module 1 session 1.4 visual 1 module 1 understanding the project and project management session 1.4...

Module 1 Session 1.4 Visual 1

Module 1

Understanding the Project andProject Management

Session 1.4

Understanding the Project Analysis Report (PAR)


Instructional Objectives

By the end of this session, when given a summary Project Analysis Report and a worksheet, you should be able to:

1. Summarize the key project parameters described in the PAR

2. Review the financial and economic analyses including the rate of return

3. Identify at least two of the assumptions in the PAR

4. List at least two assumptions not treated explicitly in the PAR

5. For each assumption, perform a subjective risk analysis

6. Develop guidelines for when to reassess the feasibility of the project


Purpose:Enable decision makers to evaluate project for funding

The Project Analysis Report

MILLENNIA

NATIONAL HIGHWAY PROJECT


Currency Equivalents2

CURRENCY EQUIVALENTS

US$ 1.00 = LCU 20.00

SYSTEM OF WEIGHTS AND MEASURES: METRIC

Metric Imperial

1 meter (m) 3.281 feet

1 square meter (m2) 10.764 square feet

1 cubic meter (m3) 35.315 cubic feet

1 kilometer (km) 0.621 mile

1 square kilometer (km2) 0.386 square mile

1 metric ton 2,205 pounds


Acronyms and Abbreviations

ACRONYMS AND ABBREVIATIONS

ADGB - Additional Director General, Bridges

ADGR - Additional Director General, Roads

CMF - Contract Management Framework

CRRI - Central Road Research Institute

DGRD - Director General, Road Development

ERR - Economic Rate of Return

GDP - Gross Domestic Product

GNP - Gross National Product

HDM - Highway Design and Maintenance Model

ICB - International Competitive Bidding

ILA - International Lending Agency

MOT - Ministry Transport

MRC - Milenian Roads Congress

PWD - Public Works Department

RDB - Regional Development Bank

TA - Technical Assistance

VFM/RUC - Vehicle Fleet Modernization/Road User Charges Study

FISCAL YEAR

April 1 - March 31

ACRONYMS AND ABBREVIATIONS

ADGB - Additional Director General, Bridges

ADGR - Additional Director General, Roads

CMF - Contract Management Framework

CRRI - Central Road Research Institute

DGRD - Director General, Road Development

ERR - Economic Rate of Return

GDP - Gross Domestic Product

GNP - Gross National Product

HDM - Highway Design and Maintenance Model

ICB - International Competitive Bidding

ILA - International Lending Agency

MOT - Ministry Transport

MRC - Milenian Roads Congress

PWD - Public Works Department

RDB - Regional Development Bank

TA - Technical Assistance

VFM/RUC - Vehicle Fleet Modernization/Road User Charges Study

FISCAL YEAR

April 1 - March 31


Table of ContentsTABLE OF CONTENTS

1. The Transport Sector .........................................................................................................................A. Economic Setting and the Transport Sector ...........................................................................B. Transport Planning and Coordination ....................................................................................C. Transport Investments .............................................................................................................D. Transport Pricing and Taxation ..............................................................................................

2. The Roads Sub-Sector.........................................................................................................................A. The Roads Network ..................................................................................................................B. The National Highway System .................................................................................................

Administration .....................................................................................................................Financing ..............................................................................................................................Maintenance ..........................................................................................................................Engineering ..........................................................................................................................Construction/Contracting/Contract Administration .......................................................

C. Intercity Road Traffic ...............................................................................................................D. Road Safety ................................................................................................................................E. Training ......................................................................................................................................F. Research and Development ......................................................................................................G. Highway Planning .....................................................................................................................H. The Road Transport Industry ..................................................................................................

The Vehicle Fleet ..................................................................................................................Vehicle Utilization and Traffic Growth Rates ..................................................................


Table of Contents (continued)

3. The Project...........................................................................................................................................

A. Objectives ...................................................................................................................................

B. Project Description ....................................................................................................................

Part A of the Project - Road Modernization Works

.........................................................

Part B of the Project - Bridge Construction and Reconstruction

....................................

C. Project Costs and Financing ....................................................................................................

D. Project Implementation ............................................................................................................

E. Procurement ...............................................................................................................................

F. Environmental Impact ...............................................................................................................

4. Economic Evaluation...........................................................................................................................

A. Assessment of the Highway Modernization Component (Part A of the Project) ................

B. Assessment of Aksala Bridges Component (Part B of the Project) ......................................

C. Project Risks ..............................................................................................................................



Annexes

1.1 Expenditures under the Current Five-Year Plan 1985-90............................................................

3.1 Road Monitoring Equipment...........................................................................................................

3.2 Terms of Reference for the TA to the MOT...................................................................................

3.3 Summary of Project Costs ...............................................................................................................

3.4 Contract Management Framework ................................................................................................

3.5 Terms of Reference for the Supervision Consultants ...................................................................

3.6 Project Implementation Schedule....................................................................................................

3.7 Project Organization Chart.............................................................................................................

4.1 Economic Evaluation........................................................................................................................


Tables

2.1: The Road Network ..........................................................................................................................

2.2: Villages Connected to the Road Network .....................................................................................

3.1: Amounts and Methods of Procurement ........................................................................................

4.1: Economic Evaluation of Part A .....................................................................................................

4.2: ERR Sensitivity to Cost Increases .................................................................................................

4.3: Economic Evaluation of Part B ......................................................................................................



MILLENNIA

NATIONAL HIGHWAY PROJECT

THE TRANSPORT SECTOR

A. Economic Setting and the Transport Sector

1.1 Millennia, a federation of many states, is a large and populous

country. It covers about 2 million km2 and has a population of about 300

million. Agriculture dominates the economy, absorbing about two-thirds

of the labor force and generating about one-third of the GDP; the service

and industrial sectors absorb the remainder of the labor force, and

account in equal proportions for the remainder of the GDP. Growth of

the GDP in earlier years was about 2.7% per annum, but in recent

decades it has been steady at about 4.5% per annum. Per capita income,

in real terms, is about US$350 per annum.

The Report


1.15 The scope for improving road pricing was reviewed under the

VFM/RUC study (paragraph 1.10). This study examined the extent of vehicle

usage, the composition of the fleets, and the charges levied on the various

classes of vehicle, and concluded that road users paid about 3.5 times

government expenditure on roads. The study also concluded that

the structure of road user charges was flawed in that it encouraged the use

of inefficient vehicles, the charges did not penalize vehicles sufficiently for the damage that they

cause to the pavements, and the charges that are made are levied through economically inefficient

means, such as sales and excise taxes instead of, for example, fuel taxes.

The Report (continued)



2.41 The government’s commitment to prepare within twelve months an

Action Plan based on (i) the VFM/RUC Study and on (ii) the ILA’s report on

Policy Issues on Road Transport in Millennia, was confirmed at loan

negotiations with the ILA; also confirmed was the government’s

determination to implement the Plan thereafter.


2.43 Using various scenarios for GNP growth, industrial growth, and

probable demographic changes, the Planning Commission estimated demand

for rail and road transport for the year 20002 . . . .

. . . Therefore, traffic growth

rates of 12 percent to 15 percent per year are to be expected. These results

only highlight the need for the proposed project and magnify the importance

of the continued dialogue between the government and the ILA on sector and

project management issues.



Possible Additional Sections: Demand Analysis

More detailed analysis of need or demand

Size of market to be served

Market share likely to be attained

Marketing strategy



3. THE PROJECT

A. Objectives

3.1 The objectives of the project are to:

• modernize key sections of the national highway network

• promote improvement in:

- road engineering and construction

- network management

- contract management

• assist in construction of a new bridge with approaches and the

reconstruction of flood-damaged bridges.




B. Project Description

3.4 The proposed project includes two parts, A and B:

Part A

• modernizing six sections of national highways (civil works and supervision) totaling about 290 km in length

• equipment for monitoring and managing the national highway network

• institutional strengthening including:

• fellowships and training in the supervision of road works for professional and field staff

• technical assistance to MOT

• studies to prepare follow-up projects

Part B

• reconstruction of six flood-damaged bridges

• construction of one new bridge with approaches


3.20 The design of the new structures has been standardized to use identical 42.2

meter spans made of prestressed concrete and well foundations. The new bridges will

be at a higher level on the same site, or just beside the old bridges. Land acquisition is

minimal and no one needs to be relocated or resettled because of the construction.



Contract Management Framework

3.23 Experience shows that particular attention needs to be paid to minimizing

implementation difficulties. To address this concern, a contract management

framework (CMF) was designed which integrates a streamlined decision-making

structure in the states and at MOT, with supervision of works by international

consultants. The framework spells out the duties and responsibilities of state PWD

and MOT officials and those of the consultant (annex 3.4).



F. Environmental Impact

3.37 With the exception of the bypass, the civil works are within the existing right-of-way. However, limited land acquisition was necessary and some people had to be resettled because of the construction. A resettlement specialist reviewed the land acquisition and the resettlement procedures used in each state. The review revealed that the acquisitions had been done long ago, that most plots acquired were small, and that about 650 households had been affected. This did not include people trespassing on the right-of-way, who have been, or will be evicted on short notice without compensation. Since the acquisitions had taken place long ago, at a time when the PWDs were not informed of the ILA’s policy on involuntary resettlement, it was agreed with the government of Milenia not to pursue the fate of the 650 households.

3.39 The project has a clearly beneficial environmental impact: by reducing congestion and improving accessibility it contributes to cutting vehicle emissions and improves the quality of life. . . .

. . . A potentially adverse impact is the unstructured development that usually occurs along road improvements.



Possible Additional Sections: Financial Analysis

For revenue-earning entity: Costs Cost recovery Fees (education) Charges (health care) Tolls (roads)

For private, profit-oriented firm: Balance sheets Projected income and expense Projected sources of funds Projected uses of funds Rate of return Financial ratios



4. ECONOMIC EVALUATION

A. Assessment of the Highway Modernization Component (Part A of the Project)

4.1 The economic returns of modernizing the six highway links in the project were

estimated by comparing the total costs to the economy of the no-improvement (base)

case with those of the improvement option. Both options were modeled with the

assistance of the HDM. The pattern of evolution of costs in the base case is well

mapped. It involves a continuation of current maintenance practices (at increasing

costs because of increasing traffic volumes), increased congestion and, therefore,

decreased vehicle speeds.



Benefits

4.4 The proposed project will modernize and expand to four lanes heavily congested

two-lane sections of the national highway network. The project's main benefits will be

savings in vehicle operating costs, reduced congestion, and increased speeds. The

competitiveness of the road transport industry in Millennia is expected to ensure that

project benefits, which will accrue directly to users, but principally to transport

operators, are eventually passed on to consumers. Lower transport costs should

manifest themselves in lower distribution costs, and eventually in lower and/or more

competitive tradable goods market prices.




Table 4.1: Economic Evaluation of Part A

Road Section Economic

State From To Costs (LCUs) ERR

Ohadi Nevah Oner 688.5 41.5

Awoi Emon 326.8 53.7

Emon Onuj 161.7 37.7

Enaim Krawen Drofarc Creek1 579.1 43.3

Aksala Imaim Sotlasol2 738.3 37.6

Nagichim Oner Atnas 429.5 62.2Anilorac Selegna Salsagev3 462.7 49.3

Bridge

Total Project 3,386.6 (weighted) 45.2

1. Including the Drofarc Creek bridge2. Including the Fuen bridge3. Excludes the Selegna bridge, which is in Kroy state.



Table 4.2: ERR Sensitivity to Cost Increases

Best Estimate Increase in Costs ofRoad Section ERR 10% 50% 100%

Nevah to Oner 41.5 39.3 33.0 27.7Emon Bypass 53.7 50.2 40.6 33.4Emon to Onuj 37.7 35.7 29.5 24.3Krawen to Drofarc Creek 43.3 42.0 37.7 33.7Imaim to Sotlasol 37.6 35.4 29.2 24.1Oner to Atnas 62.2 59.3 50.7 43.5Selegna Bridge to Salsagev 49.3 46.9 39.6 33.5


4.5 The proposed project should yield considerable institutional benefits, especially to

the Government. The project will promote the use of better, more modern, equipment-

intensive road construction techniques. It will also employ consultants to supervise the

civil works within a new contract management framework. The technical and

managerial innovations incorporated in the project should improve the efficiency of

road works and their quality and durability. Also, under the project, management of

the MOT investment program will be improved. All these actions are expected to

generate lifetime cost savings rather than one-off benefits.



Benefits

4.11 The main benefit of reconstructing the washed-away bridges is the saving in

vehicle operating cost of avoiding the long detours. For the damaged bridges the main

benefits are avoided repair cost, the removal of load restrictions, and the increasing

maintenance cost of keeping the bridges in use; two of . . . .



Table 4.3: Economic Evaluation of Part B

Aksala Bridges

Length Economic Costs ERR on Road No. over river near (m) (Millions of LCUs) %

SH-17 Nadroj Nodnol 126.6 33.1 99.0MDR-62 Nosduh Sirap 168.8 38.6 47.0SH-7 Tsea Areneg 253.2 61.2 62.0SH-7 Enies Nilreb 126.6 34.9 105.0MDR-68 Ras Bergaz 317.6 62.6 116.0SH-7 Ebunad Dirdam 84.4 35.8 65.0



Conversions and Abbreviations

Executive Summary

Statement of the Problem (Need or Demand)

Description of the Proposed Project

Financial and Economic Evaluation

Agreements and Recommendations

Annexes

Typical Summary for a Summary PAR


Familiarizes the manager with the project

Serves as basis for initial Implementation

Planning

Serves as a reference point for judging when to

reevaluate project parameters/assumptions and

call back project analysts

Benefits of PAR for Project Manager


New project managers should read PARs carefully when appointed to the project.

The PAR: provides orientation to the project

helps project manager determine if/when a new analysis is needed

serves as foundation of the initial Implementation Plan

Summary

module 1 session 1.4 visual 1 module 1 understanding the project and project management session 1.4...

Documents

project management session

transport sector

road development

transport planning

transport pricing

transport investments

key project parameters

square feet