed Burki CMU Director: Myrna Alexander Acting SMU Director: Krishna Challa Task Managers: M Mekan/A. Kapur -i.i- Argentina National Highways Rehabilitation and Maintenance Project CONTENTS A. Project Development Objective 1. Project development objective and key performance indicators .....................................3 B. Strategic Context 1. Sector-related CAS goal supported by the project ........................................................3 2. Main sector issues and Govemment strategy ......................................................... 3 3. Sector issues to be addressed by the project and strategic choices ................................4 C. Project Description Summary 1. Project components .........................................................6 2. Key policy and institutional reforms supported by the project ......................................6 3. Benefits and target population .........................................................6 4. Institutional and implementation arrangements .........................................................7 D. Project Rationale 1. Project alternatives considered and reasons for rejection ..............................................7 2. Major related projects financed by the Bank and/or other development agencies ...........8 3. Lessons learned and reflected in proposed project design ..............................................8 4. Indications of borrower commitment and ownership ....................................................9 5. Value added of Bank support in this project ......................................................... 9 E. Summary Project Analyses 1. Economic ........................................................ 10 2. Financial ........................................................ 10 3. Technical ........................................................ 10 4. Institutional ........................................................ 11 5. Social .... I 11 6. Environmental assessment ..................... 11 7. Participatory approach ..................... 12 F. Sustainability and Risks 1. Sustainability ..................... 12 2. Critical risks ..................... 13 3. Possible controversial aspects ..................... 14 -Iv- Argentina National Highways Rehabilitation and Maintenance Project CONTENTS G. Main Loan Conditions 1. Effectiveness conditions .................. ... . . . 14 2. Other .14 H. Readiness for Implementation .14 I. Compliance with Bank Policies ............................................ ; 14 Annexes Annex 1. Project Design Summay .15 Annex 2. Detailed Project Description .18 Annex 3. Estimated Project Costs .22 Annex 4. Cost-Benefit Analysis Summary .23 Annex 5. Financial Summary .27 Annex 6. Procurement and Disbursement Arrangements ...................................... 28 Table A. Project Costs by Procurement Arrangements .29 Table Al Consultant Selection Arrangements .29 Table B. Thresholds for Procurement Methods and Prior Review .31 Table C. Allocation of Loan Proceeds .32 Annex 7. Project Processing Budget and Schedule .33 Annex 8. Documents in Project File .34 Annex 9. Statement of Loans and Credits .35 Annex 10. Country at a Glance ..39 Annex 11. Description of CREMA Program . .41 Annex 12. National Highway Network ..44 Map No.s 29287, 29288, 29289, 29290, 29291, 29292, 29293 Argentina National Highways Rehabilitation and Maintenance Project Project Appraisal Document Latin America and the Caribbean Regional Office Country Department 7 Date: February 20, 1998 Task Managers: Moazzam A. MU=an lAnil Kapur CMU Director: Myrna Alexander Acting SMU Director: Krishna Challa Project ID: AR-PE-52590 Sector: Transportation Program Objective Category: Economic Management Lending Instrument: Sector Investment and Maint. Loan Program of Targeted Intervention: [I Yes 3 No Project Financing Data Z Loan El Credit 0 Guarantee O Other [Specifyl For Loans/Credits/Others: Amount (US$m/SDRm): IBRD Loan of US$450 million Proposed Terms: El Multicurrency 0 Single currency Grace period (years): 3 0 Standard Variable El Fixed 0 LIBOR-based Years to maturity: 15 Commitment fee: 3/4 % Service charge: 0 % Financing plan (US$m): 929 million US$ Million .. " " "" ' ''' ' ' .' .. ....... .. -'... Sorce Local oeg oa Government 263 216 479 Cofinanciers IBRD 248 202 450 IDB _ Others (specify) _ __I__ 511 418 929 Borrower: Argentine Republic Guarantor: Responsible agency (ies): National Highways Department (Direcci6n Nacional de Vialidad) -DNV Esiae Disburement (B- F-,-Mj) 19 199 200 200 200 2003 Annual 177.75 83.62 71.17 70.28 43.08 4.10 Cumulative 177.75 261.37 332.54 402.82 445.90 450.00 OSD PAD Form: July 30, 1997 Projed Appraisal Document Pag 2 Argentina- National Highways Rehabilitation and Maintenance Proje For Guarantees: [ Partial Credit 0 Partial Risk Proposed coverage: Project sponsors: Nature of underlying financing: Terms of financing: Principal arnount (US$m): Final maturity: Amortization profile: Financing available without guarantee: fJ Yes O No If yes, estimated cost or maturity: Estimated financing cost or maturity with guarantee: Project Implementation Period: Expected Effectiveness Date: Expected Closing Date: S'A Years July 1, 1998 December 31, 2003 Project Apptaisa Document Pap 3 ArgeDtina - National Highways Rehabilitation and Maintenance Project A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1J) The project would have the overall objective of preserving the Argentine national road network. The proposed project builds on the achievement of the ongoing Bank-assisted Road Maintenance and Rehabilitation Sector Project (361 1-AR). The project has the following specific objectives: * Stabilize the physical condition, arrest the further deterioration of the non-concessioned national road network, and reduce the long-run economic costs for the rehabilitation and maintenance of the national road network in order to achieve financial sustainability; * Increase the participation of the private sector in road rehabilitation and maintenance activities; and * Adapt its role and further strengthen the Direccion Nacional de Vialidad's (DNV's) capabilities for planning, contracting, and efficient supervision of rehabilitation, maintenance, and concession programs. The key performnance indicators are: (a) the roughness of the non-concessioned paved network will not exceed an international roughness index (IRI) of 3.5; while roads in poor condition will not exceed 6%; (b) at least 90% of the non-concessioned paved network will be contracted to the private sector; and (c) DNV will have effectively decentralized its operations to the regional offices. B: Strategic Context . Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 16505-AR Date of latest CAS discussion: May 15, 1997 Other Reports: Argentina Transport Privatization and Regulation: The Next Wave of Challenges (Report 14469- AR), June 6, 1996 Staff Appraisal Report for Argentina: Road Maintenance and Rehabilitation Sector Project (Report 11413-), May 10, 1993 The proposed project (titled: National Highways Rehabilitation and Maintenance II) is part of the Bank's assistance strategy and supports the objectives to rebuild and upgrade the road infrastructure, enhance public infrastructure in the provinces, and promote private sector investment in transport. The project provides a follow-up to an on-going Bank loan (361 1-AR), eliminates the rehabilitation backlog, and generates wider private sector participation in maintenance operations. 2* Main sector issues and Government strategy: For decades, fiscal crises and poor management have led to under-funding and deterioration of Argentina's infrastructure. According to the 1994 WDR, in tenns of quality and quantity, Argentina was one of the lowest performers among upper-middle income countries. In 1990, Argentina had the lowest share of paved roads in good condition among these countries. In response to the deterioration of the road network and the gradual decline in public funds for road maintenance, the Governnent embarked, beginning in 1990, on a major reform program that increased private sector participation in the rehabilitation and maintenance of the national roads network and redefined DNV's institutional structure. DNV concessioned the operation and maintenance of 9,800 kn of high traffic highways (>2,000 vehicles/day), out-sourced road rehabilitation and maintenance activities to the private sector, transferred to the provinces the maintenance of a major part of the unpaved national network, and decentralized to the regional offices, including the maintenance of a residual 2,500 kms. of the unpaved national road network by force-account. OSD PAD Form: July 30, 1997 Projed Appraisal Document Page 4 Argentina - National Highways Rehabilitation and Maintenance Project These reforms have resulted in a major transformation of the highway sector in Argentina. One of the most impressive results achieved by these policy reforms has been the improvements in road conditions. The proportion of paved roads in poor condition decreased from 30% in 1989 to 25% in 1993 and is further expected to drop to 10% by the end of 1998. This improvement in road maintenance was achieved in face of a tight fiscal situation, which resulted in a decrease of DNV's operating budget in real terms. Furthermore, DNV has shed operational responsibility for as much of the network as possible and has been left with a residual paved network which does not carry enough traffic to permit concessioning without public support. For the remaining network, DNV has devised a two-pronged strategy: (a) cut costs and improve efficiency by contracting to the private sector rehabilitation and maintenance activities under CREMA (Contratos de Recuperaci6n y Mantenimiento) mechanism; and (b) strengthen DNV's regional offices to facilitate the decentralization of decision-making and contract management. The Government and the DNY have also initiated a broad-based reform program to address other important sector issues such as restructuring of highway organization in view of newly-emerging needs, management of the provincial road networks, bridge maintenance, control of axles loads, improving highway safety. The main challenge ahead for the Government is to ensure the economic, financial, social and environmental sustainability of these reformns. This in turn will require continuous fine-tuning of the reform agenda in order to adapt to the changing political and financial circumstances. This includes: (i) the need to monitor the long-term economic and financial viability of the highway concessioning program while allowing for system expansion and modernization; to- date, these trends are encouraging; (ii) the restructuring of road user charges so that road users pay their fair share of the cost of road infrastructure as well as the externalities associated with road use such as congestion, air and noise pollution, and road accidents (study financed under the Provincial Roads Project); (iii) the attention to road safety as a public health issue in view of the rising incidence of injuries and fatalities from road accidents; (iv) the need to address urban traffic congestion through market-based instruments such as electronic road pricing and proactive transport demand management; and (v) the need to develop adequate medium-term planning to ensure that the highway system capacity keeps pace with and is responsive to the demands associated with a rapidly-expanding open economy and the rapid growth in regional (MERCOSUR) and international trade. The above issues are part of the continuing sector dialogue between the Bank and the Government, including the Ministry of Economy and Public Works and DNV. These programs are being supported by the ongoing Bank loan (3611-AR), Provincial Roads (4093-AR), and several IDB projects 3. Sector issues to be addressed by the project and strategic choices: The focus of this project are to ensure the long-tenn sustainability of the non-concessioned national paved road network and adapt DNVs organization and staffing levels to be more efficient and responsive to the changing environment. Three actions are being addressed under the proposed project: (i) Alternative Road Financing: Before 1990, the financing of all road expenditures relied on eannarked taxes distributed between DNV and DPVs (Provincial Highway Departmnents - Direcciones Provinciales de Vialidad). Then, 10% of fuel taxes, 57% of tire taxes, 50% of lubricant taxes and 100% of taxes on vehicle registration and sales went to DNV; the revenues from the same taxes received by the DPVs were 9, 29, 27, and 0% respectively. After 1990, earnarked revenue assignment to DNV was eliminated. This decision was intended first to restore the flexibility needed in the macroeconomic managemnent of the economy at a time of structural adjustment, and secondly to ensure that all public expenditures are subject to the same scrutiny and priority-setting in the context of the consolidated government budget. As part of the economic reform policy initiated in 1990, tax revenues from taxes on tires and lubricants were transferred directly to the Treasury and the earmarking of tax revenues derived from taxes on vehicle registration fees and sales was eliminated. While in 1990, earmarked taxes represented 70% of DNV's financial resources and only 2% Project Appraisal Documcnt Par 5 Argentina - National Highways Rehabilitation and Maintenance Project was provided by the Treasury. In 1992, there was no revenues from earmarked taxes and 97% of DNV's financial resources was provided by the Treasury. To assist DNV adapt to this new financial environment, the project will help to further improve DNV's road maintenance planning and programming capabilities (a process started during project preparation) to help cut costs and improve efficicency within the overall constraints of the budget framework. (ii) Rehabilitation and Maintenance Backlog: A major component of the steady state strategy is to eliminate the rehabilitation and maintenance backlog by financing existing CREMA contracts and by maximizing their extension to the rest of the network. Under this scheme, the contractors first rehabilitate the road (if needed) and then maintain it for a total period of five years. The CREMA requires the contractor to rehabilitate and maintain a network of 200 kms. for each conract on a fixed price basis. The payment scheme ensures that the contractor maintains the network on a performance basis. The CREMA projects were pioneered under the ongoing Bank project (3611-AR), and have been successful. For the network which cannot be easily put under CREMA (e.g., disjointed segments of roads), the proposed project also includes financial support for minimal rehabilitation/maintenance work based on the traditional unit ratelkm scheme. At project completion, it is expected that the national highway network would have reached a steady state with respect to its physical condition, requiring a relatively uniform, and reduced flow of public expenditures to provide a respectable level of service. (iii) Institutional Development and Coordination:. In concert with the road concessioning and CREMA policy, DNV needs to be transformed into a planning, coordinating, and regulatory agency which will undertake the technical and financial supervision of road concessions and performance-based maintenance contracts. In this context, the interaction between DNV headquarters and its regional centers needs to be strengthened. The regional centers are expected to gradually become responsible for managing the contracted works on the sections of the national road network located in their areas, while the headquarters will concentrate on medium-term planning, program design and monitoring, development and supervision of contract plans, and oversight and regulations over contract concessions. DNV intends to undertake a comprehensive organizational study under IDB financing to define its future mandate and functions and the supporting organizational and staffing structure Additionally, strong emphasis will be placed on the continuing use of the Bank's Highway Design and Maintenance Standards Model (HDM HII) to define and prioritize the optimal strategy for DNV's road expenditures under budget constraints. The project also includes support for knowledge-based programs to strengthen DNV's planning role. These programs are intended to support DNV in its transformation into a lean, responsive, efficient, and well-trained organization to meet the technological and institutional challenges of the next millennium, while providing world class service to its primary clients- the road users. Project Appraisal Document Pag 6 Argentina -National Highways Rehabilitation and Maintenance Project C: Project Description Summary 1. Project components (see Annex 2for a detailed description and Annex 3for a cost breakdown): TotalM Co totl (SM) mn Phase I CREMA: contracts let under the ongoing Bank loan 3611-AR and covering: . 4,026 km of rehabilitation; and Physical 544 58% 370 68% * 11,815 km of maintenance Phase ll CREMA: new contracts covering an additional: * 1,459 km of rehabilitation; and Physical 130 14% 65 50% * 2,581 km of maintenance Rehabilitation and maintenance of the remaining network: * 2,379 km of rehabilitation; and Physical 240 26% 0 0% * 5,106 km of maintenance Institutional and consultant support: * Strengthening DNV's organization . Supervision of CREMA EUnit Cost Study Institutional 15 2% 15 100° *Engineering Studies Bidn 52/ 510/ * Labortory Equipment * Knowledge Based Programs _ 929 100% 450 480% 2. Key policy and institutional reforms supported by the project: - Decentralization of DNV's contract monitoring activities and planning to its regional offices. • Consolidation of the new mechansims for road rehabilitation and maintenance activities through the CREMA program. * Decentralization of the maintenance of the unpaved network to the DPVs. * Use of knowledge based programs to further strengthen DNV's planning capacity 3. Benefits and target population: The proposed project will benefit road users in the less populated and low traffic areas of the country in terms of reduced vehicle operating cost and travel time. The Government is also expected to benefit from efficiency gains and overl lower unit costs of rehabilitation and maintenance. These gains would result in future financing requirements becoming self- sustaining. More importantly, the Governnent and the tax payers are expected to benefit from lower cost of maintenance/rehabilitation in the future. In the context of trade, both extemal and intemal, irnprovement in the road network should lead to lower cost of tradable products. The total cost ofPhase l is USS650 million, of vhich US$106 million been appropriated underthe ongoing Bank-financed project 361 1-AR. Project Appraisal Document Pae 7 Argentina - National Highways Rehabilitation and Maintenance Projec 4. Institutional and implementation arrangements: The Ministry of Economy (as the Govermment's borrower) would on-lend the loan funds to DNV on a grant basis. A separate subsidiary agreement between the Ministry of Economy and DNV defining the terms and conditions has been approved by the Bank. The project will be executed by DNV and will be coordinated by the same Project Coordinating Unit (PCU) as that of the 361 1-AR loan. The PCU would be strengthened by inclusion of a few additional staff during the overlapping period. The CREMA sub-projects are prepared by DNV's regional offices who carry out an extensive analysis of their respective network with the help of the Highway Design and Maintenance Standards Model (HDM). As a result of this evaluation, the following is identified: sections to be maintained and those needing rehabilitation; technical standards to be applied; and the associated economic cost/benefit assessment. At central level, the Planning and Works Departments reviews and approves the evaluation and prepares the bidding documents. Advertising, tendering, evaluation of proposals, and award of contracts are processed at the central DNV level. Inspection of the works is the responsibility of the regional offices, and is nornally undertaken by a senior engineer. Since the contractor is responsible for the implementation of a quality assurance system, the DNV engineer only oversees the quality of work done and verifies the performance results. The authorized payments are processed centrally. Throughout the implementation of the CREMA, regular visits to the sites are also made by DNV's central office representatives and by the PCU staff in order to follow the CREMA program progress. Project progress benchmarks were agreed during Appraisal and will be used to monitor the performance of the project. A mid-term review is planned in March 2000 to coincide with the end of the CREMA-based rehabilitation work and a subsequent survey of the network. Also, it was agreed that the DNV will provide the Bank with quarterly progress reports. Financial management and yearly financial audit arrangements (including the yearly publication of DNV's Annual Report) were agreed during Appraisal: the current financial management system for the 3611-AR will be upgraded to allow follow-up on both physical and financial perfonrance. The auditing requirements will be the same as that under the previous loan no. 361 1-AR. D: Project Rationale L. Project alternatives considered and reasons for rejection: Three projects alternatives were considered for the rehabilitation and maintenance of the non-concessioned road network: (i) transfer the responsibilities of the non-concessioned road network to the provincial authorities. This alternative was rejected due to the uneven institutional capacity of the provincial highways departments; (ii) concession the rehabilitation and maintenance of the remaining road network to the private sector. The second altemative was rejected as it was found to be economically unfeasible because of low traffic levels and potentially excessively high toll charges; and (iii) federally fund the rehabilitation and maintenance of the non-concessioned road network with full managerial and operational responsibility transferred to the private sector (CREMA). This was the chosen and preferred alternative as it was successfully demonstrated in early results under the on-going project. On the economic side, selection of the network to be included under the project was optimized through an HDM economic analysis, which consisted of calculating the NPV of various altemative maintenance options and of selecting the strategies which yield acceptable economic return. With regard to the road rehabilitation and maintenance contracts, the CREMA methodology was preferred over traditional methods (e.g., unit price contracts) because of the positive DNV/Bank experiences with its use under the ongoing 361 1-AR loan. Project Appraisal Docutment Pw I Argentina - National Highways Rdhbilitation and Maintenance Projet 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): N~~S~o &se Ojc RaLI, (Bank-financed projects on Y) Bank-financed IP DO * Improvement of the road network Argentina: Road Maintenance and S S condition; Rehabilitation Sector Project (3611- * Sustainability of road maintenance AR) by concessions * Funding of road maintenance * Strengthening DNV _ * Transferring maintenance execution Argentina: Provincial Roads Project S S to private contractors (4093-AR) * Strengthening environrnental management capabilities * Rehabilitation of federal network; Brazil: Federal Highway Management S S * Increasing private sector management Project (3169-BR) and financing * Decentralization to state highway administrations * Capacity building in the road agencies Other develoDment asencies * Road links with Chile IDB: Argentina - Programa de Corredores Viales Nacionales (1994- 1999) * Road links with Chile EIB: Argentina - Corredores Nacionales de Transporte (1996-2001) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory). HU (Highly Unsatisfactory 3. Lessons learned and reflected in the project design: The following important lessons leamed from the experience with the above projects have been incorporated into the design and preparation of the proposed project: *. Cost Overruns / Delays in implementation. Experience with earlier highway projects in Argentina and worldwide has shown that highway maintenance, when carried out by force account, is generally ineffective and costly. In addition to the difficulties in ensuring the necessary and timely transfers of resources from the Treasury, government road agencies have demonstrated their inability to effectively manage the numerous activities. Since the early 1990s, DNV has been following a program to decrease its reliance on force account and extensively use contracts with the private sector for maintenance and rehabilitation, in addition to using a highly effective inter-urban road concessions programn. The fixed-price CREMAs, will reduce considerably the Project Appraisal Document Pag 9 Argentina - National Highways Rehabilitation and Maintenance Project risk of cost overrun. Delays in implementation are furthermore minimized since the CREMA requires the contractor to prepare detailed engineering designs before initiating the works (delays in previous similar projects were due to a lack of stock of sub-projects ready for implementation). * Counterpart Funding and Budgets. Historically, counterpart funding problems have adversely affected the implementation of the physical investment components of most projects in Argentina. Government efforts to contain public expenditures in order to achieve important economic stabilization have been the main reasons. The increased use of CREMA and concession contracts require the Government to provide stable funding for the road sector, since the long-term payment obligations under these contracts become legally binding on the Government. The 1998 budget supports this arrangement and fully funds the Government's commitments under the CREMA program. * Design and Implementation of Institutional Components. Borrowers and executing agencies have generally given higher priority to physical investments than to the institutional components, which have often fallen short of achieving their objectives. The frequent changes in sector administrations and management personne1 have been an important factor. But often the scope and timetable of the agreed institutional components have been over-optimistic, and have underestimated the difficulties of the reforns. In order to be effective, the institutional and training components of the projects need to be focused on addressing a few essential issues. Their design and timetables should be realistic, and based on a detailed analysis of the capacities of the organizations to implement them 4. Indications of borrower commitment and ownership: The first-phase CREMA program, representing about 60% of the project cost, has already been let following the Bank procurement guidelines under the ongoing Bank loan 3611-AR. The Phase II CREMA builds on the experience of. Phase I and is expected to be let by the middle of 1998. These two components are equivalent to about three-fourths of the project cost. Of the 5,106 km paved network remaining with DNV, only high-priority rehabilitation and maintenance works are contemplated. All this suggests that project implementation should be smooth without any of the major problems experienced with previous road projects in Argentina. 5. Value added of Bank support in this project: The Bank has made a number of important contributions in ensuring the stability of the physical condition and further deterioration of the non-concessioned national network. Firstly, the Bank has provided timely financial resources under the ongoing 3611-AR loan and the proposed new loan. These loan funds, coupled with the Government's constrained budget, has played a critical role for DNV to eliminate its rehabiliation and maintenance backlog and reduce significantly the poor quality of the national road network. In the absence of the timely availability of financing, the Government runs a serious risk of not meeting its contractual obligations under the CREMA program and reachning a steady state needed for sustainability. Furthermore, the Bank played an important role in assisting DNV to establish clear and transparent rules of the game in the design and awarding of the CREMA contracts Secondly, the Bank has contributed in further strengthening DNV's institutional capacity in meeting its future strategic mandate. The project supports the shift in the DNV's organizational structure. DNV is moving from an agency less involved in direct execution of works but rather more involved in planning, contracting, and monitoring works. This shift would require optimization of DNV staffing level and decentralization of decision making and operational work to the regional centers. In addition, the Bank will continue to assist in enhancing the use of the HDM model, including a seminar on the latest HDM-4 version. The proposed loan includes financial resources for the calibration of the HDM model for the Argentine network, and will support the implementation of the recommendations of the IDB-financed study on DNV reorganization. Projed Appraisal Document Page 10 Argentina - National Highways Rehabilitation and Maintaurnce Projec E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): 1 Cost-Benefit Analysis: NPV=US$ 2,391 million; IERR= 83% O Cost Effectiveness Analysis :I Other (Specify) A minimum of six project altematives were evaluated with the HDM model for each one of the nearly 600 homogeneous road sections defined by DNV based on a network-wide survey of road characteristics and traffic. The sensitivity and switching value analyses have shown that the economic return is robust, with a worst-case scenario yielding an economic rate of return of 54 percent, and costs multiplied by 5 or current traffic divided by 7 to yield a zero net present value. The switching values in the case of Brazil road projects have ranged from 4 to 13. The main benefits are savings in road user costs along with savings in future road maintenance needs. The main beneficiaries are road users who will save US$240 million per year on their financial transport costs during the project period alone. The trucking sector will receive 60 percent of the road user benefits, and will reduce by 7 percent transport costs with respect to the without-project case. The road agency will also benefit because, after the project is completed, future financial capital maintenance needs will be 23 percent of the expenditures during the project period, going from US$122 million per year to US$94 million per year. DNV estimates ta local communities will benefit with the generation of about 5,000 jobs every year due to road maintenance activities. 2 Financial (see Annex 5): The DNV budget, for the most part, consists of transfers from the Treasury. For the year 1997, the budget is distributed as follows (not including debt service): administrative and personnel expenses (11%); new construction and paving (3 8%); and rehabilitation, maintenance, and transfers (51%). Between 1996 and 1997, the DNV budget went up by about 43%; this was largely due to an increase in new construction and paving. Also, 1996 was an unusual year marked with low activity. Rehabilitation and maintenance expenditures over the last five years have been in the range of US$215-230. While these expenses are expected to rise in 1998 due to the startup of the CREMA program, by the year 2002, the rehabilitation and maintenance requirements are expected to return to the sustainable level of about US$200 million. On average, CREMA costs about 25% more than traditional rehabilitation and maintenance under the kilometer- month system. This difference is due to: (a) the financing cost which the private contractor must incur under the delayed payment schedule for the first-year rehabilitation works; and (b) price contingencies for future maintenance work. However, this cost is offset by the gains in efficiency, quality, and reliability of work performed under the CREMA. 3. Technical: CREMA is a performance-based program for rehabilitation and maintenance. There are 61 contracts under Phase I which have already been contracted. Phase 2 CREMA would include another 14 contracts. The rest of the network will be maintained as follows: about 9,800 km tirough concessions; 1,800 under the Construct, Operate, and Transfer programn (COT), about 3,000 km by the provinces, and about 5,000 km under the kilometer-month system. As the majority of CREMA contracts were let at one time, the contractors would be providing rehabilitation works about the same time. This may stretch the available capacity or may have put pressure on the price of the contracts. DNV is planning to correct this problem by staggering the contracts in the future. The technical package (pavement strengthening technology and road maintenance standards) was developed during the design of Phase I of the Project Appraisal Document pag it Argentina - National Highways Rehabilitation and Maintenane Project CREMA program. This package is based on proven highway engineering practice and experience witb siilar programs in Argentina, Chile, Canada, United States of America, and the United Kingdom. The project includes a number of engineering studies to advance the state of the art in road design and cost-effective use of local road- building materials. 4. InAstitutional: a. Executing agencies: The Ministry of Economy (as the Government's borrower) would on-lend the loan funds to DNV. Under a separate subsidiary agreement between Ministry of Economy and DNV, DNV will be appointed as the executing agency for the loan. In light of changing market conditions, DNV's role has evolved from that of an executor to one of planning and monitoring the national roads network. In 1997, DNV operated from its central headquarters office and five regional offices with a total staff of about 3,300 employees With its changing role, DNV's staffing levels are expected to decrease to about 2,400 employees by the year 2002. In addition, DNV has incorporated into its planning process the World Bank's HDM model which has facilitated in decision making for the CREMA contracts. A review of this organizational structure and the accompanying job descriptions are the subject of an IDB-financed study. The commencement of the study is a condition of loan effectiveness. b. Projed management: The project will be managed by the same PCU as that of the 361 1-AR. The general financial management system of the project was assessed by Bank staff during the appraisal mission. DNV is in the process of updating its current financial management system to conform with Bank requirements. On completion of this update, DNV's financial management system will be satisfactory. The PCU has a proven track record in managing projects for both the World Bank and the IDB. Nevertheless, given limited prior experience in awarding and monitoring the CREMA contracts, the PCU will be strengthened by additional staff commensurate with additional responsibilities of the new project. The PCU has previous experience with the Bank's requirement on procurement, disbursements, environmental and social guidelines, and auditing requirements, and is uniquely qualified to manage the proposed project. The incremental costs of the PCU will be financed under the project. s. Social: Impacts of road rehabilitation and maintenance operations on the local population will be minimal, as most of the network under CREMA covers inter-urban highways passing through sparsely populated areas. No resettlement is expected under the project. 6. Environmental assessment: Environmental Category El A E B a C The project supports minimum rehabilitation and maintenance works on existing national road network. No new roads or paving is contemplated under the project. Under the ongoing 361 1-AR project, a permanent environmental unit was established in the DNV. The Environmental Unit (EU) is responsible for reviewing the sub-projects for their environmental content. Similarly, the environmental operational manual approved by the Bank for use under the ongoing project will also be adopted to guide the selection and implementation of sub-projects under the proposed project. The EU also actively participates during the implementation of the project to ensure that the contractors fully follow the environmental guidelines. Nevertheless, the EU will be fiurther strengthened under institutional component of the proposed project. Project Appraisal Document Page 12 Argaina -National Highways Rehabilitation and Maintenance Project 7. Participatory approach [key stakeholders, how involved, and what they have influenced: if participatory approach not used, describe why not applicable]: Private Sector (concessionaires, contractors) IS/CON COL COL Academic institutions COL COL COL Local governments (state, municipal) IS/CON COL CON Other donors IS/CON CON CON Note: IS = Infonmation sharing, CON = Consultation, COL Collaboration a. Primary beneficiaries and other affected groups: Road users, cargo haulers, property owners, contractors, universities. While there are a number of stakeholders, a limited participatory approach was used because: (a) no new construction is contemplated in the projects; and (b) improved road surfaces will benefit all stakeholders without any negative outcome. The benefits to these groups have been, to a large extent, confirmed by the HDM results. Also, a number of universities are expected to collaborate with DNV on the institutional development component. Similarly, the construction activities under the project are expected to benefit the private sector and will result in new employment opportunities. b. Other key stakeholders: Multilateral institutions, especially IDB. During project preparation, extensive dialogue was maintained between the IDB and the Bank, especially in defining the terms of reference for the IDB-financed human resources/organizational study for DNV. F: Sustainability and Risks L. Sustainability: Economically, sustainability of the project's benefits depends on ensuring stable funding for the road rehabilitation and maintenance program. DNV has tried to mitigate the funding shortfalls by concessioning more heavily used roads and ensuring a legal minimum level of Government financial support through the use of CREMA contracts. However, the CREMA mechanism assures funding only through the contractual period (i.e., five years). At the end of the current CREMA contracts, DNV would have to renew these contracts, for which it will be dependent on the Government's support. However, these needs would be minimized due to: a) improvements in the overall condition of the network (or at least arresting further deterioration of the network); and b) converting heavily used roads into toll roads. It is estimated that after the completion of rehabilitation and maintenance programs financed under the project, the annual maintenance needs of the project will be reduced to US$200-230 million. These requirements are in line with DNV's historic and current budgets for maintenance and thus should be sustainable. Pro"cat Appraisal Document Page 13 Argentina - National Highways Rehabilitation and Maintenance Project 2. Critical Risks (reflecting assumtions in thefourth column ofAnnex 1): is Risk ti sk imizat Outputs to Objective * The Governnent's continued support for the N CREMA contracts covering CREMA system 11,144 km have been signed; another 2,500 km are ready to be let by early 1998. * Traffic and networks surveys are reliable and N The project supports a training timely and the VOC methodology remains and institutional building consistent component. * Continued interest of private-sector in CREMA M Private interest will continue as long as the Government is paying its bills on time and the private sector complies with the contractual obligations. So far the Government has showed great commitment to meet its legal obligations. * Regionalization of DNV's functional S An IDB-financed study will responsibilities and staffing; in accordance with propose a new organizational the agreed schedule (Annex 5) structure. The study will also make recommendations on strengthening the role of the regional offices of DNV. Components to Outputs * Timely availability of counterpart funds N CREMA contracts form legal obligations of the Government. * Training programs are adequately prepared and S Detailed agreement on the scope implemented and implementation of the training program will be reached on completion of the lDB- financed organizational study.. * Efficient performance of contractors and N Contracts have penalty clauses supervision teams for sub-standard performance. Supervision teams will be strengthened by a rigorous training program Overall Risk Rating N Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligibfe or Low Risk) Projc#A Appraisal Docue3ol hpg 14 Argeni n3 --Nstional Highways Rhablithton ad Maiktaoancs Project 3. Possible ControvcrsialAspects: No internal and external controversial aspects are foreseen at this time. G: Main Loan Colnditions 1. Effectiveness Conditions: * Contracting of an IDB-financed human resources/organizational study, satisfactory to the Bank. (The TORs for the study were agrecd during the Appraisal). Z Other fclas;fy according to covepant types used in the LegolAgreements.J: a Receipt of a project progress report every three months. * The usc of the Bank-approved Environmental Operational Manual for all sub-projects. * Mid-tenn review of the pmjoct's progress in March 2002. a Regular publication of DNV's Annual Report of its work program, operational and financial performsnce, for release to the public no later than March 31, of the following year R. Iteadiness for Implemenitation I The engineering design documents for the first year's activities are complcte and ready for the start of projmect inplementation. 'The procurement documetnts for the first year's activities are complete and ready for thc strt of projcct implomcntation. i The Project Inplemuation Plan has been appraised and found to be realistic and of satisfictory quaWty. D Th following items are lacking and are discussed under loan conditions (Section G): I. Compliance with Bank Policies 3 This project complies with all applicable Bank policies. a The fbllowing exceptiois to Bank policies are recommended for approval: The project complies with all other applicable Bank policies. M. kan/A. Kapur Krishna Challa Myrnh Alexander Task anagcr Actng Director SMU) Director CMU Project Appraisal Document Page 15 Argentina- National Highways Rehabilitation and Maintenance Project Annex I Argentina: National Highways Rehabilitation and MaintenanceProject Project Design Summary CAS Objectives Rebuild and upgrade the road Rehabilitate about 5,500 kms. Periodic Bank project The Goyernment continues infrastructure. Enhance the and maintain about 15,000 supervision and mid-term throughout project public road infrastructure in kms. of the national road review implementation to support and the provinces; and promote network under the CREMA show commitment to the private sector investments in project and to the CREMA roads. system Project development objectives: 1. Stabilize road transport 1.1. On completion, the DNV, through timely traffic 1.1. Traffic and networks costs by arresting the roughness on non- and network surveys and HDM surveys are reliable and further deterioration of the concessioned paved evaluations timely non-concessioned national network will not exceed road network an IRI of 3.5; while roads 1.2. Methodology for VOC in poor condition will not evaluation remains exceed 6% consistent 2. Increase the participation 2.1. The maintenance of at Periodic Bank project 2.1. Private sector continues to of the private sector in least 90% of the non- supervision and mid-term show interest in CREMA road rehabilitation and concessioned paved review system of contract and maintenance activities network will be contracted does not overbid in the out by the mid-term future review. 3. Strengthen the capabilities 3.1. The responsibility for the Periodic Bank supervision and 3.1. DNV central management of DNV for planning, preparation, and mid-term review continues to be willing to contracting, and efficient monitoring the devolve preparation, and supervision of rehabilitation of the entire monitoring of CREMA rehabilitation, non-concessioned network contracts to regional maintenance, and will be transferred to the authorities concession programs regional districts by the mid-term review. 3.2 Staff realigned between Periodic Bank supervision and 3.2. Timely implementation heaquarters and the mid-term review for the realignment of staff regional offices 3.3. Regional authorities have Periodic Bank supervision and 3.3. Timely conclusion and been trained and equipped mid-term review implementation of the to assume newly assigned human resources and responsibilities organization study Baseline and targeted values should be shown, with the latter divided into values expected at mid4am, end of project and full impact Project Apprisal Document Page 16 Argentina - National Highways Rehabilitation and Maintenanc Project Annex 1 Project Outputs 1.1. At mid-term and at the 1.1. Network surveys results 1. Prevent further end of the project, the 1.1. The rehabilitation and deterioration of the non- non-concessioned paved maintenance programs concessioned network have been executed * a proportion of roads in according to expectations, good condition (RI <4) both quantitatively and of not less than 65 °/o qualitatively . a p.oprtonof in 1.2. Roughness surveys are * a proportion of roads snreliable and timely poor condition (IRI>5) not exceeding 10% and 6% respectively. 2. Rehabilitation and 2.1. The proportion of the maintenance program length of the non-1. Connued interest of the concessioned paved 2. 1. DNV reports, Bank's 21 otne neeto h contracted by the CREMA ctorkcsontracted 2.. nssion asepssment, and private sector in their system ~~~~~network contracted under involvemesmntead . nt in the system the CREMA system will Procurement reports mantenance anagement increase from a current terad network 56% to at least 70% of the road network 3. Regional districts to be capable of and made 3. 1. At mid-trm review, hal 3. 1. Continued commitment of responsible for the of the regions will be 3.1. DNV reports with Bank's DNV central management preparation (Including responsible for overall mission assessment to decentralize surveys, economic analysis implementation of responsibilities and and udge prearaton)rehabilitation and acceptance by DNV and budget preparation) maintenance programs. regional units to assume follow up and monitoring At the end of the project, rgoa nt oasm of the rehabilitation and At regens of he such such responsibilities maintenance program in all regions will have such their respective region responsibilites Project Components 1. Rehabilitation and 1.1. US$544MM (58%) Supervision and progress * Availability and timely maintenance of CREMA By the end of 1998: reports release of counterpart contracts, phase 1 * 4,026 km rehabilitated funds and/or resurfaced * 11,814 km maintained . Efficient performance of regularly, every year contractors and inspection teams Project Appaisal Document Pap 17 Argenina - National Highways Rehabilitation and Maintenance Project Annex I ~~~~~~~.. ..... .. . .... ,, ,e 2. Rehabilitation and 2.1. US$130MM (14%) maintenance of CREMA By the end of 1999: contracts, phase 2 * 1,459 km rehabilitated and/or resurfaced a 2,581 km maintained regularly, every year 3. Resurfacing, 3.1. US$240MA (26%) rehabilitation, and By the end of 2003: maintenance works on . 2,359 km rehabilitated roads outside the CREMA . 5,106 km maintained networks regularly, every year 4. Institutional Development 4.1. US$JIMM (2Y) and Consultant Support . Completion of the 4.1. Commitment by the DNV Component organizational and the Government to diagnostic study (end- implement the 1998) recommendations of the * Implementation of the human organizational resources/organization diagnostic study (end- study 2002) * Completion of the knowledge-based programs (end-2002) ProjectAppraisal Document Pare is Argentina - National Highways Rehabilitation and Maintenanc Project Annex 2 Argentina: National Highways Rehabilitation and Maintenance Project Project Description The project comprises four components. The first three consists of civil works including rehabilitation and routine maintenance of the non concessioned paved network, at an estimated cost of US$914 million (98.4% of total project cost). The fourth component covers technical assistance, training and equipment to strengthen DNV's organizational capabilities and to support knowledge-based programs, at an estimated cost of US$15 million (1.6% of project cost). Project Component 1 - US$544 million (58.5% of total project cost) This component represents the first phase CREMA program which has already been let following Bank procurement guidelines under the continuation of the on-going Bank loan 361 1-AR. This program will cover a total length of 11,818 km of the non-concessioned paved network, of which 4,026 km will be rehabilitated under the project in 1998. Routine maintenance of the entire 11,818 km will also be executed under the project, during the 5-year implementation period. Rehabilitation works will include resurfacing with slurry seal or surface dressing over a length of 970 km, asphalt concrete overlays (AC) in thickness varying between 3 and 7 cm over 2,933 km, and reconstruction of base and wearing course over the remaining 123 km. The works will be carried out through 61 individual contracts covering distinct sub- networks varying in length between 80 and 328 kin. They will enable the overall quality and structural integrity of that network to be preserved, maintaining a good level of riding quality equivalent to about 3.6 average International Roughness Index (IRI) throughout the next five years. Also, in the future, only periodic maintenance consisting of thin bituminous carpets (about 3 cm) will be needed every 5 to 10 years in order to maintain a satisfactory and similar level of service (average 3.6 IRI), at a lower financial cost. Project Component 2- US$130 million (14.0% of project cost) This component represents the remainder second phase CREMA program which will be procured in 1998. It covers an additional length of 2,581 km of the non-concessioned paved network, and will include rehabilitation works over 1,459 km to be carried out in 1998 and 1999, as well as routine maintenance over this entire sub-network during the 5-year implementation period of the project. Rehabilitation works will consist of resurfacing with slurry seals or surface treatment over 337 kin, asphalt concrete overlays in thickness varying between 3 and 5 cm over 1,092 km and reconstruction of base and wearing course over 30 km. The works are to be contracted through 16 individual contracts involving distinct sub-networks with length ranging from 93 to 203 km. Consistent with the first phase CREMA program, the rehabilitation and maintenance operations to be carried out will help prevent further deterioration of that network, and maintain a uniformly good riding quality equivalent to a 3.6 average International Roughness Index throughout the next five years. Beyond, year 2003, that good roughness level can be maintained through regular periodic overlays of 3 cm thickness executed at intervals varying between 5 and 10 years. Project Component 3- US$240 million (25.8% of total project cost) This component is designed to improve the condition of the remaining 5,106 kan of non- concessioned paved network not included in the above CREMA contracts. Combined with CREMA, this component will help achieve a uniformly good to fair condition over the entire non-concessioned paved national network. The improvements are to be carried out between 1999 and 2003 at an estimated cost US$174 million. They will consist of a variety of rehabilitation works, ranging from resurfacing with 3 cm PrNect Appraisal Docmamnt Par 19 Argentina - National Highways Rehabilitation and Maintenance Projec Annex I of asphalt concrete overlays (905 Ian) or strcngthcning with 4 to 7 cm asphalt concrete overlays (1,110 Iam) to reconstruction of base and wearing course (344 krm). In addition, the routine maintenance of this residual network will be contracted out and regularly carried out through the project period at an estimated total cost of US$66 million. The works will cause the proportion of roads in poor condition (IRI>5) on that residual network to be reduced to about 9% at the end of the project. The average International Roughness Index will be maintained at about 3.6 throughout the next five years. In the future, that network can be satisfactorily maintained to provide a similar level of service using periodic asphalt concrete overlays of 3 cm thickness, at a substantially lower cost (about 40% less). Overall, the project will help rehabilitate a total length of about 7,844 km (or 40% of the total non- concessioned paved network) consisting of 1,307 kn of slurry seal, 2,990 kan of 3 cm thick asphalt concrete overlays, 1,575 km of 4 cm thick asphalt concrete overlays, 1,235 kln of 5 cm thick asphalt concrete overlays, 40 km of 6 cm thick overlays, 201 km of 7 cm thick overlays and 497 kIn of reconstruction. The weighted average thickness of asphalt concrete overlays is estimated to be in the order of 3.8 cm over the 7,844 kan of network to be rehabilitated (3.4 cm for CREMA and 5 cm for the network outside CREMA). In the future, only periodic overlays consisting of thin asphalt concrete carpets will be needed to sustain a satisfactory level of service (average roughness below 4 IRI). ':,:..:: ........ . .. ,n ".' ...l A :1; Total (cm) 11,818.00 2,581.00 5,106.00 19,505.00 Total Rehabilitation (kin) 4,026.00 1,459.00 2,359.00 7,844.00 Rehabilitation (0/e) 0.34 0.57 0.46 0.40 Slurry Seal (kn) 969.80 337.00 - 1,306.80 16.7% 3 cm AC (km) 1,204.00 881.00 905.00 2,990.00 38.1% 4 cm AC (km) 1,113.30 185.00 277.00 1,575.30 20.1% 5 cm AC (km) 547.80 26.00 661.00 1,234.80 15.7% 6 cm AC (km) 39.70 - 39.70 0.5% 7 cm AC (kcm) 28.70 - 172.00 200.70 2.6% Reconstruction (kIm) 122.70 30.00 344.00 496.70 6.3% Average AC (cm) 3.50 2.85 5.00 3.82 Consolidated Financing Table for on-going 3611-AR loan and new loan Phase I CREMA Phase 2 CREMA Rehabilitation & Institutional Support Total Maintenance of remaining network ______ Total Bank Total Bank Total Bank Total Bank Total Bank Cost Financing Cost Financing Cost Financing Cost Financing Cost Financing USSM USSM USSM US$M US$M USSM USSM US$M USSM USSM 3611-AR 139 104 - - 592 211 25 25 756 340 New loan 544 370 130 65 240 0 15 15 929 450 Total USS 683 474 130 65 832 211 40 40 1685 790 Total % - 69.4 _ 50 - 25.4 100 - 46.9 Project Appraisa Document Page 20 Argentina -National Highways Rehabilitation and Maintenance Project Annex 2 Project Component 4 - US$15 million (1.6% of total project cost). The Implementation and Institutional development component consists of three broad categories and is designed to: (a) assist in the implementation of the project by providing advisory support to the Project Coordinating Unit in DNV, undertaking periodic supervision of the rehabilitation and maintenance contracts, and in purchasing state of the art laboratory equipment (the total cost of this category is US$6 million); (b).strengthen DNV's institutional capabilities both at central and regional levels, through a series of training programs, other institutional support activities, and support for the concession programs (the total cost of this category is US$4.0 million); and (c) support various knowledge-based programs (studies and manuals), including the modernization of the sector library, at an estimated cost of US$5 million. The following is a brief description of the various training programs, studies and other initiatives for which terms of reference have been included in the project implementation plan: (a) Staff Exchange Programs with CEDEX and FHWA. This program is to obtain direct knowledge of developments in Road Organizations or Agencies in other countries, and also to investigate more advanced technologies and investigate how to incorporate them in DNV's operations. The first step would be establish cooperation agreements with the General Administration of Highways of Spain and the Federal Highways Administration of the United States. This component includes fellowships for training abroad and attendance at international conferences and technical workshops. This program is estimated to be US$300,000, and will be implemented over the entire project implementation period. (b) Support for Three Concession Studies. These studies are proposed to support the concession program. The first one seeks to assess and quantify the economic and financial impact of a road concession on a specified transport corridor. The second study aims at reviewing and analyzing the performance of the concessionaires over the last five years in the carrying out of their maintenance programs, to identify innovations in workmanship, processes, equipment or materials that have led to more cost-effective execution and to incorporate the lessons in DNV's own maintenance manuals. The third study aims at comparing and selecting the most appropriate types of materials to be used for slope stabilization and preservation. Duration of studies: About 2 years; at a cost of about US$1 million. (c) Engineering Studies These consultant studies refer to detailed engineering investigations to be made for additional road sections to be rehabilitated and maintained under the project.. The total cost of these studies is aboitt US$1.8 million. (d) Update of Geometric Designs This study aims at updating and improving DNV's 1967 Manual on "Geometric Standards for Rural Roads". It will draw from the latest international related references and in particular the 1994 AASHTO Standard Specifications and other European documentation. The updated version would include design standards for road cross-sections, functional classification of highways, intersections, capacity and level of service; elements that were missing in the prior manuals. Duration of study: about 8 months at a cost of US$100,000. (e) Calibration of HDM m Model for Argentina. The study aims at defining the calibration factors to be applied to the pavement deterioration models embodied in HDM III, and the forthcoming HDM IV, for the various regions of Argentina. It will involve the selection and further performance monitoring surveys on representative and homogeneous sections of the national highway system. The results of the investigations will be used to calibrate and adjust the model to Argentinean conditions. Duration of study: 5 years; at a total cost of US$500,000. (f) Use of Local Materials. The purpose of the study is to promote the cost-effective use of local road building materials in the north-west region of Argentina, including a comprehensive definition of Project Apprisal Document Page 21 Argentina - National Highways Rehabilitation and Maintenance Project Annex 2 their geotechnical characteristics, three-dimensional location, and susceptibility to chemical stabilization. The study should help prepare a catalog of pavement design based on the above-defined characteristics and on the results of a pavement performance monitoring survey of existing pavements. Duration of study: 30 months; at a total cost of US$ 500,000. (g) Modernization of the Sector Library. This work will modernize the library, as well as add an internet connection, generating a constant flow of information which in the end will come to the Central DNV Library from all over the country. Implementation of the Microisis system which is to classify the library resources has already started. The cost of the project is $100,000. (h) Study of the Unit Costs of Key Maintenance Operations. The purpose of the study is to monitor the real cost of a selection of significant maintenance activities carried out by Contractors on the national road network. It will involve the selection of a few but representative work sites and the monitoring of the resources effectively used to carry out the specified activities (materials, equipment, and labor). The study will help DNV establish a list of reliable costs that can be used to improve the preparation of maintenance programs and contracts, and to serve as a reference in the evaluation and negotiation of CREMA bid proposals. Duration of the study: 2 years; at a total cost of US$1 million. Project Appiaal Document Page 22 Argentina- National Highways Rehabilitation and Maintenance Project Annex 4 Argentina: National Highways Rehabilitation and Maintenance Project Estimated Project Costs (US$ Millions) ~~~~~~~~~~~~~~~. . . . . . . . . . .0g 0itt0- Components L~~~~~~~~~~~~~~~~~pxxocl Forei&gn T..t. l Physical Components * CREMA Phase 1 281.05 229.95 511.00 * CREMA Phase 2 67.65 55.35 123.00 * Non-CREMA Rehab. & Maint. 123.20 100.80 224.00 471.90 386.10 858.00 Project Implementation and Institutional Development Components a. Project Implementation: Support to the PCU 1.35 0.15 1.50 Supervision of Rehab. & Maint. 2.10 0.90 3.00 Laboratory Equipment - 1.50 1.50 b. Institutional Development: Training of DNV Staff 0.15 1.35 1.50 * Other Institutional Support 0.15 1.35 1.50 * Support for the Concession Program 0.80 0.20 1.00 c. Other Technical Support and Studies Engineering Studies 1.44 0.36 1.80 *Update of Geometric Designs 0.10 - 0.10 Calibration of HDM III 0.50 0.50 Study on the Use of Local Materials 0.50 - 0.50 Modemization of Sector Library - 0.10 0.10 Unit Costs of Maintenance Operations 0.70 0.30 1.00 Other Studies (to be defined) 0.70 0.30 1.00 8.49 6.51 15.00 Contingencies * Physical 2.75 2.25 5.00 Price 28.05 22.95 51.00 30.80 25.20 56.00 Total - 511.19 417.81 929.00 Project Appmisal Document Page 23 Argentina - National Highways Rehabilitation and Mainteance Projec Annex 4 Argentina: Natonal Highways Rehabilitation and Maintenance Projed Cost-Benefit Analysis Summary (US$ Millions, 1997) Comparison with Without Project Case Financial Impact Net Benefits A) Agency Present Value @ 12 percent - Financial capital * Economic Financial expenditures during Analysis Analysis project period (1998-2003): Users CREMA 1 1603 2003 6,350 USS/year-km i.e. CREMA 2 423 528 122 M US$/year Other Works 409 511 - Financial capital Subtotal 2434 3042 expenditures after project Agency CREMA 1 -25 -43 period (>2003) to obtain CREMA 2 4 6 same level of service: Other Works -22 -32 4,900 US$/year-km i.e. Subtotal -43 -62 94 M US$/year Society CREMA 1 1578 1961 CREMA 2 426 534 B) Users Other Works 387 479 - Financial road user costs Total 2391 2980 savings with respect to IRR CREMA 1 80% 65% without project case CREMA 2 100% 79% during project period: Other Works 111% 103% 12,400 US$Syear-km i.e. Overall 83% 68% 240 M US$/year * Reseals, overlays or reconstructions Methodoloev * An economic analysis was done for each rehabilitation and maintenance program being financed under the project consisting of: (a) contracts under CREMA, 1st phase; (b) contracts under CREMA, 2nd phase; and (d) other works not covered by CREMA, all of which account for 98 percent of the project costs. The main objective of the project is to minimize road transport costs by arresting further deterioration of the non-concessioned national road network. The main benefits are savings in road user costs, mainly vehicle operating costs and time savings, along with savings on future road agency maintenance expenditures. Net benefits were evaluated using the Highway Design and Maintenance Standards Model (HDM-III) which simulates life cycle conditions and costs and provides economic decision criteria for multiple road design and alternatives. * DNV collected detailed network wide road characteristics and traffic data and identified approximately 600 homogeneous sections according to their condition, structure, traffic, topography and enviromnent. Each section was evaluated using the HDM model, by regional engineers after receiving training by DNV central staff, with the objective of: (a) identifying sections to be maintained and sections in which Project Apisal Document Pap 24 Argentina - National Higways Rehabilitation and Maintace rjed Annex 4 some kind of rehabilitation work was economically justified, such as a reseal, overlay or reconstruction; and (b) for the sections that warranted rehabilitation, computing the net benefits of possible project alternatives. * DNV evaluated a minimum of six project alternatives for each homogeneous section. Five of them were common to all sections and corresponded to: (a) the without-project alternative which includes routine maintenance followed by reconstruction when the road roughness reaches 8.0 IRI; (b) slurry seal in the first year; (c) 3 cm overlay in the first year; (d) 4 cm overlay in the first year; and (e) 5 cm overlay in the first year. The sixth project alternative was another rehabilitation option in the first year defined by regional engineers with local experience of the rehabilitation needs of each section. After the rehabilitation work in the first year of the analysis period (20 years), all alternatives included adequate and appropriate maintenance policies in future years. The net present value (NPV), at a 12 percent discount rate, computed by HDM and the road deterioration predictions of HDM were then used to define the minimum, economically feasible, technical standards to be required for the CREMA contracts and for rehabilitation works not covered by CREMA. * Maintenance and rehabilitation costs were estimated in financial and economic ternns; economic costs being on average 70 percent of the financial costs (net of taxes). Vehicle fleet characteristics and unit costs were defined for typical vehicle classes, economic road user costs being on average 80 percent of financial cost due to taxes. The traffic growth rate was defined based on recent traffic trends, and was set to 3 percent for the duration of the analysis period. Typical economic road user costs and composition are given below, in US$ per vehicle-kIn, as well as a relationship between the average fleet economic road user costs and road roughness, for future evaluation and monitoring of changes in typical road user costs. *,, -, , , ,- - - - - ~~~~~~~~~~~~~~~~~~~~~~~~~~..... - .. ...:- itnhns fIR! __-_.__. 2 0.37 0.38 2.61 0.51 1.35 3 0.37 0.38 2.62 0.51 1.35 4 0.38 0.40 2.66 0.56 1.43 5 0.39 0.41 2.71 0.62 1.50 = RSSSSS SS~~~~~~~~. ..=. =i. ... = .. D . =...= Fuel & Lubricants 0.04 0.07 0.08 0.08 0.15 Tires 0.003 0.005 0.03 0.02 0.06 Maint. Parts & Labor 0.07 0.08 0.34 0.22 0.84 CrewTime 0.11 0.12 0.16 0.10 0.13 Depreciation & Interest 0.07 0.05 0.17 0.09 0.17 Passenger Time 0.08 0.06 1.85 0.00 0.00 Fleet Economic Road User Costs (US$/ vehicle-Ian) = 0.52622 + 0.05737 * IRI - 0.00614 * IRPA2 + 0.00068 * 'IA3 * The first phase CREMA program representing about 58% of the project total costs has already been contracted, therefore, based on the contract agreements, there is an updated and more precise definition hrqAt Documat Pare 25 ArSmfia -National Highways Rehabilitation and Maintenance Project Annex 4 of the program costs, rehabilitation works and rehabilitation timing. With this new information, the Bank mission has reevaluated the benefits of the project, confirmed that all project components yield acceptable economic return (IRR greater than 12 percent), and estimated the financial impact of the project. Detailed results are in the project file. Sensitivity Analvsis * The economic evaluation of the project yields a net present value, at 12 percent discount rate, of US$ 2,392 million and an economic rate of return of 83 percent. The results are robust relative to the main risks considered in the economic analysis, namely, cost increases and lower traffic volumes. Under a worst case scenario of traffic dropping by 80 percent of the current levels, a 20 percent increase in costs, and a one percent traffic growth rate, the project still yields significant benefits, represented by an NPV of US$ 1,414 million and an economic rate of return of 54 percent, which indicates that there is limited risk of the project being uneconomnical. Because CREMA 1 has been already contracted on a lump sum basis, the risk of cost increases is minimal. The sensitivity analysis yields the foDlowing results. gGX,i,0'i,-R..'se':.:H~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... .. ...g (tI$S MWie4.~~~~~~~~~~~~~~~..~~~~i ~~ ~ .. ...... Base Case 2,391 83 Sensitivity: * 1% Growth Rate 1,885 81 * Traffic decrease by 20% 1,610 66 * Costs increase by 20% 2,291 76 * Combination of cases described above 1,414 54 The analysis of switching values of critical items indicates that to yield a NPV equal to zero, investment costs need to be multiplied by 5 or base case traffic levels divided by 7. Distribution of Benefits * The distribution of the economic benefits represents the savings between two alternatives - without the project altemative which includes routine maintenance followed by reconstruction when the road roughness reaches 8.0 IRI and with the project alternative which optimizes maintenace and rehabilitation strategies within the budget constraints. The distribution of the present value of economic benefits over the 20-year life cycle is summarized in the following table. Road users would be the greatest beneficiaries of the investments because they would lower their road transport costs in the short and long term. The financial road user cost savings with respect to the without project case during the project period (1998-2003) amounts to USS 1,450 million which corresponds to USS 12,400 per year-km, a savings of 5 percent with respect to the base case. The analysis shows that (a) trucks receive 60 percent of the user benefits, buses 10 percent and cars 30 percent; (b) time savings are 7 percent of the project benefits; and (c) medium trucks receive slightly greater benefits because they save 8 percent on vehicle operating costs with respect to the base case while other vehicle classes save from 4 to 6 percent. Poed Appra Dment Pagp 26 Argentim - National Highways Rehabilitation and Maintenance Project Annex 4 Present Value of Agency Cost and User Savings (USS millions)* Amount (%) Agency Periodic Investments -40 92 Recurrent Maintenance -3 8 Saving with respect Subtotal -43 100 to without project case (°) User Cars (Vehicle Operating Cost)s 370 15 -5 Pickups (Vehicle Operating Costs) 296 12 -6 Buses (Vehicle Operating Costs) 118 5 -4 Medium Trucks (Vehicle Operating) 326 13 -8 Articulated Trucks (Vehicle Operating 1,136 47 -6 Cars (Passengers Time Savings) 36 1 -2 Pickups (Passengers Time Savings) 20 1 -2 Buses (Passengers Time Savings) 132 5 -2 Subtotal 2,434 100 Society Net Present Value 2,391 i These amounts are present values (at 12% discount rate and 20-year analysis of the differences in agency and user costs between the "with" and "without" alternatives. * The road agency will have positive financial benefits in the long term because future expenditures needed to maintain the network at the same and acceptable level of service as today, (i.e. average international roughness index (IRI) of 3.5 to 3.7), will decrease. During the project, the agency will spend US$ 6,350 per year-kmn for capital works (reseals, overlays and reconstructions) and after the project that amount will be reduced to US$ 4,900 per year-km. With the project, the proportion of the network in poor condition in the year 2003 will be 6 percent, whereas without the project, it would have been 55 percent which would imply future rehabilitation needs of US$8,500 per year-km. The recurrent maintenance expenditures will be about the samne during and after the project, around US$ 3,000 per year-kn. * Overall, society will have positive economic benefits, with a net present value of US$ 2,391 million - over the 20 year period. * DNV also estimated that communities located near the networks to be maintained would benefit through opportunities of employment generated by road maintenance activities: a preliminary evaluation indicates that about 5000 jobs will be generated across all regions, every year. Projet App Don Page 27 Argentin-National HighWay Rabiiio and Mantnance Poe Annex 5 Argentina: National Highways Rehabilitation and Maintenance Project Financial Summary (Current US$ Million) ........ :,,r, R~~~~. R:5,:,.,,R...... .::....g' .............. ... ....... .. -. ...... ..... R' . .. ...'' ' ''" l0|8 Sources of Funds Treasury 414 506 483 371 385 411 490 540 570 600 Own resources 2 1 5 3 4 7 7 7 7 7 Loans 38 60 77 89 232 300 245 167 113 86 Total 454 567 565 463 620 718 742 713 689 692 Uses of Funds Personnel 56 55 56 56 51 50 51 51 51 51 Administratin 24 18 16 6 10 24 17 17 17 17 Transfers 84 77 104 13 56 52 67 67 67 67 Routine Maintenarice 49 150 150 150 150 157 157 149 146 152 Rehabliation 48 90 92 65 89 205 136 87 77 79 NewConstuction 141 111 91 111 218 141 196 222 225 235 DebtSerice 51 67 57 63 46 90 119 121 107 92 Total 454 567 566 463 620 718 743 713 689 692 Staffing Headquaters 745 606 547 502 556 505 471 438 429 398 Regions 3,71 3,093 3,065 2,931 2,785 2.574 2402 2,237 ,189 2,034 Total 4,016 3,699 3,612 3,433 3,341 3,079 2,873 2,675 2,618 2,432 * The projected staffing liels are based on the observed hIstorical attrition rates. DNV is planning to undertake an organizationalhuman reources study which wIl determine the profile and the optimal staffing levels for its new organization. OSD PAD Form: July 30, 1997 Project Appai Docment Pap 28 Argentina-National Highways Rehabilitation and Maitenance Projed Annex 6 Argentina: National Highways Rehabilitation and Maintenance Project Procurement and Disbursement Arrangements Procurement Procurement methods (Table A) Prior review thresholds (Table B) Disbursement Allocation of loan proceeds (Table C) Use of statements of expenses (SOEs): The use of SOEs will be permitted. The visiting Bank missions will review the sample of SOEs to determine their eligibility for financing under the Bank loan. In addition, an annual audit of the SOEs was agreed during the Appraisal. Special account: A special account of up to US$27 million, representing 4 months of disbursements will be opened in a commercial Bank under terms and conditions acceptable to the Bank. This account would be replenished for the amount of withdrawals on account of eligible expenditures.. OSD PAD Form: July 30, 1997 Projed Apprais Douniet Page 29 Afgntina - Nationl Highways Reablitation an Maintanc Projed Annex 6 Table A: Project Costs by Procurement Arrangements (US$ Million) Expenditure Catego Procureme.t e. vd 1. Works a) CREMA 1 544.00 544.00 (370.00) (370.00) b) CREMA 2 130.00 130.00 (65.00) *(65.00) c) Non-CREMA Works 240.00 240.00 (0.00) (0.00) 2.Goods 0.60 0.90 0.30 1.80 (0.60) (0.90) (0.30) (1.80) 3. Services 13.20 * 13.20 (13.20) (13.20) 674.60 0.90 13.50 240.00 929.00 Total (435.60) (0.90) (13.50) (0.00) (450.00) Figures in parenthesis are the amounts to be financed by the Bank loan Note: ICB = International Competitive Bidding NCB = National Competitive Bidding N.B.F. = Not Bank-financed Total cost including contingencies t The third component for the project will be entirely procured using the counterpart funds. DNV has indicated that it will also use the standard Bank procurement guidelines for the procurement under this category. t Includes the operating costs for the Project Co-ordination Unit and also refers to training, seminars, subscription of magazines, and staff exchange programs Project Apprail Dommat Pap 30 Argentina - Naional Highways Rehabilitaion and Maintenance Project Annex 6 Table Al: Consultant Selection Arrangements (US$ Million) 5.00 0.50 * 5.50 (5.00) (0.50) (5.50) Total ~(5.0) (0. 50) (9.5) (15.0) Figures in parenthesis are the amounts to be financed by thte Bank loan NQote: QCBS = Quality- and Cost-Based Selection QBS = Quality-Based Selection SFB = Selection under a Fixed Budget LCS =Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section VS of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank Financed * For the Caliberation of HDM III (US$0.5 million) ncluding contingencies PrjccApI Domat Pag 31 Argaii- - Natioal Highways Rehbiliation and Matac Pjed Annex 6 Table B: Thresholds for Procurement Methods and Prior Reviewl' -'-:~~~~~~~~~~~~~~~~oa C t X1 Ctract Subject t Category (Thfreh Old) . MethodTtlleSbcto (USS thousands) (US S millions) 1. Works > 5,000 ICB All/664 2. Goods >350 ICB All /0.6 >100 < 350 ICBINCB First two contracts 10.4 <100 Shopping None 3. Services >100 QCBS/SFB/CQ All / 10 <100 QCBS/SFB/CQ TORs only 4. Miscellaneous >10 All I 3.00 Total value of contracts subject to prior review: 690 Procurement of works, goods, and services, as well as contracting of consultants with Bank funds, would be carried out in accordance with Guidelines for Procurement under IBRD loans and IDA credits (August 1996) and the Guidelines for the Use of Consultants (January 1997, revised September 1997). The procurement would be carried out by DNV. Rehabilitation and maintenance works under Part I of the project (CREMA 1) have already been concted in advance using the Bank procurement guidelines under the ongoing Bank loan 3611-AR. The disbursements for these contracts, however, will be made against invoices for future civil works. Thus, no significant retroactive financing is contemplated under the project. ttThresholds generally differ by country and project. Consult OD 11.04 'Review of Procurement Documentation' and contac the Regional Procurement Adviser for guidance. ProjedA Waisal Documnt Page 32 Argentina -National Highways Reabilitation and Maintenanc Projed Annex 6 Table C: Allocation of Loan Proceeds ~xpenditur. Category Amount iwig C *~~~~~~~~~~s.Mi ........... Pere,t t. .. 1. CREMA Phase 1 370.0 68% 2. CREMA Phase 2 65.0 50% 3. Institutional Development * Goods and Equipment 1.8 * * Consulting Services and Training 13.2 100% Total 450.0 * 100% of foreign expenditures and 82% of local expenditures. Projed Appraisal Docuent Page 33 Argentina- Natiol Highways Rehabilitation and Mainenance Project Annex 7 Argentina: National Highways Rehabilitation and Maintenance Project Project Processing Budget and Schedule ;;,12%) for the investment. The contractor is required after the contract is awarded (to the lowest evaluated bidder) to carry out a detailed engineering design and is free to propose any rehabilitation solution above the minimum threshold defined in the Contract data. The payment schedule is designed to ensure that the Contractor maintains the network for the full length of the Contract even after the first-year rehabilitation period. He receives an advance payrnent of 5 to 10% upon being notified that he may initiate work, between 15% and 25% at the end of the first six months when specified activities have been executed, and 25% at the end of the first year when rehabilitation works are completed. The remaining contract amount, i.e., about 50% of the total bid, is paid in 48 equal monthly amounts spread over the remaining 4-year contract period. Performance guarantee of 20% is required by the Contract. Payments are made when a specified level of service is achieved and not on the basis of pre- determined bill of quantities and unit rates as in admeasurement-type of contract. Performance is assessed during monthly inspections jointly carried out by the Engineer and the Contractor. The rehabilitation works must comply in particular with a specified thickness of overlay, a maximum roughness level (usually 3.3 Max. IRI) and a minimum rut depth. Maintenance activities are broken down into about 12 essential items that are regularly inspected to ensure compliance with the specifications, namely: potholes, cracking, rutting on the pavement, condition of shoulders, culverts, drains, bridges, roadside, environment, vertical and horizontal signs. For each item, penalties for non compliance are set and applied in such a manner as to deter the Contractor from failing to comply. For example, a pothole left open beyond the authorized lirnit of time will cost the Contractor about US$400 per day until it is patched. The total amount of penalties are deducted from the monthly payments. Status of the CREMA program in Argentina * The network under the CREMA program includes a total length of about 14,400 kin, representing 65% of the non concessioned paved network. It is generally in good to fair condition with an average roughness of 3.7 IRI (10% are in poor condition, i.e., with IRI>5) and with an average daily traffic of about 750 vehicles. Project App4itW Dmfent Page 42 Argentina - National Highways Rehabilitation and Maintenance Project Annex 11 * 11.818 kn of the national road network have already been let in 1997 under the CREMA, representing 61 individual contracts on sub-networks totaling an average length of about 180 kIn, each. * An additional 2,581 km network divided into 16 contracts is scheduled to be procured in 1998. Of the 14,400 km, about 7,500 km are to be rehabilitated: 1,700 km of slurry seals or surface- dressing and 5,300 km of asphalt concrete overlays ranging in thickness between 3 and 8 cm, and some 360 km of reconstruction * The contracts for the first 11,818 km network have been awarded for a total amount of about US$650 million, equivalent to US$11,000/kn/year. Overall the lowest bid proposals exceeded the budget estimate by about 20%/, on average. * Rehabilitation works alone have been estimated to account for approximately 74% of the total bids amount (i.e., US$66,000/kin) while routine maintenance activities estimated at about US$3,000/km/year represent 25% of total cost. * Private sector participation (essentially Argentinean contractors) was high, each bid having received between 5 and 20 proposals. * An average contract represents about US$10 million. Specific Features of the CREMA program * Focus is on road users satisfaction and on Contractor's performance to achieve a minimum level of service, rather than on inputs, i.e., quantity of activity and unit rates compliance. * The system alleviates the need for time and staff consutning (thus costly) supervision, by eliminating quantities and quality-testing of activities performed. Inspection team size and tasks are reduced to the bare minimum. * The risk of cost overrun is considerably reduced since contracts are fixed-price. * Delays in project implementation, which in traditional programs are due to lack of stock of prepared sub-projects, are minimized since the Contractor is required to carry out a detailed engineering design before initiating the works. * The use of CREMA contracts deters the Government from failing to provide stable funding for the road sector as the long-term payment obligations under these contracts become legally binding on the Government. * The risk of unsatisfactory quality in the capital (rehabilitation) works is greatly reduced by the obligation required of the Contractor to maintain the roads over a five-year period. * The system fosters Contractor's innovative capacity in the programming and execution of works since acceptance and payments are not tied to rigid specifications on workmanship but rather to end results and level of service. Project Apraisai Documt Page 43 Argentina - National Highways Reabilitation and Maintenance Project Annex 11 * The design of the program requires prior reliable network and traffic surveys with an HDM economic evaluation to define the respective extents of rehabilitation and maintenance works and to set minimum acceptable standards for rehabilitation works. * The first generation of CREMA contracts call for the minimum (and not the optimum) technical standards to be applied on the sections to be rehabilitated in order to yield an acceptable rate of return (12% min.). The minimum standards are equivalent to a weighted average asphalt concrete overlay thickness of about 3.3 cm. The optimum standards would be in the order of 5 to 6 cm equivalent thickness, and would naturally cost about two-fold the current contract amounts. However, the HDM economic evaluation indicated that the minimum solutions to improve the riding quality of the network by eliminating the maintenance backlog and by bringing the network to a uniformly fair to good condition that can be maintained in the future through periodic and thin overlays using less financial resources. * In future generations of CREMA programs further thoughts should be given to potential advantages in: (a) spreading the execution of rehabilitation works over the full 5-year contract period, (b) extending the contract period perhaps to 7 or 10 years, (c) adjusting the payment schedule to further limit the Contractor's need for borrowing on the external narkets thereby reducing financial costs, (d) adopting technical standards lying between the HDM recommended minimum and the optimum solution, (e) selecting through an optinization process the right length of sub-networks or size of individual contracts, (f) fine-tuning the penalty rating system, (g) incorporating the lessons that may be learnt during the implementation of the first generation program, (h) possibly expanding the system to new construction, i.e., contracting combined paving and future maintenance programs, and (i) public participation (especially road users) in the formulation and monitoring of CREMA contracts Project Appmisal Document Page 44 Argentina - National Highways Rehabilitation and Maintenance Project Annex 12 Argentina: National Highways Rehabilitation and Maintenance Project The National Road Network Length and Surface Type Fig 1. Network length per surface Type 35000 The national road network of Argentina 30000 . . . has a total length of 38.744 km of which E 25000 30,912 km (or 80%) are paved and 7832 A20000 km (or 20%) are unpaved. (Fig. 1) It . 5000. represents a total asset of about US$7 ' soooo billion equivalent. It carries most of the 5000 a -R - country's long distance traffic. Road 0 ...... users spend annually an amount Paved Gravel Earth equivalent to about US$10 billion (i.e. Surface type more than its replacement value) for Fig 2. Evolution of paved network over the last 30 years operating their vehicles on that network. 40000 Already in 1975, 64% of the total network was paved (about 25,000 km) and a E sustained rate of paving of about 300 a aS 30000 km/year during the last 20 years broughit IM the paved network to its current length of 31 nearly 31,000 km. (Fig. 2) 20000 Pavement Structure 1975 1980 1985 1990 1995 1996 Averg Year About 80% of the paved network consists __, of flexible structures with granular base - course overlaid either by asphaltic concrete (40%).or by double- surface dressing (60%). The remaining 20% are made mainly of soil-cement and occasionally bituminous macadam. Rigid or cement concrete pavements are not well represented, accounting for less than 0.5% of the total length of the network. As mentioned above, about 80% of the paved network is more than 20 years old, with about 8% less than five years old. Trafric Characteristics Fig 3. Traffic Distribution on the National Road Network 20%9 -.ga B ..B ,.B . ' B . Traffic volumes on the paved network cover xN5% *a a wide range, from less hn 500 vehicles . up to 10,000 to 20,000 vehicles per day on 10% the most heavily trafficked corridors. (Fig. -1 iz 5% 3) Average annual daily traffic volumes on two-lane rural highways generally range 0%6 between 500 and 3,000 vehicles per day. .25 25- 50 100- 200- 300 500- 1000-2000- 4000- >ooo 50 IDO 200 300 500 1D00 2000 4000 8000 Trafflc ADT Project Appraisal Docunimt Pagp 45 Argentina - National Highways Rehabitation and Maintenance Project Annex 12 Between 1990 and 1995, traffic growth Fig 4. Traffic Composition on the National Road Networ rates on the main corridors were in the 40 .....;; order of 8 to 13% per anum but fell 35 ; ... ....... thereaf:er to about 3 to 5%. A typical 3 traffic composition on the nationa highway * 25 network is 50% light vehicles and 50% 20 comnercial vehicles. (Fig. 4) On the e unpaved network, traffic volumes generally Of' B vary from less than 50 vehicles up to 500 vehicles per day. Care Pick- Bu Medium Heavy Art. up truck truck truck Network Surface Condition and Maintenance Modalities Fig 5. Roughness Distribution on the National Paved Network 50 45 _ lljF gii~~~~~JConcession, % 45 For decades, fiscal crisis and poor 40 .. .. . .......... management led to under-funding and x 35 : A ~ 30 - deterioration of Argentina's infrastructure F 25 .... . ..''.'AL'' in general, and road network in particular. 320 In 1990, available data indicated that L 2 0 Argentin had the lowest share of paved O roads in good condition amnong upper- -a 2-3 3-4 4-5 5-7 >7 middle income countries. A survey carried Roughness Range, IRI out in 1992 confirmed that the paved network was in good condition only over Fig 6. Evolution of Condition of National Paved Network 44% of its length with a high 35% Of roads 4 .......................... ...................... .. in poor to bad condition. The first action 30 taken in 1991 by the goverment to 0 25 ..,..... ....;. ....B.B.. alleviate the situation was to concession 10 20...... 5,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. nearTly 9,000 kmn of the paved system with 8 I the highest density of traffic (generally t 5 exceeding 2000 vehicles per day). N 0 V ml r. " ; a Altogether 18 concession contracts, S p Z S p a _ Z representing about 20 corridors, were awarded to the private sector for a period of 12 years and their up-keep has been financed essentially by road users tolls. In parallel, a loan from the Bank was approved to finance for the first time high priority rehabilitation and maintenance works on the remaining 22.000 km of non-concessioned paved network. The Bank-financed project also helped Vialidad Nacional to gradually contract out the routine maintenance on that network and to pioneer a successful mechanism for contracting for a period of five years a combined performance-based Rehabilitation and Maintenance (C.R.E.M.A.) system which covers nearly 14,400 km and comprises about 77 sub-networks and contracts. Between 1994 and 1997 force-account activities have, therefore, been drastically reduced to mere emergency operations covering a length of about 2,600 km or 7% of the total network With the substantial improvements that have occurred in the macro-economic situation of the country, the condition of the national -nad network has also improved considerably, thanks to the concession progran on the one hand, and on th ib, the rehabilitation works (6000 km) and contracted maintenance carried out so far under the ongoing Bank-financed sixth Highway Project. A survey conducted at the end of 1996 shows that the proportion of paved roads in poor condition (with IRI> 4.5) had dropped to about 10% to 15%. (Fig. 5, 6) On the concessioned network, that percentage is insignificant, while on the non-concessioned Project Appaisa Doment Page 46 Argentina- National Highways Rehabiltation and Maintenance Project Annex 12 network the proportion is still currently in , Fig 7. DNV Past and Expected Road Expenditures the order of 15% to 19%. The total amount a o0 of investments made over the last six yerso by the concessionaires to rehabilitate and ° eliminate the backlog from the 9,000 km I under their responsibility, represented about X 2 $USI.2 billion, a rather high US$21,000 X 100 - --I- per km per year. Currently, as a result of ' 1 te that effort, the average annual maintenance e 2 2! 2 2 e 2 e work on that network has fallen to about Year US$5,000 per year. On the non- Fig8. DNVExpenditureson Routinemaintenance concessioned portion of the network under Rehabilitation alone DNV's responsibility and including the _ X 7832 km of unpaved roads, the annual , g 360 volume of capital and recurrent 300. expenditures made during the samne period , ' 1 200 - . past was less important, about US$210 million, A'i ' 100 i.e., only about US$7,O000per Ia, per year. so II I E0 in tar- a as (Fig. 7, 8) Economic evaluations using the M % U : ~ : ; O o : o HDM model suggests that in order to Y… preserve the non-concessioned paved network (about 19,500 kIn, excluding the 1,879 km to be concessioned shortly for a 10-year period under a non-tolled system called "COT" i.e., Construct/OperatelTransfer) in a sustainable good to fair condition, future annual allocations for the rehabilitation and maintenance of that network should remain at a level of about US$7,750/km, i.e, a total of US$150 million (US$55 million for routine maintenance and US$95 million for periodic overlays). An additional US$50 million is to be allowed for the maintenance of the unpaved network (US$14 million) and for the up-keep of the concessioned COT network (US$36 million). Maintenance modalities on the National Road network are as follows: Km =_____________________________ Paved Unpaved Total Tolled concession (incl. access) 9,508 - 9,508 Untolled concession (COT) 1,879 1,879 CREMA 1st phase (1997-98) 11,818 - 11,818 CREMA 2nd phase (1998-99) 2,581 - 2,581 Transferred by contract to provinces 1,503 5,220 6,723 Contracted on km/month(routine only) 3,623 - 3,623 DNV force-account - 2,612 2,612 30,912 7,832 38,744 Road Safety Road accident surveys over the last five years show that road fatality rates are relatively high in Argentina, about 33 deaths per 100,000 population and nearly 20 per 10,000 vehicles, sinmilar to the rates in Mexico, Columbia, Brazil and Chile. As a comparison, corresponding figures in developed countries where comprehensive road safety strategies have been implemented are in the order of about 10 to 15 and 1 to 3 Project Appraisal Document Page 47 Argentina - National Highways Rehabilitation and Maintenance Project Annex 12 respectively. The data for the last five years also indicate that there has been a consistent increase in the total number of accidents since 1993, from 21,100 to an estimated 29,000 in 1997, although the annual rate of increase has steadily diminished from 12% between 1993-94, to 10% between 1994-95, to 8.6% between 1995-96 and to about 3% between 1996-97. Bridge Network There are about 2500 bridges on the national highway system (on average, one bridge every 15 kmn) representing a total length of nearly 700 km. The actual condition of the bridge network is yet to be ascertained but considering that little investment has been allocated to its maintenance over the last 10 to 15 years, including in the C.R.E.M.A. contracts it is reasonable to assume that a significant proportion may be today in need of major maintenance and rehabilitation, including widening. A bridge management system based on an extensive inventory and survey is to be carried out shortly under the on-going Bank-financed Maintenance and Rehabilitation Sector Project. It is DNV's intention to implement in two to three years time, a comprehensive bridge rehabilitation project based on the results and recommendations of the management system study. Project Appraisal Document Page 48 Argentina - National Highways Rehabilitation and Maintenance Project Annex 12 Argentina National Road Network Characteristics, Condlition, Traffic (1996 Survey) Network Lencth Per Surface Tvye E 40000 Surface type Length (kin) % ..3000 Paved 30912 80% . 10.00...B0. Gravel 5893 15% 0- t 'A Earth 1939 5% Paved Gravel Earth Total 38744 100% Surface type Distribution of base and wearina courses on sample of Paved roads Material Base Wearing course 2000. n % m % E 20 - ................~~~~~~~~~....... . ........__ Km % Km % E -~1500 Granular 2249 82% 0 .,1oo Soil cement 498 18% 0 FL0 Bitumen macadam 0 0% 0 0% 0 Soil lime 0 0% 0 Asphalt Surface Cement Asphalt concrete 0 1026 37.5% concrete treatment concrete Surface treatment 0 1699 62.2% Cement concrete 0 8 0.3% Type of Wearing course Total 2747 2733 Evolution of paved network over the last 30 years %increase Year Length per year No.klnyr 40000 1975 24694 E 1980 25005 0.2 62 m 30000 1985 28163 2.5 632 4, 1990 28451 0.2 58 20D0_ 1995 30098 1.1 329 uz0 U (n 0 4) 1996 30912 2.7 814 - a) Average 1.2 311 Year Aae of paved network % within 25000- Year of construction Age (frs) Length (km) range 20000 1990-95 0-5 2461 8% - 1000 1985-90 5-10 288 1 % a) 10oooo 1980-85 10-15 3158 10% 4 5000 --. - = - 1975-80 15-20 311 1 % E. <1975 20-30 24694 80% 0-5 5-10 AgWV5ars 15-20 20-30 Total 30912 100% Sample of Paved network structural strenath Structural Number Length (ki) % 1400 1.5-2 712 19% E 1200 2-3 1050 28% 1000 3-4 1237 33% c.00 .. H 4-5 562 15% 200 5-6 189 5% 1.5-2 2-3 34 4-5 5-6 6-7 6-7 0 0% Total 3750 100% | Structural number Project Appraisal Document Page 49 Argentina -National Highways Rehabilitation and Maintenance Project Annex 12 Deflection distribution on samole of Paved network Deflection (mm) Length (km) % 1500 E 0-0.4 837 22.3% 1000 0.4-0.6 1129 30.1% 0.6-0.8 672 17.9% n500 I. . 0.8-1.0 214 5.7% 0 .... 1-1.5 397 10.6% 0- 0.4- 0.6- 0.8- 1- 1.5- >2 0.4 0.6 0.8 1.0 1.5 2 1.5-2 501 13.4% >2 0 0% ~~~~~~~~~~~~~~~~~~~~Deflection, mm >2 0 0% Total 3750 100% Rouahness distribution on the network IRI Paved Unpaved 2000 .0.... .- ..... .... ....: Km % Km % E 15000 0-2 310 % K % 1 0000 .................. .........v ......... 2-3 7728 25% 1 3-4 15146 49% ' 5000 4-5 5255 17% 01 0 @ n C V ; a Y . 5-6 2164 7% N I? U) (D eO U OD 6-8 309 1 % co 8-10 0 0% Roughness, IRI 10-15 0 0% 15-20 0 0% Total 30912 100% Maintenance condition of the network 25000 Surface condition Paved Unpaved 20000 Km % Km % .~ 15000 Good 8038 26% iE 10000 Fair 20401 66% 500 Poor 2318 7% 0 X Bad 155 1% v co Total 30912 100% Surface condition Daily Traffic distribution on the network ADT Paved Unpaved Km % Km % 7000 i X- 0-25 0 1314 16.6% E 6000 25-50 0 1803 22.7% 500 lm 4000 50-100 0 1903 24.0% > 3000 100-200 0 0% 2264 28.5% > 2000 1000 200-300 1948 6.3% 548 6.9% 0 300-500 3330 10.8% 107 1.3% 500-1000 5895 19.1% 1000-2000 6962 22.5% Average Daily Traffic 2000-4000 6978 22.6% >4000 5799 18.8% Total 30912 100% 7939 100% Vehicle fleet distribution on the network Cars Pick-up Bus Small trucks Med. trucks Heavytrucks Articulated trucks Combined(%) 32 18 4 0 11 15 20 Sources: DNV, Bank Estimates 70 B O L I V I A 60 A9uQo.Jj *\ />* X .( \ Woe% (03 ); @ / N >9 'f34 '~,, xIPARAGUAY '"'" ' t T A / '.Y'' N ) 25'N (~ - V d ETnYlJf 7$s" '':--l ' Asuo ci (1 05 Niryr. - }>5R5 Epmoso& (S ~A- i 2) 5, I ,TUO9UMA'l8 CnpG .A . oe..5 R 4,24 .4B. ,dOd a T * T cs5Zoj, - .- B R A Z I L * r.o 7< ®;4,,r,god6-i3oIsrr * f0 ±9 mot ¢ t sos c. > -/ mocn0 r-"v '- -' ˇg6T C 4 . r n s~~~~ ~ ~~ Th5 _ t1 ' oc icl s g;racsi 302 * +~~~~~~OArrO - o 3 AA J a bc A C AIATA. ;r., , l g jf 9SePp56]9. Cne- 3 \ -4C * 4$ , fQ v 0g K * $ i 1 Z r , ,\ vrul Gu rzT 1- XC+z] es>< ,'-'\ del0U0Lgesv \ 5 P A$F '0 5 3 n oLrdoo --~- 5.1U RU G A Y SGntidgL~ ~ ~~~ Lib,-/9 ds ,f, v ^ .................. f Son.+>j] oenL *- Pt £NT 9 ° oAR 'N 'Js ,- tf Neqer f ' =10+ LP -R'oc , t Lrso t AEApcrsWc 3A0f0dl 4ˇ3 O%tO . ˇ6 j! Sooloo® ~1AM~~ [os /,iToc%~URUGUAY C SM NI0c e 03, 'mgGN )t.)~~~~~~~~'. Suro:dyL ANAMINTNNERJC .5 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ L *it * ..J-Rido ? ~ ~ ~ ~ ~ ~ ro . * --NWCOCSIN 35' lu PORTS 45 . 40 ~ ~ ~ ~ ~ ~ ~~CA74 45 g .b2i Mo o 9 AIRPOARGENTINA NATIONAL HIGHWAYS REHABILITATION 6r.-rsAyr -AND MAINTENANCE PROJECT NEW CONCESSIONS T; S 0 ) SPIO Deseudo _ _ INTERNATIONAL ROADS SELECTED RAILROADS / / fPORTS 45 ~ ~ ~~~~~~~~~~~~~~~~~~~~~± AIRPORTS pOs MA~~~-dRi-d. - ~ ~ Ksnsdsss 5i'so.risr @0 ~~~~~~ PROVINCE CAPITALS * NATIONAL CAPITALS D,,,edo - - - INTE~~RNATIONAL BOUNDARIES ~~- ----PROV~~~~~~~~INCERAINLBOUNDARIES '< > /3050 r/,, 05f FUEGO o 250 500 750 h h i , ; N RILOMETERS -~~~~~~~~-ss r~~~~~~~~his cop sos poodoredIs sIe Mep Desrrbs snfoTre Merd Book -' - re bersodooiss colors. desoeinooeseocoonyorher,inh rmiooooshoeo onhis mop d,o -1 py, o he prr of The Worldd Rk Gp, gy 55 i ju~~~~~~~~~~~~~~rdgoesr son she Iegsl5srrs of ony rerLyorsp 0a0s sodorsecers or_ sc,eprore of soch b-odeles.w Bo-o-~- 70- 65- 605 555 57 45 C 0 S'7 7' 55 i 5 ST w3 IBRD 29288 J7 ) BOLIVIA \ v-v-( L ARGENTINA > ; R(AyNATIONAL HIGHWAY REHABILITATION ;I < J) N AND MAINTENANCE PROJECT _ u° t}-/ / &/ 50( REGION I CREMA I ROADS 0 SELECTED TOWNS 81) < UBUGUA>$5 sesrBrsom CREMA 11 ROADS ® PROVINCE CAPITALS ( A-ec; Aires 0 l - ~~~~ NON-CREMA ROADS ' PROVINCE BOUNDARIES .. of Ai-res NATIONAL ROADS REGION BOUNDARY L,. | (' 1 -s- . --, ,-- RAILROADS INTERNATIONAL BOUNDARIES . \ ,. l 0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 650, 2 2 To Cordobo 0 50 100 150 200 250 60 2T 6db v - ( >A: . 0 l O SO 1010 lSO Nva. Gaia Reaiic6 350 KILOMETERS35 ,'.- .51.8a>£ 5@ < 0 it SANJ To Son Tlo Buenos R\ Tofo1 Sa.Isbe, LUIS Aires 'Barroncas LA PAMPA To Son T L e l El Car6ncho \n, \ ,( ~ ~ ~ ~~ PkLun u p \ C b rhoeie Choel '1< Leufu RIO~~~~~~~Snt Rs BarrncasS r 6 106 _- \ Curosw dr$er NEGRO <<,0 40~~~~~~~~~~~~~~~~~osso4ootos~4oleors Gr v *l h Jd o; Gr. aan sie "LU Chacharramendi )Achcci | '< br.n /4wl>silin:ldiBone FEBRUARY 1998 IBRD 29289 BOLIVIA 7 0, RIO NEGRO I PARAWAY) E 111 1-1 A AAI clu Puerto Mc 2 Trel 102A, R ch") c __j Las Heras SANTA CRUZ s Horquetas I 05 El Salad 01, r s agos Cru Rio 602 28 a_ FEBRUARY 1998 IBRD 29290 i 600 / PARAGUAY 5 ARGENTINA ToRen,0is, NATIONAL HIGHWAY REHABILITATION AND MAINTENANCE PROJECT 20 B REGION 11 95 To So*ncode Esten,S SANTA9 f 1~~~~~~~~~~~~~~~~~f29 La Rioia ~ ~ ~ Ri Tstad 98 ~CORRIENTES LA fdeM''a BRAZILMr 260 X ~ ~~~~~~ ob XRafoela . r' ?"'h' Dolores . RP a r a n Paran6 9 i<<>"< <~~~~~-blores ENTJ^ v 'U \ 1 )5RE 21 cillMaria O RIOS URUGUAY SAN 2Y (sorio LUISt U a 5 41 uarto N Qg 0 T.o San Luis 2 2 v LLs OCu'v -reci u - os Aires oSan Rafael to Koat -M-=ntevideo To SanRofl O¼1 300 s ~~~~~~~~~~~~~~~ReaIic ea ThismAp noproduced by the Mop Design Unit of The World Bok.A The boandories s,denoinotionsnd 7 1 A- anyother information shownon this sap do not isply, on the port of The World Bonk Group, ony judgment on the Legalstctus of o-y territory-or any endorsement or occeptone of such boundries. Sant Rosa 0 ' t t VA r \// $ l rt I f01 2t 1 R~ oets t0 22. =t :;a.rdc OcUarf Santa -Rosa1 f O k -Sssi CEEk i S 0 SEIECThD TOWNS - > i::-t? i :. -1 -380 08 2 f - T¢NAL- -OI~ P~QVNCE BOUNDARIES 38 ;- A1 (';' ' .Attt .iRES REGIO? BOUNDARY -.:., .t) ,: . ~~~~~~~~~~~~~- - - . .ToRosnA4>tX' ' ;. '' ' ' - TI At BOUNDARIES ______________ 5 + 1 V i ;' f 'A- S: ..................................................... , ' , . 'R'19 IBRD 29291 TMS, *, <,S, *, *70 f BOI7VIA 3,5C4 P < - gTUCUMAN PARAG(AY' CATAMARCA TinoDgasta I ol X r > SiS Catamarca W ;ARGENTINA M X'P'm , 30 ,tA rca I 5arcoU A K a S .9 ( ~>( tj X A 9 e Cl | Arco 33/03 174 P. de achal Chamicol Y Agu. Negro ¸00¸0 0 ~~~~~~~~~sNiuQ1 65' --, D ~ t )Dolores This map was produced by the - ~ Mop Design Unit of The World Bank. ? ! H *i La X X,[The boundaries, colors,denominations 40 * ~~~Laand anyother information shown on SS'rPli fX- f i3 Quines ; } X this map do not imply, on the port of The World Bank Group, any judq-et 1 148 a~~~~~~n the legol stotus of ony territory. or c ~~~~~~~~~~~~~~~~~~~~~~~~~~any endorsement or acceptance of 147 I such boundaries. ' A 9 Bedoza {> S Xfr Xoz u Agrelo L~~ CORDOBA tiag O *> >SantiagoOS IM u W = ~ t i tE Paredito EN ZA 305TSA N Buenos Aires 31 33B 314 Ist Pedr: EspeigranJ ¸r 35- Tot Buenos Aires t ) X ~~~~~~~~ ~ ~ ~ ~ ~~~ ~ ~~~~~~31 2 } DL cf t \ } ~~~~~~~~~~MaltzrgOe o Arizonat b . > t tX ~~~~~~ARGENTINA ' NATIONAL HIGHWAY REHABILITATION AND MAINTENANCE PROJECT sw X ) f } ~~~~~~~~REGION III .' \ t 0, $ ) MA CREMA I ROADS 0 SELECTED TOWNS \( t To ZapOla , CREMA iI ROADS ® PROVINCE CAPITALS k 4 * > W NON-CREMA ROADS 'nwo PROVINCE BOUNDARIES NATIONAL ROADS ¸0o REGION BOUNDARY N \UE090 N -----ENRAILROADS INTERNATIONAL BOUNDARIES \ \ 7$): a 65° FEBRUARY1996' FEBRUARY 1 998 IBRD 29292 B°' ) BOLIVIA , | 64' Y 7 1PARAG\JAY') ARGENTINA -; > NATIONAL HIGHWAY REHABILITATION 20' --/ Aru -N -20O AND MAINTENANCE PROJECT - / K REGION IV CREMA I ROADS 0 SELECTED TOWNS 'AR G E N T I ..URUGUAY CREMA 11 ROADS ® PROVINCE CAPITALS 4 -/ ~( Aires t~ - ~~~~~ NON-CREMA ROADS - PROVINCE BOUNDARIES -~+ 8 --NATIONAL ROADS 1-1-- REGION BOUNDARY .- - sF -| RAILROADS INTERNATIONAL BOUNDARIES K4f % { -': . ;- ff / 0 -tB W -; - . 0 - S ~~~B O L I V I A / ii it? ( 40 - ATtzywThr < La Cuiaca 19 PARAGUAY ws X 0- - - pULYz; - -wr s > ~~~~~Agauasi| - : ->45A; t r~~~~~~~~~~~~~~~~~~~~~ai . 1 ,X Chlct 408 ! oo 0 i) 4 7\\%M2\ %< ~~~LAN ~ ~ ~ ~ A -28Ot , Campo GalFR UARF 1998 . ( K - K ED> ;' f t~~~~~~~~~~~~~~~~~~uc m '1 C H,, I L E \ S A h, tb CJ I f\ S Vilckio-DeMrA C)% 1 r a @ m g \ X rS~~ ~~~~~~~~~~~~~~ an go el Eser g i 9ff- , 405 05;~ ~~FBUAY19 IBRD 29293 04- O 60' BOLIVIA\ i A RG E N T I N A NATIONAL HIGHWAY REHABILITATION AND MAINTENANCE PROJECT REGION V - g tvb, CREMA I ROADS 0 SELECTED TOWNS . 4< g +t,t. CREMA II ROADS O PROVINCE CAPITALS T. San Rsen-,n NON-CREMA ROADS * NATIONAL CAPITAL NATIONAL ROADS * PROVINCE BOUNDARIES --|------- RAILROADS REGION BOUNDARY 24 SAlTA- INTERNATIONAL BOUNDARIES SALTA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~24' 0 50 100 150 200 250 . iF LasOmbasWO G o t ss~5 m KILOMETERS1 - o /ro XF n 50 La Blonco,r 'a t T. TOlleroe0 77 ~~~~~~~~~~~~~~~~~~~Pt' Iguazb - X C h' A f Ofta>g9x°g, ~~~~~~~~~~~~P A R A G U A yPtIuz-s_o ,1 E g~~ ~~~~~res Islet D Formos> gK d r;r tnRe'no~~~~~~~~~~~~~~~~ erod PRs.f. Scenz PeiAQ deligy )!\ D(L 'OSa° 2°51 2A oSn Miguel 503 0 2 T. Scnfafe 0 l FIRRr ES -f This nmap wos produced by the P.\ 0 -''~~ '- any e-dorsement or -ccept ..ce of 0Z ~~~~~~~~Y3oe 5'such bounodries. 0G ucyquJtraro *~' SAN A s~~~~~~~~ 506 l; r cb;quitaN 1, 011 4 %, -~~~~~~~~~~~~~~~~ 'Tj~4~fs FEBRUARY 1998