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Document of

The World Bank

Report No: ICR00003186

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-75520)

ON A

LOAN

IN THE AMOUNT OF USD 232 MILLION

TO THE

REPUBLIC OF THE PHILIPPINES

IN SUPPORT OF PHASE 2

OF THE

NATIONAL ROADS IMPROVEMENT AND MANAGEMENT

(APL) PROGRAM

June 21, 2017

Transport & ICT Practice AreaPhilippinesEast Asia and Pacific

CURRENCY EQUIVALENTS

(Exchange Rate Effective May 15, 2017)

Currency Unit = Philippine Peso (PHP)PHP 49.66 = USD 1

COUNTRY FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

AADT Annual Average Daily TrafficADB Asian Development BankAPL Adaptable Program LoanAusAID Australian Agency for International Development BIIP Business Improvement Implementation Projects BQS Bureau of Quality and Safetye-NGAS Electronic New Government Accounting SystemCAS Country Assistance StrategyCSO Civil Society OrganizationDBM Department of Budget and ManagementDILG Department of Interior and Local Government DoF Department of FinanceDPWH Department of Public Works and HighwaysEIA Environmental Impact AssessmentEIRR Economic Internal Rate of ReturnESSO Environmental and Social Safeguard OfficeGDP Gross Domestic ProductGoP Government of the PhilippinesGRSF Global Road Safety FacilityHDM-4 Highway Development and Management Model FourHRM Human Resources ManagementIBRD International Bank for Reconstruction and DevelopmentICR Implementation Completion and Results ReportICB International Competitive BiddingICD Institutional Capacity Development IDF Institutional Development FundIFR Interim Financial ReportINT Department of Institutional Integrity IPE Independent Procurement EvaluatoriRAP International Road Assessment ProgramISR Implementation Status and Results ReportsIT Information TechnologyJICA Japan International Cooperation AgencyLGU Local Government Unit

LTPBMC Long-Term Performance-Based Maintenance ContractM&E Monitoring and EvaluationMTR Mid-term ReviewMVUCs Motor Vehicle User ChargesMYPS Multi Year Programming and Scheduling ApplicationNCB National Competitive BiddingNEDA National Economic and Development AuthorityNGO Non-Governmental OrganizationNOL No Objection LetterNPV Net Present ValueNRIMP National Road Improvement and Management ProgramNRS National Road SystemOCCP Organizational Culture Change ProgramPAD Project Appraisal DocumentPAP Project Affected PersonPCC Portland Cement ConcretePCMA Project and Contract Management ApplicationPDO Project Development ObjectivesPGS Performance Governance ScorecardPHP Philippines PesoPMP Preventive Maintenance ProgramRAP Resettlement Action PlanROW Right of WayRMA Road Maintenance AuthoritySEMS Social and Environmental Management SystemSRSuF Special Road Support FundUPMO Unified Project Management OfficeUSD United States DollarVCI Visual Condition Index

Senior Global Practice Director: Jose Luis IrigoyenPractice Manager: Almud Weitz

Task Team Leader: Ashok Kumar ICR Team Leader: Oliver Whalley

PHILIPPINES National Roads Improvement and Management Program (Phase 2)

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design..............................................12 Key Factors Affecting Implementation and Outcomes.............................................73 Assessment of Outcomes.........................................................................................154 Assessment of Risk to Development Outcome........................................................255 Assessment of Bank and Borrower Performance....................................................266 Lessons Learned......................................................................................................317. Comments on Issues Raised by Borrower/Implementing Agencies/Partners............33Annex 1. Project Costs and Financing...........................................................................34Annex 2. Outputs by Component...................................................................................36Annex 3. Economic and Financial Analysis...................................................................38Annex 4. Bank Lending and Implementation Support/Supervision Processes..............40Annex 5. Stakeholder Workshop Report and Results....................................................44Annex 6. Summary of Borrower's Comments on Draft ICR.........................................46Annex 7. Comments of Cofinanciers and Other Partners/Stakeholders.........................47Annex 8. List of Supporting Documents........................................................................48Annex 9. Revised Project Components..........................................................................50Annex 10. Project Development Objective Progress Prior to Second Restructuring.....51

MAP

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A. Basic Information

Country: Philippines Project Name:

National Roads Improvement and Management Program (APL) Phase 2

Project ID: P079935 L/C/TF Number(s): IBRD-75520

ICR Date: 06/23/2017 ICR Type: Intensive Learning ICR

Lending Instrument: APL Borrower: DEPARTMENT OF FINANCE (DOF)

Original Total Commitment: USD 232.00M Disbursed Amount: USD 187.84M

Revised Amount: USD 232.00M

Environmental Category: BImplementing Agencies: Department of Public Works and Highways (DPWH)

Cofinanciers and Other External Partners: Australian Agency for International Development (AusAID)

B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 03/16/2006 Effectiveness: 04/16/2009 04/16/2009

Appraisal: 03/28/2007 Restructuring(s):12/06/2012

12/23/2014

Approval: 05/13/2008 Mid-term Review: 10/31/2011 12/23/2011

Closing: 12/31/2012 12/31/2016

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory

Risk to Development Outcome: Modest

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

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C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower RatingsQuality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately Unsatisfactory

Implementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank Performance: Moderately Satisfactory Overall Borrower

Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No): No Quality at Entry

(QEA): None

Problem Project at any time (Yes/No): Yes Quality of

Supervision (QSA): None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes Original Actual

Sector Code (as % of total Bank financing) Central Government (Central Agencies) 9 9

Rural and Inter-Urban Roads 91 91

Theme Code (as % of total Bank financing)

Infrastructure services for private sector development 50 50

Rural services and infrastructure 50 50

E. Bank Staff

Positions At ICR At Approval Vice President: Victoria Kwakwa James W. Adams

Country Director: Mara K. Warwick Bert Hofman

Practice Manager/Manager: Almud Weitz Junhui Wu

Project Team Leader: Ashok Kumar William D. O. Paterson and Ben iii

L.J Eijbergen

ICR Team Leader: Oliver Whalley

Team Assistant: Geraldine Bacani

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The Program goal is: the establishment of road management arrangements which ensure the upgrading and preservation of the National Road System (NRS) in an environmentally, socially and financially sustainable manner. The development objective for Phase 2 is: Improved operation, organizational effectiveness and fiduciary control in the management and financing of the national road system, to enhance road user satisfaction in the project areas and efficiency and integrity in the use of financial resources.

Revised Project Development Objectives (as approved by original approving authority)

To improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways (DPWH) at the national and local level.

(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1: Administrative Efficiency - Percentage of projects delivered with less than 15 percent excess to original cost and time.

Value quantitative or Qualitative)

6 n/a

70 50

Date achieved 12/23/2014 n/a n/a 12/31/2016

Comments (incl. % achievement)

71% achieved. Originally referred to reduction in project delivery time, however it was difficult to fix common basis for varying contract sizes. Indicator was modified at 2nd restructuring to an alternative definition of administrative efficiency.

Indicator 2: Improved asset management of National Road Network - percentage of roads in good and fair condition as a share of total classified national roads.


55 n/a 60 55

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No change from baseline. Originally referred to increased cost recovery from road users but there was no activity linked to this. Replaced with the core indicator at 2nd restructuring as determined by international roughness index (IRI) of less than seven.

Indicator 3: Percentage of satisfactory perception of external stakeholders with the National Road System (NRS)


-65% n/a >60 74

Date achieved 12/23/2014 n/a 12/30/2015 12/31/2016


123% achieved. Originally referenced road user satisfaction, however, the consultancy to measure this ended prior to project close. Revised at 2nd restructuring to utilize regular DPWH surveys on "external stakeholder perception".

Indicator 4: Percentage of DPWH's infrastructure projects subjected to life cycle monitoring using improved information technology (IT) tools


26 n/a 70 97.87

Date achieved 05/16/2013 n/a 09/30/2015 12/31/2016


140% achieved. Indicator added at the 2nd restructuring to capture adoption of IT tools within DPWH.

Indicator 5: Percentage of local infrastructure subprojects, receiving technical assistance under the project, that are in compliance with the prescribed technical standards of DPWH


0 n/a 80 49.70



62% achieved. Indicator added at the 2nd restructuring to capture management effectiveness of DPWH at local level.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1: Component A1: National Roads improved (kilometers)

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Value (quantitative or Qualitative)

0 450 280 295

Date achieved 04/16/2009 n/a 03/31/2014 12/31/2016


Original target 66% achieved, revised 105% achieved. Indicator was originally defined as national roads upgraded to paved roads at acceptable standards, and was modified at the 1st restructuring to include work on existing paved roads.

Indicator 2: Component A2: Number of kilometers of roads maintained through Long-Term Performance Based Maintenance Contracts


0 n/a 680 680

Date achieved 12/06/2012 n/a 10/10/2013 12/31/2016


100% achieved. Indicator originally referred to 75% of paved roads in fair condition or better, and at least 1000 km under preventative maintenance annually. Modified at 1st restructuring.

Indicator 3: Roads rehabilitated: Non-rural (kilometres)


0 n/a 1500 1200



80% achieved. This core sector indicator was added at 2nd restructuring.

Indicator 4: Percentage of Annual Road and Bridge Asset Preservation Program of DPWH evaluated by technical and economic criteria through the use of DPWH planning applications


0 n/a 80 82

Date achieved 12/23/2014 n/a 10/08/2015 12/31/2016


103% achieved. Indicator was added at the 2nd restructuring. The highway design and management model four (HDM-4) is being widely used for DPWH road project evaluation.

Indicator 5: Percentage of Central and Regional Offices with operational Multi Year Programming and Scheduling (MYPS)


0 n/a 100 6


Comments (incl. %

6% achieved. Indicator was added at 2nd restructuring.

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achievement)

Indicator 6: Number of DPWH offices with improved financial management systems of Electronic New Government Accounting System (e-NGAS) and e-Budget


0 n/a 203 204

Date achieved 12/23/2014 n/a 12/15/2015 12/31/2016



Indicator 7: National Roads design guidelines and standards updated by DPWH and in use


No n/a Yes Yes

Date achieved 12/23/2014 n/a 12/03/2015 12/31/2016


Indicator was added at 2nd restructuring. Standards are in use and are to be officially adopted across all DPWH projects from 2017 onwards.

Indicator 8: Percentage (or number) of regional and central offices that are implementing (phase 1) enhanced Project and Contract Management Application processes


0 n/a 100 100

Date achieved 12/23/2014 n/a 12/31/2015 12/31/2016



Indicator 9: Percentage (or number) of regional and central offices that are using Geographical Information Systems (GIS) for forward planning through integration with MYPS (Planning Services and Regions) Module


0 n/a 100 100

Date achieved 12/23/2014 n/a 12/31/2015 12/31/2016



Indicator 10: Percentage of classified network of Road Inventory, condition and traffic data up-to-date in accordance with update cycle.


69.2 n/a 80 96

Date achieved 12/23/2014 n/a 01/27/2015 12/31/2016vii



Indicator 11: Number of offices that upgraded/expanded IT Infrastructure "Voice and Data communication network"


70 n/a 95 116

Date achieved 12/23/2014 n/a 10/08/2015 12/31/2016



Indicator 12: Enhanced Data Governance Program implemented


No n/a Yes No



Indicator was added at 2nd restructuring. Program has been formally established with DPWH issuing departmental orders, but is not in widespread use.

Indicator 13: Improved and Effective Corporate Structure: Number of DPWH offices implementing Rational Plan of DPWH, as approved by the Department of Budget Management (DBM).


n/a

n/a

203 203

Date achieved 12/23/2014 n/a 12/31/2014 12/31/2016


100% achieved with DPWH rationalization completed in 2014. Indicator was added at 2nd restructuring.

Indicator 14: Improved Road Fund Performance: Number of New Road Board Secretariat policy and procedures introduced to institute internal controls for approvals and release of funds


Non/a

Yes Yes

Date achieved 12/23/2014 n/a 12/31/2014 12/31/2016


Policies and procedures were introduced, but road board performance remained questionable. Indicator was added at 2nd restructuring.

Indicator 15: Number of staff trained in various subjects for enhancement of Project Implementation Capacity and road safety

Value 0 n/a 600 3354

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(quantitative or Qualitative) Date achieved 12/23/2014 n/a 10/14/2015 12/31/2016


559% achieved. Indicator was added at 2nd restructuring. Areas of training included planning-related business procedures, organizational culture change, asset preservation, change management, e-procurement, IT applications, and road safety.

Indicator 16: OCCP (Organizational Culture Change Program) Road Map adopted by DPWH


No n/a Yes Yes

Date achieved 12/23/2014 n/a 07/08/2015 12/31/2016


Indicator was added at 2nd restructuring. An adapted Road Map will be carried forward by a DPWH change team, which is under the responsibility of the Undersecretary for Support Services. DPWH is undertaking other human resource (HR) interventions, including with Asian Development Bank (ADB) support.

G. Ratings of Project Performance in ISRs

No.Date ISR

ArchivedDO IP

Actual Disbursements

(USD millions)

1 12/11/2008 Satisfactory Satisfactory 0.00

2 10/26/2009 Moderately Satisfactory Satisfactory 3.00


4 12/19/2010 Moderately Satisfactory Moderately Unsatisfactory 5.02

5 03/28/2011 Moderately Satisfactory Moderately Unsatisfactory 6.23

6 09/06/2011 Moderately Unsatisfactory

Moderately Unsatisfactory 14.10





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9 12/16/2012 Moderately Unsatisfactory Moderately Satisfactory 45.83

10 05/16/2013 Moderately Satisfactory Moderately Satisfactory 63.33







H. Restructuring (if any)

Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

12/06/2012 N MU MU 45.83

To take into account current implementation needs and adjustments that are necessary to address delays.

12/23/2014 Y MS MS 112.02

To allow DPWH to provide urgent technical assistance to Local Government Units (LGUs) for rehabilitation of local infrastructure in Typhoon Yolanda/Haiyan affected areas.

If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below:

Outcome RatingsAgainst Original PDO/Targets Moderately UnsatisfactoryAgainst Formally Revised PDO/Targets Moderately SatisfactoryOverall (weighted) rating Moderately Satisfactory

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

Country and Sector Background1. The Philippines National Road Improvement and Management Program (NRIMP) was an

Adaptable Program Loan (APL) launched in 2000 as a three-phase, 10-year program. The NRIMP APL supported the transport sector reform goals of the Government of the Philippines (GoP) as well as the sustainable development and operation of the National Road System (NRS). It was originally intended to include three phases: (i) Phase one, design (NRIMP-1), (ii) Phase two, initiation (NRIMP-2) and (iii) Phase three, operation (NRIMP-3). Governance issues which emerged in the road sector under NRIMP-1 were the subject of a Department of Institutional Integrity (INT) investigation (refer Box 1 – Section 2.1). This resulted in a two- year delay to the preparation of NRIMP-2, as the Bank’s Executive Directors sought assurances that NRIMP-2 made sufficient efforts to address the significant issues identified. In late 2016, the Bank and GoP agreed not to extend NRIMP-2, nor to continue the NRIMP APL to the originally intended third phase (NRIMP-3). It was mutually agreed that the GoP’s needs would be best met through a new project.

2. A s d e s c r i b e d i n t h e P h i l i p p i n e s C o u n t r y A s s i s t a n c e S t r a t e g i e s ( C A S s ) a t t h e t i m e o f a p p r a i s a l

of both NRIMP-1 and NRIMP-2, the Philippines had a tremendous range of assets to draw upon for its development. World class human talent and a high level of overseas employment reflected the international demand for its labour force. Available natural resources included a rich biodiversity, with significant mineral, oil, gas and geothermal potential. Despite these endowments, development outcomes in the Philippines fell short of their potential. This was in a large part due to the limited ability of public institutions to resist capture by special interests. As a result, they failed to work effectively for the common good, weakening the social contract between the Government and its citizens. Put succinctly, this created a vicious cycle of weak public services, lack of trust in the Government, and an unwillingness of citizens to provide adequate resources to the Government.

3. Before NRIMP-1, the Philippines’ per capita growth performance lagged significantly behind other East Asian countries, with domestic and foreign investment flows also well below those of its neighbours. However, just prior to the approval of NRIMP-2 there were some positive signals in regards to growth and investment levels in the Philippines. For example, gross domestic product (GDP) grew by 7.3 percent in 2007, the highest in decades. External imbalances remained robust, due mainly to rising remittances from migrant workers and large capital flows. The country’s economy had the basis for a vibrant private sector, liberal domestic and foreign investment regimes, and good entrepreneurial capacity. The economy also benefited substantially from strong intra-regional trade. In addition, it had a very active civil society which was a potential agent for change. Yet, political and institutional hurdles made a long term coherent reform agenda difficult to implement.

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4. During preparation of NRIMP-2, the Government of the Philippines (GoP) designated poverty alleviation as well as improved income and wealth distribution as key goals1. Subsequent plans added the pursuit of inclusive growth as a national objective, acknowledging the benefits of sustained growth for creating jobs and reducing mass poverty2. Inadequate infrastructure, especially roads, was one of the constraints to investment and therefore growth3. As an archipelago, transport is critical to the national economy of the Philippines. The country’s transport system is based largely on roads and inter-island shipping – the two modes account for almost all freight and passenger traffic. While some progress had been made in the years prior to NRIMP-2, the efficiency of the road network in promoting growth and providing safe access had been limited by high levels of congestion, the widespread poor condition of roads and bridges, inadequate connectivity, and the lack of an effective road safety strategy. As a result, for example, intercity freight rates in the Philippines were more than 50 percent higher than in Thailand or Vietnam.

5. The period prior to NRIMP-1 was characterised by under-investment in the road sector, with capital expenditures on the NRS reaching a low of PHP 34 billion (0.9 percent of GDP) in 2002 and rising slightly during the period of fiscal constraint until 2005. Funds allocated to road maintenance rose from 2004 due to rising revenues from the Special Road Support Fund (SRSuF). The SRSuF was established under NRIMP-1 to fund road maintenance with motor vehicle user charges (MVUCs) consisting of driver licencing and vehicle registration fees. Despite this, maintenance funding was only about 40 percent of the estimated needs in 2006, and cost recovery needed to rise further. With the resurgence in the economy, the combined capital and SRSuF budgets for 2007 rose to PHP 69 billion (1.8 percent of GDP), a level which had the potential to address the maintenance backlog if spent efficiently.

6. At the time of appraisal of NRIMP-2, the total length of the non-toll road network was estimated at 201,000 km, with the NRS accounting for 14 percent of the total, provincial roads 14 percent, and city and municipal roads 11 percent. The balance of 61 percent were classified as barangay roads, which were mostly unpaved village-access roads. Visual condition surveys of the NRS were undertaken in 2005 and 2006 and a visual condition index (VCI) was developed under NRIMP-1. According to the data, 53 percent of the NRS was in fair to good condition, with roughness measurements consistent with these findings.

Rationale for Bank Assistance7. There was a compelling case to continue the Bank’s engagement in a road sector plagued by

inefficient systems and poor management effectiveness. Since the launch of reforms in 1997, the Bank was a key partner in reshaping financing and management of the sector. The Bank’s NRIMP APL was launched to support the GoP’s reform goals and ensure the sustainable development and operation of the NRS. The program aimed for NRIMP-1 to put in place a strong platform for further reforms, with the subsequent phases taking this forward. Under

1 Medium Term Philippines Development Plan 2004-2010. National Economic and Development Authority. Republic of the Philippines. 2 Philippines Development Plan 2011-2016. National Economic and Development Authority. Republic of the Philippines. 3 Philippines: Meeting Infrastructure Challenges. Report No. 31782. December 1, 2005. World Bank and Public Private Infrastructure Advisory Facility.3

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NRIMP-1, the SRSuF was established and became operational, critical financial management and environmental safeguards processes were established, and the physical targets were achieved, albeit with a delay of two years. The Department of Public Works and Highways (DPWH) achieved progress in developing and piloting an impressive set of business process improvements. However, due to frequent leadership changes and severe fiscal constraints from 2002 to 2006, legislative support could not be mobilized to establish a separate authority for the NRS.

8. Through its engagement, the Bank acted as a catalyst in promoting institutional integrity (refer Section 2.1 and Box 1). Consistent with the Bank’s CAS4 which aimed to build islands of good governance, the NRIMP APL, and NRIMP-2 in particular took a comprehensive approach by adopting an integrity strengthening strategy that focused on both institutional capacity building measures and specific project-protection measures. Given the risk of leakage of resources for public works through corruption, particularly in road works, the strengthening of anti-corruption efforts and governance in the road sector was a high priority for both the GoP and donors. This included the Bank and the Australian Agency for International Development (AusAID). NRIMP-2 aimed to have a significant impact on the overall integrity standards of DPWH. The project design addressed these issues, building on existing GoP integrity programs, developing new sector specific integrity measures, providing special measures for protecting public and Bank funds, and involving beneficiaries and civil society organisations (CSOs) in external monitoring of governance effectiveness. The involvement of the Bank leveraged grant financing from an AusAID trust fund to support these activities. The approach adopted was cutting edge at the time of preparation and was fully consistent with the Bank’s own 2006 Governance and Anti-Corruption strategy.

1.2 Original Project Development Objectives (PDO) and Key Indicators

9. NRIMP APL objective. The long-term programmatic objective of the NRIMP APL was the establishment of road management arrangements which ensure the upgrading and preservation of the NRS in an environmentally, socially and financially sustainable manner.

10. The key program indicators for the NRIMP APL were as follows:

NRIMP APL Key Indicators End of NRIMP-1

End of NRIMP-2

End of NRIMP-3

Management Effectiveness: Performance standards for key NRS management systems will be achieved at least by: 40% 75% 95%

Financial Sustainability: Finances needed to maintain the NRS will be obtained through a sustainable mechanism, such as a road fund, raised through user charges, by at least:

60% 90% 100%

Physical Conditions: NRS average road roughness (measured by IRI) is reduced by: 3% 8% 15%

Environmental and Social Conditions: These issues will be integrated in all phases (preparation, implementation and operations) of road upgrading and maintenance projects. The percentage of regional environmental impact assessment (EIA) staff who can carry out such functions will be:

50% 80% 100%

4 Country Assistance Strategy for the Philippines 2006-2008. Report No. 52897. May 17, 2005. World Bank Group. 3

11. Original NRIMP-2 PDO. Building on NRIMP-1, the original PDO of NRIMP-2 was to improve operation, organizational effectiveness and fiduciary control in the management and financing of the NRS, to enhance road user satisfaction in the project areas and efficiency and integrity in the use of financial resources.

1.3 Revised PDO of NRIMP-2 (as approved by original approving authority) and Key Indicators, and reasons/justification

12. For NRMIP-2, the second restructuring resulted in a revision of the PDO to reflect the fact that DPWH was required to provide technical support to Local Government Units (LGUs) in response to Typhoon Yolanda/Haiyan. This extended the project scope to beyond the initial NRS focus. The PDO then became: to improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways at the national and local level. To measure this, a PDO indicator was added monitoring the percentage of local projects receiving technical assistance which were in compliance with DPWH’s prescribed technical standards. The objectives of the NRIMP APL, the original NRIMP-2 PDO, and the revised PDO are listed in the table below.

NRIMP APL Objective

Establishment of road management arrangements which ensure the upgrading and preservation of the NRS in an environmentally, socially and financially sustainable manner.

NRIMP-2 PDO

Original (at approval)

Improve operation, organizational effectiveness and fiduciary control in the management and financing of the NRS, to enhance road user satisfaction in the project areas and efficiency and integrity in the use of financial resources.

Revised (2nd restructuring)

To improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways at the national and local level.

1.4 Main Beneficiaries

13. The beneficiaries of the NRIMP APL were expected to be the entire population of the Philippines as follows: (i) road users would reduce the time and money they spent on transport; (ii) better roads would increase access to social services, reduce the cost of products and facilitate commercialization; (iii) efficiency gains and the new SRSuF should lessen pressure on the budget and contribute to reducing general taxes; and (iv) better technology should increase DPWH’s staff satisfaction and credibility. There were no revisions to this “primary target group” throughout implementation of NRIMP-1 nor NRIMP-2.

14. Other financing agencies including the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) also benefited from NRIMP-2. They adopted an approach to road maintenance financing that is similar to the one under the NRIMP APL,

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including support of the SRSuF. Their own projects have also benefited from using the business processes and integrity frameworks established under the NRIMP APL.

1.5 Original Components

15. NRIMP-2 originally included the following components, with costs including contingencies provided below:

Component A: National Road Improvement and Asset Preservation (Appraisal Estimate USD 519.3 million including USD 210.8 million International Bank for Reconstruction and Development (IBRD) loan)

1. National Road Improvement (Appraisal Estimate USD 238.5 million including USD 123.9 million IBRD): Works and services for road upgrading, rehabilitation and widening, bridge replacement, and landslide rehabilitation, totaling approximately 450 km of arterial roads and about 1,000 m of NRS bridges.

2. Road Asset Preservation (Appraisal Estimate USD 280.8 million including USD 86.9 million IBRD): Preservation works on the NRS included; 1. Support for LTPBMCs for comprehensive maintenance on a 1,000 km length of

the arterial NRS.2. Preventive (periodic) maintenance of approximately 1,200 km of the NRS

annually over four years.3. Advisory support for implementation of the asset preservation program and for

improving the service delivery of routine/general maintenance under DPWH and SRSuF.

Component B: Institutional and Capacity Development (ICD) (Appraisal Estimate USD 56.1 million including USD 20.6 million IBRD loan and USD 10.5 million AusAID grant)

1. Business Process Improvements (Appraisal Estimate USD 47.1 million including USD 18.0 million IBRD loan and USD 4.1 million AusAID grant): Modern business tools for planning, financial management and procurement that were piloted under NRIMP-1 were to be institutionalized and implemented in all regional and a majority of district offices of DPWH. This included expansion of the communications networks and computerization, regular asset surveys, and strengthening internal controls. One important part of this component was the updating of DPWH’s dated NRS design standards (guidelines, criteria and specifications) which included consideration of natural hazard risks and value engineering.

2. Corporate Effectiveness (Appraisal Estimate USD 7.5 million including USD 1.1 million IBRD loan and USD 6.4 million AusAID grant): This would modernize the structure and processes of DPWH to make it a user responsive, transparent, and efficient public sector agency. It aimed to enable effective participation by road users and citizens, through four subcomponents: (i) enhancement of DPWH’s effectiveness through an institutional audit and organizational restructuring; (ii) support for a multi-stakeholder partnership of road users and non-governmental organizations (NGOs) for improving responsiveness and transparency in the road sector; (iii) support for a pilot trial for commercializing the current operations of district engineering offices to improve service delivery; (iv) support for strengthening the fiduciary integrity of the project implementation, through independent technical audit, parallel procurement evaluation, and strengthening institutional integrity.

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3. Strategic Sector Reform (Appraisal Estimate USD 1.2 million all IBRD loan): Support to strengthen the operations of the Road Board to manage the SRSuF and update its mandate, review road cost recovery, and to consider options for restructuring the management and delivery of services in the sector.

4. Training and Workshops (Appraisal Estimate USD 0.3 million all IBRD loan): Activities for facilitating achievement of the project objectives and related skills development.

1.6 Revised Components

16. The component changes resulting from the two restructurings of NRIMP-2 are summarized in Annex 9. For the first restructuring in 2012, the findings of the mid-term review (MTR) resulted in a number of changes to the components of NRIMP-2: (i) the number of road improvement sub-projects was reduced from 12 to 10, with one dropped due to procurement issues resulting from two failed rounds of bidding, and a second implemented with GoP funding independent of NRIMP-2; (ii) the extent of preventative maintenance was reduced due to cost increases associated with higher pavement design standards; (iii) a number road improvement and bridge replacement activities under sub-component A.1 were dropped as well as advisory services; (iv) four of the eight LTPBMCs were dropped as they could not be implemented in the project timeframe that was expected to remain; (v) the supply of some information technology (IT) equipment and software was dropped as DPWH decided to procure these separately to the project with local funds; and (vi) the district office commercialization pilot was no longer considered a priority due to DPWH rationalization plan which was being implemented.

17. For the second restructuring of NRIMP-2 in 2014, a new component “Technical Assistance to Local Government Units (LGUs)” was added to enable DPWH to provide technical support to LGUs for reconstruction activities in the wake of Typhoon Yolanda/Haiyan. This natural disaster struck the Philippines in November 2013, causing large scale destruction to physical infrastructure and prompting the GoP to undertake recovery programs to avoid economic losses equivalent to one percent of GDP. The technical assistance for recovery provided under NRIMP-2 included: (i) support for selection of activities, detailed engineering designs, management of social and environment issues, and preparation of contract documents for infrastructure such as city/municipal/barangay buildings, classrooms, public hospitals/health centers, local roads, water supply and irrigation facilities; (ii) construction supervision for local infrastructure; (iii) project management and capacity building support to DPWH and LGUs including training, workshops, and preparation of related technical documents; and (iv) preparation of maps and road inventory database for the local road network in Mindanao. In this restructuring, the scope of some Component A activities on road improvement and asset preservation was also reduced, while under Component B, ICD activities on corporate effectiveness, strategic reform, maintenance services and training were merged.

1.7 Other significant changes

18. During the first and second restructurings of NRIMP-2 there were significant modifications to the results framework (refer Section 2.3). These changes improved measurability and included revising indicators to reflect the evolving capacity development needs of DPWH, with a shift in focus from development of business systems to dissemination or roll-out of those systems as planned under the phased NRIMP APL approach. They also reflected the

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improved governance and management effectiveness of DPWH over the course of the project as it benefited from the reforms made. In addition, the cumulative extension to the NRIMP-2 closing date was four years, two years for each of the restructurings. The first of these offset the delays in preparing NRIMP-2 which resulted from the sector governance issues discussed in Box 1.

19. The second restructuring also responded to the GoP’s request for support on road safety, a key development issue in the Philippines. Using an AusAID trust fund, International Road Assessment Program (iRAP) surveys were conducted for 6,000 km of roads. Then, with Global Road Safety Facility (GRSF) funding, a road safety expert provided DPWH with support to address the iRAP recommendations on three pilot sections of the NRS. DPWH Bureau of Quality and Safety (BQS) also designed safety interventions for two of the LTPBMC sections, however these were only implemented on one contract. Finally, with additional AusAID support an expert reviewed DPWH safety manuals, undertook training and mentoring, and prepared a road safety strategy.

2 Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

20. Soundness of the background analysis: The NRIMP APL design responded well to the analysis of the national context conducted at the genesis of the program, as well as to the updated analysis conducted during preparation of NRIMP-2. While lessons from projects prior to the NRIMP APL had been taken into account, some of the same issues occurred: slow procurement, slow disbursement and uneven progress with institutional reform.

21. Assessment of program design: The selection of an APL for this operation was judicious. It afforded the Bank and the GoP a long-term view of the development needs of the NRS and especially the required institutional reforms. As the second phase of the three phase NRIMP APL, NRIMP-2 intended to implement the systems designed under NRIMP-1, and hence was an important and relevant part of the program at the time of entry.

22. Assessment of project design: The design of the NRIMP APL, and NRIMP-2 in particular had a high level of complexity with many objectives and components. While ambitious, the relatively sophisticated level of the GoP as well as the maturity of the Bank’s transport sector engagement justified this higher level of complexity. While some of the targets for delivery of both reform and physical works components were bold, there was a degree of complementarity with, for example, business process improvements designed to facilitate streamlined implementation of the road improvement and asset preservation components. The PDO of both the NRIMP APL and NRIMP-2 was overly complex and formulated in terms that were not readily measurable by DPWH, as were some of the original PDO indicators. The objectives of NRIMP-2 including the project design were also fully consistent with the 2005 CAS.

23. Both the NRIMP-1 Implementation and Completion Results Report (ICR) as well as an INT report into NRIMP-15 (refer Box 1) identified a number of governance lessons which the design of NRIMP-2 sought to address. The Board approval of NRIMP-2 was delayed for two

5 Redacted report -National Roads Improvement and Management Program (Phase 1). January, 2009. World Bank Group Integrity Vice Presidency. 7

years awaiting the outcome of INT’s investigation, with multiple submissions and briefings required by Executive Directors who were justifiably concerned about the serious governance issues that had been identified. Findings of their report included a strong need for improved governance, particularly for procurement and contract management. NRIMP-2 sought to address this through a redoubled focus on upgraded business processes which aimed to improve governance and reduce cost and time overruns.

24.

Adequacy of Government’s commitment: While the GoP was fully involved in the preparation of both NRIMP-1 and NRIMP-2 and adopted all of its objectives, it could have been more engaged in determining monitoring and evaluation (M&E) arrangements (refer Section 2.3). Repeated changes in GoP staffing and structure also resulted in the loss of some the program’s champions during NRIMP-1, with the delays preparing NRIMP-2 contributing to this. As a result, there were fewer reform champions within DPWH at the time of NRIMP-2 effectiveness.

25. Assessment of risks: During the design of NRIMP-1 and NRIMP-2, the risks were clearly defined and candidly rated. Some of the risks that were rated as high or substantial (road right of way (ROW), budget allocations and procurement) materialized, however well-designed mitigating measures served to protect the project from these risks. Of particular note is the procurement risk which received a great deal of attention and ultimately caused a two-year delay to the preparation and approval of NRIMP-2. The project team were required to provide multiple submissions and briefings to the World Bank Board after the package was initially returned, eventually assuaging the valid concerns which arose due to the governance issues identified during NRIMP-1 (refer Box 1). Any delay was clearly warranted as the resulting measures which were adopted in the design provided a sound basis for addressing the governance issues. As described in Section 2.4, these measures included use of an Independent Procurement Evaluator (IPE), enhanced controls, adoption of IBRD guidelines instead of country systems, strengthened audit capacity, enhanced business processes and civil society oversight. All of the measures served to address the significant procurement risk for NRIMP-2.

2.2 Implementation

26. The design of the NRIMP-2 as well as the full APL program was ambitious with a broad scope that required both intensive and extensive implementation support. Key factors which

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Box 1: Evidence of Collusion and Bid-rigging in Road Contacts

In 2003, the Bank’s NRIMP-1 supervision team identified signs of bid-rigging in the procurement of two roads packages and rejected award of the contracts. Two further rounds of bidding in 2004 and 2006 revealed similar signs and were also rejected. The Bank’s task team referred the information to the INT in 2003, who concluded an investigation in 2007 and found that a cartel of contractors had engaged in corrupt and collusive practices in all three rounds of bidding, undermining competition in roads construction in the Philippines and inflating prices by 25 to 30 percent. These findings were disclosed to the GoP for follow-up under Philippines law. In addition, the INT investigation resulted in sanctioning of eight contractors5, one of the largest set of blacklistings in the Bank Group’s history. The investigative findings were also crucial in designing mitigating measures for NRIMP-2, described in Section 2.4.

positively influenced implementation included:

27. GoP’s commitment to the reform agenda: A high level of GoP commitment to the NRIMP APL objectives emerged during the mid-stages of NRIMP-2 implementation, resulting in a change to strong reform-minded leadership of DPWH. This leadership championed improvements in governance and organizational culture which enabled the success of NRIMP-2’s ICD components, particularly at the national level. In terms of funding, GoP also increased the maintenance budget for DPWH from PHP 2.5 billion in 2009 to PHP 8.5 billion in 2016 which shows their interest in moving towards provision of sufficient maintenance financing, thus enabling proper asset management in the road sector.

28. Impact of ICD component: The ICD component had a significant positive influence on the implementation of NRIMP-2 relative to NRIMP-1. The incremental adoption by DPWH of systems developed under the NRIMP APL led to increases in efficiency of design and procurement, particularly for activities later in NRIMP-2 which benefited most from these systems. The updated NRS design standards developed under NRIMP-2 will also ensure new designs can make use of advances in materials and design methods to improve the quality of road infrastructure, including in the areas of value engineering, climate resilience, drainage, structures, geotechnical engineering and road safety. Implementation of these design standards could have been improved by ensuring that work to integrate them into DPWH business processes was completed by the same consultant, but these standards like other ICD activities will nevertheless have a significant impact.

29. Reduction in civil works prices: The transparency inherent in DPWH’s improved systems reduced the opportunity for interference and resource leakage on civil works contracts. This ultimately resulted in significant savings in the cost of civil works. Between 2002 and 2007, an INT investigation revealed bid prices for some NRIMP-1 works contracts were at least 25 percent greater than engineer’s estimates which was attributed to collusion amongst contractors6. By 2013, the Bank’s procurement post review reports documented average bid award prices which were 20 to 25 percent lower than the engineer’s estimate7. Overall, a cost normalization of at least 45 percent was realised, which represents a major improvement in the efficiency of undertaking civil works. Unfortunately, this was not translated into additional work due to implementation delays (refer below).

30. While the positive contribution of these factors to implementation is clear, there were also a number of negative factors which had an adverse impact:

31. Slow commencement of implementation: While some of the detailed engineering for Component A, and planning for Component B had been carried out under NRIMP-1, the project was slow to start and by the time of the original NRIMP-2 closing date (December 2012), only 12 percent of the loan was disbursed. Lack of progress on civil works components could mainly be attributed to a slow procurement process, with both DPWH and the Bank sharing responsibility for these delays (refer Section 5).

6 PAD in support of Phase 2 of the National Roads Improvement and Management (APL) Program. Report No: 40764-PH. April 15, 2008. World Bank Group; and Redacted report -National Roads Improvement and Management Program (Phase 1). January, 2009. World Bank Group Integrity Vice Presidency.7 NRIMP-2 Procurement Post Review Supervision Mission Report. March 26 & April 19, 2013. World Bank Group; and NRIMP-2 Procurement Post Review Supervision Mission Report. September 17, November 19 & December 12, 2013. World Bank Group. 9

32. Significant reduction in original scope: The NRIMP-2 MTR mission in December 2011 highlighted these implementation delays and provided clear rationale for adjustments to components, with some requiring a significant reduction in the original scope (refer Annex 9). The first restructuring in 2012 acted on these recommendations, making a number of modifications to scope, timing and financing. This restructuring also dropped four of the eight planned LTPBMCs and while this reduced the procurement backlog, the originally envisaged scope was not met.

33. Inconsistent direction from Bank: The Bank contributed to substantial delays due to the discontinuity of project staff (particularly team leaders) and repeated rounds of review for both works and consulting packages. It was common for new, sometimes conflicting, comments to be raised at each round of review (refer Section 5.1). In some cases, it took up to 18 months for issue of a no objection letter (NOL). There were particularly long delays for LTPBMCs due to inconsistent direction from the Bank over the approach to adopt, with contracts eventually awarded very late in March 2013, four years into the project.

34. Failure to roll out full scope of ICD: The implementation of Component B -ICD was also delayed due to procurement difficulties. Despite the broad benefits acknowledged by stakeholders (refer Annex 5), many of the activities under this component appeared to be given a lower priority compared with civil works, and as a result procurement did not commence until November 2012. Due to the long process of procurement followed by the extended time required for system development and implementation, the benefit of reforms was available to some, not all of DPWH offices, even at the revised closing date (extended to December 31, 2016). Underperformance of consultants exacerbated this, for example, the engineering design process improvements consultancy was not successfully completed. Given that the NRIMP APL will conclude at NRIMP-2 instead of NRIMP-3 (refer Section 2.5), DPWH will be responsible for rolling out the business process and corporate effectiveness improvements, potentially supported by the Bank or other donors. Failing to complete this under NRIMP-2 was a missed opportunity, as these remote DPWH offices remain at the frontier of governance issues for the GoP.

35. Failure to achieve full disbursement: NRIMP-2 closed with USD 44.2 million (19 percent of the loan value) undisbursed, which represented a lost opportunity for both the GoP and the Bank to maximise the development impact of the project. These funds could have been used for other road improvement or asset preservation sub-projects which fitted NRIMP-2’s objectives. As a last resort cancellation of a portion of the loan was requested but this was not received from GoP, and funds remained undisbursed at project close.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

36. Design: The original PDO of NRIMP-2 is provided in Section 1.2 and discussed in Section, 2.1, with the main goal to improve operation, organizational effectiveness and fiduciary control in the management and financing of the NRS. In line with these objectives, the original results framework for NRIMP-2 consisted of an extensive and complex set of indicators which in some cases created measurement constraints. It is not clear that the Bank was sufficiently engaged with DPWH during preparation of the results framework (refer Section 5.1), and as a result, the extent of understanding and ownership of the results framework by DPWH was less than desirable.

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37. An example of these measurability issues were the original PDO indicators (refer Annex 10). At the commencement of NRIMP-2 there were four covering administrative efficiency, sustainability of financing, value for money and road user satisfaction. While these indicators were fully aligned with the PDO baselines were not clearly established in the PAD with estimates of target values for the life of the project also incomplete. It is evident that DPWH did not have a clear plan for how these indicators were to be periodically measured, and as a result three of the four indicators were not fully measured prior to the second restructuring.

38. At the intermediate outcome level, the project had a total of 17 indicators. Three of these were for the physical improvements under Component A, with the remaining 14 measuring various outcomes and outputs relating to Component B - ICD. This large number of intermediate indicators was complex and difficult to grasp, with DPWH unable to establish a clear approach to measuring and reporting against these indicators prior to the restructuring.

39. In its efforts to measure against the original indicators, DPWH attempted to draw data from a range of sources. Data for primary indicators was sourced through DPWH’s procedures for road and other surveys. Additional information covering a wide spectrum of agency performance and user opinions was collected on a twice-yearly basis by the new civil society organisation (CSO) ‘Road Watch’ (Bantay Lansangan) who were funded by AusAID grant funds. The results were published twice-yearly in a ‘Road Sector Report Card’. The involvement of this independent citizen’s group enabled broader public dissemination and review of results, as well as beneficial external scrutiny of the project.

40. Implementation: Annex 2 summarises the changes to intermediate indicators at the first and second restructurings. Given the complexity of the results framework and the apparent lack of DPWH involvement in its design, the Unified Project Management Office (UPMO) who managed the project struggled to establish linkages between project activities and the results framework. The Bank task team became aware of these issues during supervision and secured grant funding from the Institutional Development Fund (IDF) for a consultancy to develop a measurement plan and define baselines. Procurement of these expertise by DPWH was plagued by delays, and the grant expired before work could be undertaken, an unfortunate outcome which meant the project retained a complex and poorly understood results framework. With these attempts to stay true to the original M&E design failing, modifications were made to the NRIMP-2 results framework during restructurings. This aimed to transform it into something more understandable and measureable to DPWH, as well as to temper what had proved to be overly ambitious targets. Justification for these reductions came not from a cost basis, with costs actually reducing as a result of procurement reforms (refer Section 2.2), but rather due to procurement delays, with the original scope not able to be achieved, even in the extended timeframe.

41. While the first restructuring dealt with reductions in physical scope, the second added a component to assist GoP with recovery from Typhoon Yolanda/Haiyan (refer Section 1.6). This was measured by a single PDO indicator; the percentage of local infrastructure subprojects, receiving technical assistance under the project that are in compliance with the prescribed standards of DPWH. The second restructuring also made significant modifications to the results framework for the ICD component. Three new PDO indicators and 11 new intermediate results indicators made for an extensive realignment of the results framework. While the adjustments improved measurability, some important aspects of the original objectives were lost, replaced with many output indicators. Notable were the changes for

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Components A2 and B1, with the outcome targets on asset management cast aside. This included replacing the target that 75 percent of the paved NRS was to be maintained to fair condition or better which suffered attribution issues, with an output indicator of the length of road under LTPBMCs, which was only one of tools available to the project, and a small part of road maintenance arrangements. In addition, indicators on procurement efficiency, timeliness of audits and cost and time over-run reductions were replaced with a single indicator on adoption of design standards by DPWH. To some degree changes diluted the ambitious original goals of NRIMP-2, however they were more measurable and realistic, in some cases reflecting the improved governance and management effectiveness of DPWH as it benefited from the reforms made under the project.

42. Other changes included adding core sector indicators, dropping results which were not measurable or fell outside the revised scope, and capturing new ICD initiatives which were added as the project had evolved. These changes in the results framework were significant and could have put the achievement of the original objectives at risk; however, they were made with a sound justification as they reflected the specific ICD interventions which ended up being used. For example, a new indicator was added to reflect the Multi Year Programming and Scheduling Application (MYPS) developed under the project, and encouraged its roll out to regional and district DPWH offices through setting targets related to the number of offices using the tools. This was a positive development, as having undertaken reforms at the national office, the project tackled the next step of addressing the issues at the regional and district frontier.

43. Once indicators had been revised, the methodology used during implementation of the results framework was found to be sound, with a high level of quality and reliability as evidenced by the depth of six-monthly progress reports produced by the UPMO. Data was in turn used for Bank aide-memoirs and implementation status and results reports (ISRs).

44. Utilization: Given the NRIMP-2 M&E framework underwent a wholesale change to improve measurability, and that some of the revised indicators were direct outputs of DPWH’s improved business processes, the M&E arrangements have the foundations for a high level of sustainability. It is also apparent that the GoP appear to have taken ownership of the arrangements, with the National Economic and Development Authority (NEDA) mandating the use of project performance sheets which present a concise one-page summary of target and actual accomplishments for each of the ICD consultancies under NRIMP-2. The systems that were developed under the NRIMP APL have facilitated this, strengthening the existing capacity and allowing the various executing agencies including the Department of Budget and Management (DBM), NEDA and DPWH to monitor implementation progress and make informed changes as required. More broadly, DPWH appear to have embraced the M&E culture championed by the NRIMP APL as part of their efforts to improve transparency, publishing an annual performance governance scorecard (PGS) report on their website8 which reports against criteria of social impact, stakeholder perception, processes, people and resource stewardship. This again underlines the wide utilization of the APL’s M&E arrangements and their likely sustainability.

8 DPWH Performance Governance Scorecard, 2016. Retrieved from: http://www.dpwh.gov.ph/dpwh/pdf/PGS.pdf 12

2.4 Safeguard and Fiduciary Compliance

45. Safeguards: The overall safeguards performance of NRIMP-2 was mixed, with ratings fluctuating from Satisfactory at commencement to Moderately Unsatisfactory as involuntary resettlement issues emerged. Delays in implementing the resettlement action plan (RAP) were a key contributor to these poor ratings. While safeguards implementation appeared strongest at DPWH national office, there were delays in establishing institutional arrangements between the UPMO, Environmental and Social Safeguard Office (ESSO) and regional and district DPWH offices for monitoring compliance through multi-partite teams. These delays contributed to poor safeguards performance for projects on the ground, with late submission of reports which were missing critical information a symptom of this.

46. A significant social safeguards issue which emerged late in the project was a failure to pay land acquisition claims for linked road improvement works that had been constructed with GoP funding adjacent to roads improved under NRIMP-2. This oversight appeared to have occurred due to DPWH misunderstanding the Bank’s involuntary resettlement policy. Better safeguards due diligence by the Bank would have also helped to identify these issues earlier. Bank policy requires that compensation claims be paid before construction is allowed to begin, even for linked works that are not funded by the project. Once this issue was identified, the Bank team worked with the ESSO to develop and implement an agreed action plan. This included reducing the ROW to that actually used to minimise land required. Due to complex GoP systems, compensation payable to project affected persons (PAPs) at two locations was not able to be paid by the closure of the project. There is clear evidence that the task team rallied to assist DPWH with implementation of the action plan, even after project closure. Further, they encouraged action by senior officials of DPWH to address the non-compliance. At the time of writing this ICR, DPWH had advised that all PAPs had been compensated at one location, with the payments for the second in escrow awaiting the outcome of a court case.

47. Procurement: The design of NRIMP-2 included a comprehensive range of anti-corruption measures to address the issues that had been identified in NRIMP-1. All these anti-corruption measures were cutting edge at their time, and were developed as outputs from the INT investigation which indicated collusion amongst bidders and resulted in the debarment of eight contractors9. This included the use of an IPE whose tasks included evaluating bids in parallel with the UPMO, who in most cases had findings consistent with those of the UPMO. While this approach added value through the significantly enhanced integrity and transparency of the procurement process, it also contributed to delays. Other project features included enhanced procurement controls and businesses process improvements inherent in the ICD component, adoption of the 2006 IBRD procurement guidelines which had stronger anti-corruption measures, and independent oversight by CSO Road Watch (Bantay Lansangan). These measures were clearly very effective at increasing transparency and contributed to the major reduction in civil works costs observed (refer Section 2.2). One unfortunate development was the discontinuation of the IPE and Road Watch oversight, as the project moved beyond the procurement phase. These AusAID funded components ended with the closing of that trust fund mid-way through NRIMP-2, and therefore the working knowledge they possessed has been lost. While there is evidence that the changes within DPWH have stuck, there remains a risk that the governance issues may re-emerge without the

9 Redacted report -National Roads Improvement and Management Program (Phase 1). January, 2009. World Bank Group Integrity Vice Presidency. 13

increased oversight that these measures provided. An ongoing engagement with the Bank and other donors will help to mitigate this risk.

48. Financial Management: The financial management performed by the UPMO was satisfactory, and was certainly aided by the systems developed and adopted as part of NRIMP-2. These included revised versions of the Electronic New Government Accounting System (e-NGAS) and e-Budget. Roll-out of these tools to regional and district offices was linked to an indicator in the second restructuring with the target of 203 offices met during 2015. The UPMO maintained qualified and experienced staff, adequate processes and procedures, and a satisfactory reporting system. Interim financial reports (IFRs) were generally submitted on time or with moderate delays. One concern was that the requirement of the legal agreement for semi-annual internal audits of DPWH’s project accounts was not consistently complied with, however this was a GoP wide issue and not unique to DPWH. External project audits were carried out on an annual basis, presenting some qualified opinions but no accountability issues.

2.5 Post-completion Operation/Next Phase

49. In late 2016, the Bank and GoP agreed not to extend the NRIMP-2 closing date for a third time, also deciding not to continue the NRIMP APL to the originally intended third phase (NRIMP-3). It was agreed that GoP’s needs would be best met through a new project which better suited DPWH’s current circumstances and the progress DPWH had made at improving management effectiveness. Ending the NRIMP APL would allow pursuit of a new project which wouldn’t be constrained by the historic framework of the NRIMP APL. For example, the GoP had requested specific support for bridge projects in Metro Manilla which would best be addressed through a new project. In light of these agreements, the transition arrangements to post-completion of NRIMP-2 are clearest for the road improvement and asset preservation component, with all investments now incorporated in DPWH’s improved asset management systems.

50. One sustainability consideration is the LTPBMCs undertaken under NRIMP-2. Given the delays in procuring LTPBMCs and their five-year duration, DPWH has agreed to finance the remaining tenure of these contracts up to September 2018, with a total value of approximately USD 11 million. While DPWH are committed to covering this, they are unlikely to adopt the LTPBMC model more broadly until they see more evidence of the efficiency of LTPBMCs versus the business as usual approach of traditional contracts. This is a potential sustainability issue which is offset by the fact that donors with an ongoing commitment including the Bank, ADB and JICA have embraced this approach to road maintenance financing that was piloted under the NRIMP APL. For example, JICA are implementing LTPBMCs on four sections of the NRS, which illustrates the donor support for the model and could thus provide the required evidence for government to fully adopt the model more broadly.

51. Ending the NRIMP APL at NRIMP-2 meant that the Bank lost a simple avenue to continue funding roll-out of improved ICD systems to all regional and district offices of DPWH. In addition, as with any business systems, maintenance and updating to suit changing needs will be required, and there is evidence that DPWH will support ongoing system maintenance including allocating sufficient human resources. There also appears to be a broad understanding of the benefits of these ICD interventions within the GoP, and this will help

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ensure ongoing funding. Promotion of the impacts of the NRIMP APL is important to sustain results and ensure the provision of adequate funding. Despite the significant impacts of the project on the management effectiveness of DPWH there appears to have been limited marketing of the project’s achievements by either the Bank or the GoP. This is likely because stories on institutional development hold limited appeal in the popular media, however the road improvement components could have provided a human angle which would have provided audience appeal and helped to reinforce sustainability.

52. Given the long duration of NRIMP-2 and indeed the NRIMP APL, an impact evaluation should be conducted by the GoP within two years. This will ensure the benefits of the road improvement and preventative maintenance works will be captured, while the ICD improvements will have had a chance to become ingrained at DPWH’s regional and district offices. As for future operations, despite the discontinuation of the NRIMP APL there is mutual interest from GoP and the Bank in working on a new transport sector operation. There is room for extending and scaling up the positive results delivered by the NRIMP APL, including to lower hierarchy provincial, municipal and barangay roads which sit beneath the NRS which was the focus of the NRIMP APL.

3 Assessment of Outcomes

53. Because of the revision of the PDO, the Assessment of Outcomes includes a split evaluation, rating the project before and after the PDO changed. In addition, the assessment evaluates the project in the context of the APL program, which has now concluded.

3.1 Relevance of Objectives, Design and Implementation

Ratings: NRIMP-2 Original PDO: High; NRIMP APL: High

54. The relevance of the original PDO of NRIMP-2 and that of the NRIMP APL to the country objectives is considered high, both at the time of preparation and currently.10 The high overall relevance of the project objectives confirms that the design reflected proper assessment of transport sector financing and governance issues which were a development priority and important to reducing poverty in the Philippines. The APL objectives remain consistent with the Bank’s current Country Partnership Strategy (2015 to 2018)11 and also the country’s own Medium Term Philippine Development Plan (2011 to 2016)12. These plans prioritized the development of road infrastructure to facilitate economic decentralisation, actions which were supported by the road improvement and asset preservation components of the NRIMP APL. However, more critical were the corruption issues which the program sought to address with improved governance. The design of the NRIMP APL focussed on improving the management effectiveness of DPWH, with the ICD component serving to address these needs across all of DPWH’s transport infrastructure investments. If designed today, the objectives would include more explicit efforts to address road safety and climate resilience, however these were not deemed as relevant at the time of preparation. Despite this, the project did end up addressing these with restructurings introducing pilot road safety interventions and

10 The objectives of NRIMP-2 and the NRIMP APL are provided in Section 1.31111 Country Partnership Strategy for the Philippines 2015-2018. Report No. 78286-PH. May 14, 2014. World Bank Group.12 Medium Term Philippines Development Plan 2011-2016. National Economic and Development Authority. Republic of the Philippines. 15

updated design standards including consideration of climate resilience.

Rating: NRIMP-2 Revised PDO: High

55. The revised NRIMP-2 PDO which sought to improve the condition of the national roads network and management effectiveness of DPWH at the national and local level is also considered relevant. This objective retained the relevance of the APL and original NRIMP-2 objectives noted above, but improved measurability through providing three sub-objectives; (i) PDO 1: Improve the condition of the national roads network; (ii) PDO 2: Improve the management effectiveness of DPWH at national level; and (iii) PDO 3: Improve the management effectiveness of DPWH at local level.

56. The addition of a local level component shows the Bank was responsive to the changing objectives and needs of the GoP, with the second restructuring modifying the project to meet a pressing need to provide technical assistance to LGUs for reinstating infrastructure damaged in Typhoon Yolanda/Haiyan. Meeting these changing needs helped to maintain NRIMP-2’s relevance but diverted some attention from the underlying institutional reforms. Further, the second restructuring served to accommodate the changing ICD needs of DPWH from one of system design to system dissemination. The shifted focus to roll-out of the improved business processes to regional and district offices met the GoP’s changing needs to tackle governance issues at the provincial frontier, thus maximising the impact of NRIMP-2.

3.2 Achievement of Project Development Objectives

NRIMP-2 Original PDO

PDO: Improve operation, organizational effectiveness and fiduciary control in the management and financing of the NRS, to enhance road user satisfaction in the project areas and efficiency and integrity in the use of financial resources – Modest

57. The progress against the original PDO indicators prior to the modification of the PDO was difficult to ascertain given the measurement difficulties that were evident (refer Section 2.3 and Annex 10). Of the four PDO indicators covering administrative efficiency, sustainability of financing, value for money and road user satisfaction, three were not fully measurable with no results reported prior to the second restructuring. There were two exceptions to this with the financing sustainability target of 60% achieved through MVUC cost recovery. In addition, the indicator on administrative efficiency was partially achieved, with the target for delivering a national competitively bid (NCB) package reduced from 12 to five months, besting the six-month target.

58. Given the measurability issues apparent with the PDO indicators, key intermediate results indicators were also reviewed to ascertain progress prior to the PDO change (refer Annex 10). While similar issues were apparent with some indicators being ill-defined, there is some evidence of achievement of the original NRIMP-2 PDO. For Component A - National Road Improvement and Asset Preservation, 295 km of paved road was added to the NRS, exceeding the target by five percent. Improvements in DPWH’s asset management were also close to targets, for example 69 percent of the annual DPWH road program was subject to technical and economic analysis compared to the goal of 80 percent. A similar level of mixed achievement was apparent for Component B – ICD, with two indicators on the Road Board operating procedures and road sector reform plan fully achieved, two on document

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processing and bid award pricing partially achieved and two not achieved. Based on the limited information available on NRIMP-2’s achievements prior to the PDO change it is deemed to have achieved only modest performance against the original PDO, with limited achievements balanced by a failure to achieve others.

NRIMP-2 Revised PDO

59. For the purposes of this efficacy analysis, each of the revised PDO objectives are discussed separately below. This is because the revised PDO had three distinct objectives, which was not the case for the original PDO. The datasheet at the start of this ICR provides full details of indicator achievements for the revised PDO.

PDO 1: Improve the condition of the national roads network - Substantial

60. NRIMP-2 addressed PDO 1 of improving the condition of the national road network through the activities in Component A (refer Section 1.4 to 1.6). As noted above, the target for the original indicator on length of paved road added to the NRS was exceeded by five percent. Of the new PDO indicators added, satisfactory perception of the NRS by external stakeholders exceed the target by 23 percent, while the percentage of roads in good and fair condition as a share of total classified roads remained unchanged from the baseline of 55 percent. An intermediate indictor on length of road under LTPBMCs achieved the target of 680 km.

61. While the output targets for roads rehabilitated and length under LTPBMCs were achieved, they did not translate into changes in outcomes for PDO 1. This is likely because the works under NRIMP-2 were small compared with the overall DPWH budget, and it was overly ambitious to expect that the relatively small investment under the project (representing two percent of DPWH’s maintenance budget) could have an impact on the portion of roads in good and fair condition as a share of total classified roads.

62. Given the eight-year duration of NRIMP-2, including the combined four years of extensions, many of the road improvements and preventative maintenance works have been long completed and are now integrated into DPWH’s asset management systems. The condition of these sections is regularly monitored with ongoing routine and follow up preventative maintenance programmed based on the needs of the NRS. Certainty of financing for this maintenance has been improved with DPWH’s annual budget for NRS maintenance increasing significantly over the duration of NRIMP-2, from PHP 2.5 billion in 2009 to PHP 8.5 billion in 2016. The systems developed under NRIMP-2 will also assist, for example with the MYPS facilitating multi-year maintenance contracts which was previously a constraint for maintenance.

PDO 2: Improve the management effectiveness of DPWH at national level - Substantial

63. NRIMP-2 addressed PDO 2 of improving the management effectiveness of DPWH at a national level through the activities in Component B (refer Section 1.4 to 1.6). Outcome indicators related to this objective were introduced at the second restructuring, with a good performance achieved by the end of the project with, for example, 98 percent of DPWH’s projects now subject to life cycle monitoring with IT tools. Also, while there are fewer projects delivered to within 15 percent of original cost and time estimates (compared with the target of 70 percent), the 50 percent achievement is still a significant improvement on the baseline of six percent. Of the 15 PDO and intermediate results indicators for this objective

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added to the results framework at the second restructuring, five were exceeded with a highlight being the number of staff trained for enhancement of project implementation capacity and road safety which was exceeded by 460 percent. Six other indicators were fully achieved, while four on use of MYPS, design standards, data governance and project delivery (noted above) were not achieved. In general, the comprehensive set of output indicators added at the second restructuring were substantially achieved.

64. There could have been a stronger link between some of the outputs and outcomes for this objective, with the link between business process improvement roll-out and DPWH’s management effectiveness a correlation at best. With these systems in place and training provided at the national level, their use is widespread, however it is difficult to establish a direct causality between this and improved management effectiveness.

65. A key causal factor which should be noted is the change in leadership within DPWH, with the senior management’s efforts to address governance issues and improve business processes also contributing to the improved outcomes. That said, the systems developed and disseminated under NRIMP-2 clearly facilitated broad adoption of these reforms, also helping to ensure sustainability after leadership had changed.

66. For this ICD objective, it is clear that the improved business processes developed under NRIMP-2 are fully integrated into DPWH’s operations at the national office level. The extensive training and dissemination activities conducted as part of the project have ensured that tools such as the MYPS and the Project and Contract Management Application (PCMA) have become their new way of doing business. DPWH have demonstrated a willingness to continue roll-out of these systems, either with their own funds or with the support of donors, driven by the benefits noted in consultations (refer Annex 5). This recognition of benefits is also likely to contribute to the sustainability of these systems at the national and ultimately regional and district level. There also appears to be a broad understanding of the benefits of these ICD interventions within the GoP, and this will help ensure ongoing funding.

67. This objective has a more significant impact compared with PDO 1 given that it aimed to improve effectiveness for the entire DPWH works program, rather than the small fraction of the budget covered by PDO 1. As a result of the business process improvements under this objective, the entirety of DPWH’s budget is now subject to more rigorous planning, control and transparency, and thus the impact of these outcomes is considered much more significant.

PDO 3: Improve the management effectiveness of DPWH at local level – Modest

68. NRIMP-2 addressed PDO 3 of improving the management effectiveness of DPWH at a local level through the activities in Component C (refer Section 1.6). This PDO objective was added at the second restructuring, with the single indicator linked to it an output rather than an outcome indicator. Nevertheless, only 50 percent of the sub-projects receiving technical assistance under the project are in compliance with DPWH’s design and construction standards, significantly less than the target of 80 percent. By defining such a narrow output indicator, it is difficult to ascertain whether the management effectiveness of DPWH has actually improved at the local level, especially as the indicator relates only to sub-projects that are supported with technical assistance rather than the broader program of DPWH’s local offices. Irrespective of this, it is not clear whether the management effectiveness improvements increased the rate of reconstruction of damaged facilities. Anecdotal evidence

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from stakeholder consultations revealed that some of the governance issues that the project addressed at the national level remain at the local level. This is exacerbated by the implementation delays which have meant that full ICD roll-out to regional and district level will need to be funded by DPWH or a new donor project.

69. Many of the output indicators added at the second restructuring are related to this objective, notably on the roll-out of business process improvements including the MYPS, and the department rationalization plan to all 203 offices of DPWH. As discussed above, most of these were achieved or exceeded; however, there is no clear link between these outputs and improved management effectiveness at the local level, and there is no outcome indicator to measure this. In light of the partial achievement of the PDO indicator and the completion of some key output indicators, a modest rating has been assigned for this objective.

NRIMP APL

NRIMP APL PDO: To ensure the preservation of an improved national roads system in an environmentally, socially and financially sustainable manner – Modest

70. Considering the progress against the NRIMP APL’s original indicators, the following achievements are evident.

NRIMP APL Key Indicators NRIMP-1 NRIMP-2 NRIMP-313

Target Achieved14

Target Achieved15

Target

Management Effectiveness: Performance standards for key NRS management systems will be achieved at least by:

40% 30% 75% 80% 95%

Financial Sustainability: Finances needed to maintain the NRS will be obtained through a sustainable mechanism, such as a road fund, raised through user charges, by at least:

60% 40% 90% 85% 100%

Physical Conditions: NRS average road roughness (measured by IRI) is reduced by:

3% 2% 8% 8% 15%

Environmental and Social Conditions:These issues will be integrated in all phases (preparation, implementation and operations) of road upgrading and maintenance projects. The percentage of regional EIA staff who can carry out such functions will be:

50% 40% 80% 80% 100%

13 As discussed above, it was agreed with GoP that the NRIMP APL would be stopped at NRIMP-2, with NRIMP-3 not be carried out.14 Implementation Completion and Results Report for the First National Roads Improvement and Management (APL) Program (Phase 1). Report No. ICR0000445. June 27, 2008. World Bank Group.15 These are based on available data including the PGS, Implementation Status and Results Reports (ISRs), Aide-memoires and GoP documents. 19

71. For all the indicators, the levels achieved at the end of NRIMP-2 met three of four targets for the second phase, but fell short of the overall APL targets which were captured in the target for NRIMP-3, the APL’s third phase which wasn’t implemented.

72. As noted above, the decision to address recovery from Typhoon Yolanda/Haiyan under NRIMP-2 drew attention from these objectives. While the use of the project to meet an urgent need was clearly warranted, the focus on local level implementation and inclusion of non-road infrastructure had an impact on the progress with addressing the underlying road sector reform goals of the NRIMP APL. This could have been avoided by maintaining UPMO resourcing for the implementation of original components after the second restructuring. The additional tasks meant staff were stretched and unable to drive progress against the NRIMP APL goals.

73. Management Effectiveness: The cost and time overruns which were evident in NRIMP-1 continued in NRIMP-2 although slightly reduced due to improved procurement and contract management. That said, the weaknesses in procurement and financial management/internal control identified in NRIMP-1 were substantially addressed under NRIMP-2. A key indicator of the APL was the definition of policy, planning and service roles and assignment of these within an improved DPWH structure which was achieved. The goal of creating a separate legislative authority responsible for maintenance of the NRS which was envisaged in the NRIMP APL under NRIMP-2, but delayed till NRIMP-3, was ambitious and has not been achieved, although this could be taken forward in a new Bank project.

74. Financial Sustainability: The GoP has committed to funding road sector needs (including maintenance) with financial resources well beyond those originally intended to be provided by the SRSuF, with the 2016 budget of PHP 8.5 billion evidence of this. With the performance of the politically controlled Road Board questioned throughout the NRIMP APL, the need for the SRSuF may have passed, with the mechanism nevertheless serving as an important stepping stone in establishing the financing approach which currently exists.

75. Physical Conditions: While the physical condition of some of the NRS improved over the duration of the NIRMP APL, other road sections may have deteriorated despite the increased budget which GoP allocated to maintenance. The use of IRIs is a relatively new concept for DPWH and presents a more objective measurement than the VCI used under NRIMP-1. The ambitious target of improving the IRI of the entire network was not achieved, and the NRIMP APL only made a small contribution to this in terms of physical works. Given that DPWH has a policy preference for Portland cement concrete (PCC) pavements, it will be difficult to achieve the current ambitious IRI reduction targets.

76. Environmental and Social Conditions: The safeguard capacity issues observed during NRIMP-1 were partially addressed during NRIMP-2. Staff have been assigned safeguards roles at the regional level and these people have received training and are observed to be performing their roles well. This includes preparing documents and participating in multipartite monitoring teams. DPWH has also adopted a Social and Environmental Management System (SEMS). Despite this, there was still some evidence that staff of the ESSO struggled to fulfil their roles, as evidenced by the resettlement issues which emerged late in the project (refer Section 2.4). A new ROW Act prepared with the support of NRIMP-

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2 was passed into law in 201616. This law is much closer to the Bank’s guidelines and improves the process of acquiring land. It should assist DPWH in dealing with resettlement issues for future projects.

77. Considering the NRIMP APL against its original objectives, it has only partially achieved the PDO indicators and hence the modest rating. As part of the APL, NRIMP-2 was originally designed to play a pivotal role in the roll-out of an improved framework across all of DPWH. While the restructurings were necessary given the implementation delays, the original scope was significantly reduced and hence the APL outcomes were lower than they could have been.

3.3 Efficiency

NRIMP-2 Original Rating: High and NRIMP-2 Revised Rating: High

78. The efficiency of the project is rated as high for both the original and revised objectives. This is because the benefits achieved by NRIMP-2 outweighed both the costs and also typical norms in transport sector projects. A key cause of this high level of efficiency was the fact that while NRIMP-2 accounted for only 1.3 percent of the total DPWH budget over the duration of NRIMP-2, the policy reforms it introduced had a positive influence for DPWH’s entire spend of PHP 1.5 trillion over the equivalent period. The investments in management effectiveness and governance were only 9.8% of the total NRIMP-2 budget, but they leveraged improvements across the entirety of DPWH’s work, with the GoP getting very good value from this relatively small investment.

79. A key reason for the strong efficiency of NRIMP-2 is the extensive procurement reform it enabled. As noted in Section 2.2, the institutional improvements that were a key part of NRIMP-2 facilitated a significant reduction in the cost of civil works, from typically at least 25 percent above engineer’s estimates during NRIMP-1, to 20-25 percent below during NRIMP-2. As these savings were realized across DPWH’s trillion-peso program, the rewards of NRIMP-2’s relatively low cost business improvement investments were high, as was the efficiency. Similarly, the updated design standards produced under NRIMP-2 will be used on future designs across the NRS, ensuring that any new works consider modern criteria and materials, including for key development issues of climate resilience and road safety.

80. The PAD analysis estimated an average project internal economic rate of return (EIRR) of 33 percent, with economic benefits of 123 times cost for asset preservation. Benefits from business process improvements were assessed based on switching values, and were found to have high benefit to cost ratios of four to 22. An economic re-evaluation conducted prior to the first restructuring in 2012 confirmed the strong economic basis for the road improvement and asset preservation activities17.

16An Act facilitating the acquisition of the right-of-way site or location for National Government infrastructure projects. Retrieved from: http://www.gov.ph/2016/03/07/republic-act-no-10752/. 7 March, 2016. Republic of the Philippines. 17 NRIMP-2 Road Upgrading and Asset Preservation Sub-Components - Economic Re-evaluation. July 2012. Department of Public Works and Highways. Republic of the Philippines.

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http://www.gov.ph/2016/03/07/republic-act-no-10752/

81. The implementation delays experienced under NRIMP-2 did detract from the project’s efficiency, as a prolonged time before undertaking physical works meant increased scope and less validity of detailed designs, with some even needing to be revisited. This typically resulted in higher costs and a longer time to achieve benefits.

82. Despite this, a further reassessment conducted at project close confirmed the strong economic efficiency, with an overall average EIRR of 23.4 percent for the sub-projects considered and a range from 11.5 percent to 35.3 percent. This analysis considered actual project costs and measured traffic volumes for selected road improvement sub-projects, with results given below and detailed findings provided in Annex 3. The overall average EIRR for the sub-projects considered was 23.4 percent, with all those considered having a positive net present value (NPV) at the 10 percent discount rate hurdle nominated by NEDA. In general, the actual costs of projects were higher than estimated in 2012, however these increases were offset by increased traffic volumes on the roads considered, thus leading to enhanced benefits. Measured daily traffic was on average 8.8 percent higher in 2016 compared with the projections made in 2012.

Road Improvement sub-project

Section 2012 2016EIRR(%)

NPVPHP

million

EIRR(%)

NPVPHP

millionRI-2.1 Magapit –

Sta. Ana Road.

Magapit – Mission 19.5% 266 30.7% 787

RI-2.2 Mindoro East Coast

Bongabong – Jct. Roxas 15.4% 233 11.5% 84

RI-2.4 Bacolod – Kabankalan

Bacolod-Bago 44.9% 711 33.2% 601

RI-2.6 Malalag Malita – J.A. Santos

Malita - Don Marcelino 15.8% 198 35.3% 258

RI-2.7A Digos-Cotabato City Road

Digos - Kidapawan 45.3% 995 21.3% 649RI-2.7B Kidapawan - Pagalungan 34.4% 611 20.4% 337RI-2.7C Pagalungan – Jct.

Cotabato 12.1% 95 11.7% 133

Average EIRR (%) 27% - 23.4% -

83. A key component of the NRIMP APL was the piloting of LTPBMCs, with DPWH committed to covering the cost of current contracts after the closure of NRIMP-2. These were championed by the Bank as an efficient approach to maintenance, however DPWH are unlikely to adopt the LTPBMC model more broadly until they see a detailed efficiency comparison between LTPBMCs and the business as usual approach. While a review was undertaken by the Bank supervision team, it didn’t provide a detailed efficiency analysis of the approach, and this should ideally be included as part of the preparation for any follow-on project.

84. Given that small investments made in improving DPWH’s management effectiveness resulted in significant reduction in the cost of works across the entire program, there is compelling evidence of the efficiency of NRIMP-2. This was resulted in stakeholder

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consultations (refer Annex 5). Updated economic analysis confirmed good returns from physical works under NRIMP-2, and while the delays and a failure to document efficiency of LTPBMCs detracted from this, NRIMP-2 is still considered highly efficient.

3.4 Justification of Overall Outcome Rating

NRIMP-2 Rating: Moderately Unsatisfactory (original), Moderately Satisfactory (revised), Moderately Satisfactory (Overall)

85. The overall outcome rating for NRIMP-2 is considered Moderately Satisfactory. The project objectives and the resulting design were considered highly relevant, with the substantial efficacy for achieving PDO 1 and 2 on NRS condition and management effectiveness respectively resulting in a moderately satisfactory rating against revised PDO. While NRIMP-2 required a four-year extension to the loan closing date and a late restructuring with 55 percent of funds disbursed, the project achieved most objectives despite closing with 19 percent of the loan undisbursed. While the business process improvements developed and rolled out under the project improved the management effectiveness of DPWH national office, delays meant the full benefits at regional and district level could not be realised under the project, and this is expected to be taken forward by DPWH with either their own or donor funding.

86. After significant implementation delays and reduced scope from that originally proposed, the completed physical components yielded high rates of return and therefore efficiency. The business process improvements contributed to significant reductions in the cost of works for both NRIMP-2 and DPWH’s entire works program.

87. NRIMP-2 effectively built on the foundation laid by NRIMP-1 to significantly improve DPWH’s management effectiveness, to the point where it is now seen as a model agency within the Philippines public sector. The lasting contribution of NRIMP-2 and the NRIMP APL will be the transformation in governance which has occurred within the national office of DPWH. If current indications hold true and DPWH continues to support roll-out of the management effectiveness improvements championed by the NRIMP APL, sustainable and long-term benefits will be realised. The outcome ratings for NRIMP-2 against original and revised objectives are summarised in the table below, with an overall rating arrived at using a weighting methodology based on the percentage disbursement at the time of the second restructuring.

Weighted Average of NRIMP-2 Outcome RatingsOriginal PDO Revised PDO Overall

Relevance of Objectives, Design and Implementation

High High

Efficiency High High

Achievement of PDO (Efficacy) Modest

PDO 1: SubstantialPDO 2: Substantial

PDO 3: ModestOverall Outcome

RatingModerately

UnsatisfactoryModerately Satisfactory

Rating Value 3 4

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Weight (% disbursed) 55% 45% 100%Weighted Value 1.6 1.8 3.5

Final Rating Moderately Satisfactory

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development 88. While the design was aware of links between transport and poverty, NRIMP-2 was not

designed explicitly to address poverty impact, gender aspects or social development. However, because of its wide target population, NRIMP-2’s outcomes will benefit the poor by reducing the time and money they spend on transport, by lowering the cost of products and by providing better access to social services.

(b) Institutional Change/Strengthening 89. All aspects of the ICD component will have significant and lasting impacts on the long-term

capacity of DPWH to implement projects. Areas of managerial effectiveness improvement include: (i) procurement; (ii) financial management; (iii) communications; (iv) standardization of contract documents; (v) planning procedures including budgeting; and (vi) pavement and bridge asset management.

90. The ICD component was a complex and multi-faceted undertaking, and after the appearance of being overwhelmed by the new systems in NRIMP-1, NRIMP-2 provided an opportunity for DPWH to embed the systems at the national office and commence roll-out to regional and district offices. While some delays and incomplete tasks are noted, DPWH national office appear to have embraced the process improvements and are committed to disseminating these at regional and district level, funded from their own budget or with the support of donors (refer Section 2.5). NRIMP-2 began institutionalizing the modernisation of technical and business processes, with a level of commitment apparent within the GoP that will improve sustainability. Any resulting savings will be realized across DPWH’s multi-billion-peso program, hence NRIMP-2’s relatively low cost business improvement investments were very efficient.

91. In addition, management effectiveness improvements have prepared DPWH well for the planned scale up in their works program as a result of the new GoP administration. An annual infrastructure spend of PHP 860 billion (seven percent of GDP) is being targeted by the new administration, with DPWH’s 2016 budget set at PHP 397 billion. DPWH are in a better positon to deliver this enlarged works program with the business process improvements in place.

(c) Other Unintended Outcomes and Impacts (positive or negative) 92. One positive unintended impact of NRIMP-2 is the technical assistance the project provided

for DPWH to support LGUs for the Typhoon Yolanda/Haiyan recovery. Added at the second restructuring, this addressed the critical shortage of technical expertise at the local level, and provides further evidence that the GoP considered DPWH national office a model agency. It underlined their desire to trickle governance and technical improvements down to regional and district offices of DPWH as well as to LGUs.

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93. Another unintended outcome is the mainstreaming of climate resilience in the work of DPWH. This issue was less critical at the time of program design, however improved design procedures which consider climate change impacts were included in the design standard updates which the project funded. This will help to improve the resilience of the road sector to climate impacts, an important outcome given the significant exposure of the Philippines to natural hazards.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

94. A series of stakeholder consultation workshops and interviews were conducted in October 2016 to reflect on project achievements, issues that affected implementation and lessons learned from the NRIMP APL (refer Annex 5). A range of stakeholders contributed including DPWH staff of various levels, contractors, consultants, suppliers and road user CSOs involved with the project. While stakeholders, and especially DPWH had a positive view of the impact of NRIMP-2, they raised a number of issues which had adversely affected project implementation including (i) procurement inefficiencies on both Bank and GoP sides; (ii) conflicting land acquisition processes between Bank and GoP; (iii) need for human resource management support for full effect of ICD; and (vi) loss of momentum between NRIMP-1 and NRIMP-2. These findings contributed to the lessons learnt discussed in Section 6 which will hold value for the preparation of new operations in the Philippines, and indeed further afield.

4 Assessment of Risk to Development Outcome Rating: Modest

95. The risk to the development outcome for the NRIMP APL is rated as modest. Considering each component of the program, the GoP’s increased spending for road maintenance has the potential to sustain the gains made through the physical works components. The road improvement, preventative maintenance and LTPBMC work undertaken has improved the condition of a small portion of the NRS. Condition monitoring and asset management based on this information have also been institutionalized across the network. Importantly, the GoP provided DPWH with PHP 8.5 billion in funding for road maintenance in 2016 and signalled a growing commitment in future years. This amount is significantly higher than the funding provided to the sector by the SRSuF, which has had questionable performance under the politically controlled Road Board. This shows that that SRSuF may have served its purpose in establishing a sustainable mechanism for meeting maintenance needs, with the GoP recognizing this and showing clear commitment to ongoing funding for maintenance outside this mechanism.

96. In terms of improved management effectiveness, while business process improvements have been institutionalized at the national DPWH office, GoP has indicated an interest in broader adoption at the regional and district level which remain the frontiers of governance issues. Ideally, if delays had been minimal, the project would have been able to support this roll-out, but at the time of project close it will fall upon the GoP to take these activities forward with their own funding or donor support. Given the path to institutionalization of process improvements in the regional and district offices can be modelled on that successfully completed at the national office, there is a high chance of success. Feedback from stakeholder consultations reveal that there is strong acknowledgment of the benefits of these improvements, with commitment to action flowing from this. For example, DPWH has

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already committed to IT upgrades with its own funding, and has also sought out donor support to continue development of the PCMA. The establishment of a separate legislative authority for maintenance of the NRS was an original goal of the APL and while this outcome was not achieved, it could be taken forward under a new engagement by the Bank or another donor.

97. The decision to cease the NRIMP APL at NRIMP-2, short of the originally intended third phase meant that the opportunities for the Bank to support sustaining and extending the NRIMP APL outcomes are less straightforward. However, as documented in aide-memoirs prior to project close, there is ongoing dialogue between the Bank and GoP on matters pertaining to road sector reform, with any resulting projects further reducing the risk to outcomes. A new project presents an excellent opportunity to provide targeted support to reinforce and advance the gains made under the NRIMP-APL, especially as the needs of DPWH have evolved since the initial preparation of the NRIMP APL some 16 years ago.

5 Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at EntryNRIMP APL Rating: Moderately Satisfactory

98. The choice of an APL for this operation was wise, as it provided the Bank and GoP the possibility to adapt project implementation to changing conditions, while retaining engagement and the long-term goals of the program. It enabled a consistent 16-year engagement with DPWH which facilitated the management effectiveness improvements that were a critical part of the NRIMP APL.

99. The NRIMP APL was designed around an institutional reform agenda played out over a planned three phases. It paid attention to the important building blocks of the reform agenda such as the institutionalisation of the SRSuF, laying out a progressive approach to tackle the reform. Despite these positives attributes, the APL design did not realistically assess the enormity of the reform challenge, providing an overly ambitious institutional reform agenda which it failed to adequately adjust at the commencement of NRIMP-2.

100. An independent progress review of the APL triggers of NRIMP-1 concluded that (i) the triggers and timeframe of NRIMP-1 were over-optimistic given the implementation capacity of DPWH; and (ii) that continuation of Bank engagement in the APL framework was fully justified, since the development objectives for NRIMP-1 had been substantially met. Given the recommendations of the independent review and the degree of difficulty in gaining legislative support for reforms, the Bank decided to proceed with NRIMP-2 but shift its approach to focus on administrative reforms, and to reschedule the ambitious legislative reforms to NRIMP-3 which didn’t end up eventuating.

NRIMP-2 Rating: Moderately Satisfactory

101. The Bank provided a sound but ambitious component design for NRIMP-2 including considering lessons learnt from NRIMP-1. The design included efforts to embed governance, transparency and anti-corruption measures in project components. In addition, NRIMP-2

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used some of the tools developed under the earlier phase for selection and prioritization of investments. Both of these contributed positively to the quality at entry of NRIMP-2. There was evidence that effort had been applied to plan through to implementation, with the PAD procurement plan featuring 35 packages of goods and works, and 18 consulting assignments. In addition, there was evidence of robust due diligence with respect to safeguards, with the high risks posed by ROW issues identified and addressed with a subcomponent involving preparation of new legislation.

102. One weakness of the Bank’s preparation of NRIMP-2 was that it failed to engage DPWH in developing a measurable M&E framework. As a result, their understanding and ownership was less than desirable and monitoring difficulties were experienced. The few indicator targets which were measurable were very ambitious and required adjustment to reflect what could realistically be achieved. Evidence of this optimistic design was the fact that despite a four-year extension to the project, it didn’t achieve the reform objectives of rolling-out all business process improvements to DPWH’s regional and district offices. The scope of policy and institutional changes as well as civil works, and the time required to implement each of these was simply too great. In failing to assist the GoP to scale back the envisaged scope at the outset of NRIMP-2, an overly ambitious project was created, one which would be difficult to fully achieve. Significant changes occurred during the two project restructurings that reflected the task team’s realization of this.

(b) Quality of Supervision Rating: Moderately Unsatisfactory

103. Adequacy of supervision inputs and processes: There were substantial shortcomings in the Bank’s identification of opportunities and resolution of threats to implementation during the supervision of NRIMP-2. While the anti-corruption measures included in the project had a significant impact through improved transparency and governance as documented in Section 2.2, these measures also contributed to extensive delays for all components of the project, with procurement and operations teams seemingly at odds about their respective roles. One example of poor supervision performance was the revisiting of some feasibility designs at the request of the Bank when they were being considered at final bid document stage. This caused some angst within DPWH, with new, sometimes conflicting comments raised at each round of review. This resulted in some documents requiring three rounds of review and some 18 months for issue of NOL. This was a particular issue for the LTPBMCs, and contributed to four of the eight planned LTPBMCs being dropped.

104. Early during NRIMP-2, inadequate handover between successive task team leaders created inconsistency in supervision which contributed to both delays, and also to a drift from the original strategy of the APL. During the latter half of NRIMP-2, task team leader staffing remained consistent and implementation improved, however some of the original vision of the NRIMP APL remained lost. With five task team leaders over the duration of the project, the inconsistency of was staffing contributed to the implementation issues noted in Section 2.2. Throughout the project, DPWH also reported that Bank supervision efforts were overly focussed around missions, with clearances coming much slower from the task team at other times. Given the complexity of NRIMP-2, it required significantly higher than normal supervision budgets and in the early stages the project teams regularly exceeded the budget provided. Had more funds been available, closer supervision support could have been provided by the project team in an effort to resolve the implementation issues which caused

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delays.

105. The Bank could have done better at proactively assisting DPWH with accelerating the implementation of ICD components, which didn’t commence till November 2012 and as a result contributed to the failure to complete the roll-out to reginal and district DPWH offices. The supervision team could also have proactively sought out other road improvement or asset preservation sub-projects which fitted NRIMP-2’s objectives to utilise the USD 44.2 million which was undisbursed at project closure. The Bank did seek a request from the GoP for cancellation of these uncommitted funds prior to project close, but this was not forthcoming.

106. Supervision of fiduciary and safeguards aspects: Feedback from DPWH revealed that the Bank could have performed better with respect to timely procurement reviews as noted above. Supervision of safeguards was weaker than other fiduciary aspects, as evidenced by the emergence of resettlement issues for linked road improvement works already completed (refer Section 2.4a). Despite the Bank identifying this risk during preparation, it failed to undertake sufficient due diligence on sub-projects which resulted in linked works proceeding without compensation payments to PAPs. It should be noted that after recognising this oversight, the Bank took extensive efforts to assist DPWH with correcting these non-compliances, developing and implementing an agreed action plan and securing management support from DPWH. These efforts have seen the compensation paid to PAPs at one of the outstanding roads, with funds for the other road in escrow awaiting the outcome of a court case.

107. Candor and quality of documentation: In general, the quality of the aide-memoires, management letters, ISRs was adequate, with implementation issues and consequences of delays repeatedly raised in correspondence to GoP over the duration of NRIMP-2. That said, the quality of restructuring documentation, in particular the second restructuring was poor, with limited detail and inadequate justification for dropped or modified components. For example, while the scope of bridge and road improvements was reduced, this was not quantified in the restructuring paper.

108. Development impact: During the restructurings of NRIMP-2, some of the challenging outcome indicators on administrative efficiency, sustainability of financing and value for money were dropped in favour of output indicators, which were both more realistic and more measurable. To a degree the changes diluted the ambitious original goals of NRIMP-2, however in some cases they also reflected the improved governance and management effectiveness of DPWH. It should be noted that with adequate justification, adjusting targets to achievable levels reflects good supervision practice.

109. Further distraction from the reforms underpinning NRIMP-2 came in the second restructuring when the Bank responded to a GoP request for DPWH to support LGUs with recovery from Typhoon Yolanda/Haiyan. This was an example of the Bank being responsive to client needs by address a pressing need of the GoP. In addition, the Bank was also responsive to the GoP’s request for support on road safety which is a significant development issue in the Philippines. A road safety strategy was prepared, with iRAP surveys and pilot interventions undertaken on the NRS. While delays in implementation detracted from the development impact of NRIMP-2 and the changes to add Typhoon recovery and road safety activities distracted from reforms, the achievements of these activities should be recognised as having some development impact.

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110. Role in ensuring adequate transition arrangements: While the Bank made some attempts to help ensure a smooth transition to post-NRIMP-2 operations, these could have been strengthened. There was limited evidence that the Bank assisted DPWH with planning for completing roll-out of the management effectiveness improvements to regional and district offices, with DPWH appearing to take this forward with their own initiative, including seeking support from other donors. That said, the Bank and GoP are discussing ongoing support which could continue the reform agenda initiated under the NRIMP APL. The Bank supervision team could have also done more to ensure sustainability of the approaches trailed under NRIMP-2. One example is documenting the outcomes of LTPBMCs, as without more evidence demonstrating the efficiency of this maintenance model relative to the traditional approach, LTPBMCs are unlikely to be more broadly adopted by DPWH for maintenance of the NRS with their own funding.

(c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory

111. With quality of supervision Moderately Unsatisfactory and both quality at entry and overall outcome Moderately Satisfactory, the ICR guidelines suggest that the overall rating for Bank performance should be Moderately Satisfactory. Weaknesses included the Bank setting overly-ambitious and immeasurable targets for implementation, and also the discontinuity of supervision staffing which contributed to extensive delays for NRIMP-2. However, these are largely offset by the achievements of NRIMP-2 which resulted in significant improvements in governance in the Philippines road sector as well as improved management effectiveness of DPWH. While there is no question that more could have been achieved with a focussed and consistent supervision effort, these modest shortcomings should not overshadow the significant achievements of NRIMP-2 and the Bank’s role in achieving them.

5.2 Borrower Performance

(a) Government Performance Rating: Moderately Satisfactory

112. The politically motivated personnel changes that were noted in the NRIMP-1 ICR were less apparent in NRIMP-2, with detrimental political interference at national and provincial level reduced but still present. This enabled the project to continue relatively unhindered, also encouraging broader adoption of the budgeting and planning systems that the program had developed. There was, however, some evidence that the GoP was not fully supportive of some of the NRIMP-2’s components. This included the LTPBMCs, where some politicians perceived the approach as a threat to their power at the provincial level, power which came from the allocation of shorter maintenance contracts in line with the business as usual approach.

113. In some cases, the response from the GoP was delayed due to tedious internal GoP approval processes which resulted in delayed processing of the restructuring requests and also effectiveness. One example of this was the delay in the signing of the amendment letter for the second restructuring. This meant that DPWH couldn’t commence procurement of activities under the new Component 3 – Assistance to LGUs, as DoF approval was required. This ultimately reduced the time available for DPWH to implement activities under PDO 3 which contributed to the Moderate performance for this objective. In addition, the delayed

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response from the GoP for an additional extension to NRIMP-2 meant a further extension couldn’t be processed prior to project close.

114. The DoF provided timely provision of funds for road improvement and asset management components, and this was never a constraint to the implementation of the project. In addition, while the Road Board and SRSuF do not operate as effectively as they could do, this is less significant with the GoP’s 2016 annual commitment of PHP 8.5 billion for maintenance, up from PHP 2.5 billion at the start NRIMP-2. This commitment dwarfs the funding provided through the SRSuF and suggests a positive future for sustainable road asset management in the Philippines.

(b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory

115. The original targets for civil works proposed under NRIMP-2 were partially achieved, however there were excessive delays between the start of the procurement process and the award of the contracts. These delays in turn led to cost overruns as further asset deterioration meant increased scope and less validity of detailed designs, with some needing to be revisited. While the increased procurement oversight and the delayed Bank reviews noted in Section 5.1 contributed to this, DPWH could have done better at expediting procurements and reducing the time to contract award. Similar delays were noted with ICD consultancies. These consultancies did not commence in earnest until midway through NRIMP-2, which indicates that DPWH gave them a lower priority compared with civil works components. The result of this delayed execution by DPWH is that the project outcomes were not fully achieved, despite a cumulative four years of extensions. Other fiduciary duties of the implementing agency including financial management and safeguards generally performed well, with a notable exception being that fact that DPWH allowed linked road improvement works to proceed without compensation being paid, a clear non-compliance with Bank involuntary resettlement policy (refer Section 2.4a).

116. While these shortcomings are notable, a shift to strong reform minded leadership within DPWH represented a key enabler of the ICD components of the program. The combination of the business process improvements developed under the project and the leadership change led to a culture change within DPWH which has resulted in improvements in management effectiveness that are likely to be sustained. One activity which affected DPWH’s performance was the implementation of a rationalization plan which occurred during the project. This resulted in a significant reduction in staff and an increase in the level of outsourcing which brought about a shift in the skills within DPWH. While the mass retirements which occurred led to some loss of institutional knowledge, it did open opportunities for succession of younger staff who have generally embraced the new systems, and have been trained in the range of skills required for the new model of DPWH’s operations.

117. In some cases, DPWH also failed to manage consultants effectively, for example the engineering process design improvements consultancy concluded without successful completion. In general, many of the activities under the ICD component were given a lower priority compared with civil works.

(c) Justification of Rating for Overall Performance Borrower

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Rating: Moderately Satisfactory

118. With implementing agency performance Moderately Unsatisfactory, and both GoP performance and overall outcome Moderately Satisfactory, ICR guidelines suggest that the overall Borrower performance should be Moderately Satisfactory. Clearly the performance of both the GoP and DPWH was improved for NRIMP-2 compared with NRIMP-1. There were moderate shortcomings including slow implementation which meant the full extent of reforms couldn’t be completed, however these should be compared against the significant improvements in sector governance and management effectiveness which were achieved under NRIMP-2. Working in partnership with the Bank, the GoP and DPWH achieved some significant improvements for which they should be justifiably proud.

6 Lessons Learned 119. Transformation of governance is a long-game requiring a series of projects adaptable to

the needs of the client and involving Government, the Bank and CSOs: The NRMIP APL represented an ambitious long-term commitment by the Bank to improve management effectiveness and governance in the Philippines road sector. Spanning 16 years and USD 382 million of investment, the Bank established a long-term partnership with DPWH, taking a considered and largely successful approach to address the deep rooted governance issues that plagued the sector. Reforms took time, thus requiring a long-term commitment by the GoP and the Bank. While the APL was a sound approach which facilitated the Bank’s long-term engagement, it did create constraints which meant the Bank found it harder to respond to changing needs, a fact not helped by an APL design which was overly ambitious. Bank teams should still look to use the modern equivalent of APLs, known as a Series of Projects (SOPs) whenever they are tackling governance, while avoiding the temptation to be overly ambitious by grounding the design in realistic and measurable targets. On the GoP side, a champion of reform within the leadership of DPWH was a key development which facilitated the culture change and institutionalization of reforms. CSOs also played a role in these reforms, with stakeholder feedback showing that the dual pressure from citizen groups and the Bank was an extremely effective way of steering GoP towards reform. Learning from this, the Bank should continue policy and investment support to sustain reforms in the Philippines transport sector. More broadly, a commitment to a long-term engagement by Governments, the Bank and CSOs should be a required condition of any attempts at governance reform for new projects in other countries and sectors.

120. Properly designed long-term engagement can effectively tackle substantial governance challenges in the sector: The NRIMP APL recognised the enormity of the governance challenges within the Philippines transport sector. At the end of NRIMP-1, an INT investigation resulted in one of the largest number of contractor sanctions in the Bank’s history. Despite the delays it caused, NRIMP-2 tackled these issues with a comprehensive suite of mitigating measures and a determination to bring about reform. The bold and ambitious approach of the NRIMP APL showed a commitment to addressing governance challenges, creating islands of good governance centred around the project, then propagating this throughout the agency so that the entire DPWH program could reap the benefits. NRIMP-2 and the oversight measures it brought to DPWH serve as a model of an effective way of bringing about governance change which can be adopted in the preparation of new projects. The approach NRIMP-2 took serves as a heartening lesson that even the most extreme cases, governance issues can be overcome. It also serves as encouragement for the

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Bank to tackle these difficult issues head-on, undertaking bold action to maximise the development impact in the transport sector or indeed any other sector which the Bank supports.

121. Information technology is an important tool for tackling weak governance: One of the most successful aspects of the NRIMP APL’s reform interventions was the introduction of IT systems that facilitated the transparency of DPWH. These ranged from the simple but transformative activity of bringing electronic communications to district offices, to the advanced PCMA developed and adopted by DPWH. As an example of the impact of the latter, stakeholders revealed that prior to implementation only 24 percent of projects matched between DPWH databases leaving them exposed to ghost payments18. Now there is a 98 percent match which closes this common avenue for corrupt practice. Clearly technology has been a key enabler of governance reform, and any future attempts to tackle governance in the Philippines or further afield should embrace technology and the transparency it can provide. Practically this can be achieved by including components on open contracting, e-procurement and development of budgeting tools modelled on NRIMP’s MYPS and PCMA in any new project. The next step in the Philippines should be to provide policy support DPWH to allow them to interpret and analyse the huge volumes of data which are now being collected. Development of systems is only a tool to facilitate change, and forming these tools is relatively simple compared with the institutionalization of policy which ultimately results in sustainable reforms. Real transformation only comes from Government commitment to full adoption of the systems and the culture change they entail, and projects should also attempt to address the cultural change required concurrently with developing IT systems.

122. For biggest reform impact, think big and tackle an entire agency: One aspect of the design of the NRIMP APL which contributed to its high efficiency was the fact that reform efforts did not focus solely on the activities it was investing in, which represented only 1.3 percent of DPWH’s budget. Instead, it sought to tackle governance across DPWH, encompassing the entirety of its budget and activities. This allowed the relatively small reform investments to leverage a significant impact across DPWH’s responsibilities. This was a bold design and one which is often not adopted by donors, with the broad scope creating potential implementation issues which task teams understandably try to avoid. The achievements of this project are proof that with appropriate design, new projects can leverage small investments to yield sector wide benefits. The ICD activities of the NRIMP APL attempted to address the needs across DPWH. This created challenges and unmet expectations, particularly with regards to the failure to roll-out reforms at regional and district levels due to delays. However, the outcomes which were achieved have a broader benefit and are much more likely to be sustainable in the long term. Despite the ambitious scope, the reforms which the NRIMP APL championed were successful at the national level, and can therefore serve as an example for new projects where agency wide transformation should be tackled rather than focusing on protection measure for the project’s activities alone.

123. Staffing continuity at the Bank could have led to improved client support during implementation: One of the weaknesses in the Bank’s implementation of NRIMP-2 was the discontinuity of staffing, particularly at the task team leader level. Five team leaders over the course of the eight years of NRIMP-2 led to changing perspectives and priorities on the Bank side, undermining the relationship between the Bank and the GoP. As staff changed, some of

18 Payments for fictitious work that has not actually been completed 32

the impetus to pursue broad reform goals was lost. Restructurings resulted in some of the more demanding (and difficult to measure) outcome indicators on administrative efficiency, sustainability of financing and value for money being dropped and replaced with indicators that are more realistic and measurable. While some of these changes diluted, to some extent, the ambitious reform goals of NRIMP-2, the targets remained challenging and relevant. Discontinuity of staffing also created frustrations for the GoP and led to difficulties in their relationship with the Bank, with the revisiting of prior decisions leading to extensive delays, particularly for the LTPBMCs. Inadequate handover between successive TTLs was also considered a factor in the resettlement issues which emerged, as better safeguards oversight would have prevented linked works from proceeding without compensation being paid. In future there is a need for the Bank to commit to staff continuity for a complex project of this nature, or at least undertake a more structured handover in the event of changing team leader staff, say over the duration of two supervision missions. Team leaders should also feel empowered to reach out to predecessors, as they have a responsibility to know and understand the priorities of the project which can be lost in reams of documentation. Proactive action by management and old and new team leaders ensures staffing continuity and avoids the strategic drift apparent during NRIMP-2. These measures help to ensure continuity of project leadership, consistency of project direction and ultimately improved implementation.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 124. The Borrower was given the opportunity to comment on this ICR, including DPWH,

NEDA and the DoF. Only DPWH provided comments within the required timeframe and these are presented in Annex 6. In general, the comments provided helpful clarifications, particularly on project scope changes and terminology. The comments reflected DPWH’s view that the ICR presented a balanced approach which considered both World Bank and Government perspectives. It was also noted that the report fairly represented the achievements of NRIMP-2, as well as the challenges faced. One particular comment of note was DPWH’s response regarding the failure to achieve full disbursement (refer Section 2.2). According to the comments, GoP did not seek a loan cancellation as ongoing disbursements were required on five remaining ICD packages that were included under the loan restructuring. While cancellation of uncommitted funds could still have been pursued, the GoP still chose not to do this. However, it was noted that GoP requested and was granted a two-month extension of the Disbursement Application Deadline up to June 30, 2017. This ensured disbursement under the loan for existing commitments were maximized.

(b) Cofinanciers and Other partners and stakeholders 125. No comments were available on this ICR from other stakeholders in time for the required

processing by the World Bank.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate19

(USD millions)

Actual/Latest

Estimate

(USD millions)

Percentage of Appraisal

A. Road Improvement and Preservation

474.02 421.75 89.0%

A.1 Road Network Improvement 214.82 168.96 78.7%

A.2 Road Asset Preservation 259.20 252.79 97.5%

B. Institutional Capacity Development

56.10 45.98 82.0%

B.1 Business Process Improvements 47.07 37.92 79.8%

B.2 Corporate Effectiveness 7.54 6.70 88.8%

B.3 Road Sector Policy Reforms 1.24 0.67 54.0%

B.4 Training and Workshops 0.25 0.69 277.9%

C. Technical Assistance to LGUs 8.1020 1.59 27.5%

Total Baseline Cost 530.12 469.96 88.7%

Physical Contingencies 19.43 -

Price Contingencies 25.89 -

Front-end fee PPF 0.00 0.00

Front-end fee IBRD 0.58 0.58

ROW acquisition 0.00 3.81

Implementing Unit Expenses 0.00 13.71

Total Project Cost 576.02 488.06

(b) Financing Source of Funds Type of Appraisal Actual/Latest

19 From Annex 5, NRIMP-2 Project Appraisal Document20 From NRIMP-2 Second Restructuring Project Paper 34

Cofinancing

Estimate

(USD

millions)

Estimate

(USD

millions)

Percentage of

Appraisal

AUSTRALIA: Australian Agency for International Development

Grant 10.50 10.50 100%

Borrower 333.52 289.72 86.9%

International Bank for Reconstruction and Development

Credit232.00 187.84 81.0%

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Annex 2. Outputs by Component

Intermediate Outcomes

Intermediate Outcome IndicatorsOutputs AchievedOriginal Restructured

Component A.1: National roads are upgraded to paved roads at acceptable standards.

Kilometers of paved road added to NRS by project Exceeded: 295 km of

national road upgraded to paved standard.450 km 280 km

Component A.2: National arterial paved roads are maintained in good condition.

At least 75% of NRS paved length in fair condition or better

680 km of roads maintained efficiently through LTPBMCs

Achieved: 680 km under LTPBMC.

At least 1000 km committed under preventative maintenance annually

1500 km of roads rehabilitated (non-rural)

Not achieved: 1200 km of non-rural roads rehabilitated.

Component B.1: Improved asset management and stewardship of the NRS by DPWH.

80% of Annual Road and Bridge Asset Preservation Program of DPWH evaluated by technical and economic criteria through the use of DPWH planning applications

Exceeded: 82% of projects were identified through HDM-4 analysis.

Procurement processing standards achieved in 80% of cases: NCBworks/goods within 6 months. National Roads Design

Standards updated by DPWH and in use

Achieved: Standards updated in 2016 and in use. Will be fully adopted from 2017 projects onwards.

Financial audits timely and adverse opinions reduced by 50%.Cost and time over-runs reduced to less than 30% of contract terms in 70% of project works.

Road, bridge and traffic data in RBIA kept current on at least 90% paved NRS network

80% of classified network of Road Inventory condition and traffic data up-to-do in accordance with update cycle

Exceeded: Currently at 96% and originally achieved in 2015.

Component B.2: Streamlined and effective corporate structure and processes in place to improve service delivery accountability and integrity.

Functional and structural reorganization of DPWH operational

203 DPWH offices with improved financial management systems of e-NGAS and e-Budget

Achieved: All offices have these systems as of December 2015.

100% of National and regional Offices with operational Multi Year Programming and Scheduling Application (MYPS)

Not achieved: Only 6% achieved (1 of 17 offices) but operational at National office.

Improved compliance with document processing time standards

203 DPWH offices implementing Rationalization Plan, as approved by the DBM

Achieved: Rationalization plan implemented in 2014.

100% of regional and national offices are implementing (phase 1) enhanced Project and Contract Management

Achieved: Implementation of PCMA achieved across offices in 2016.

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Application processes

Road user appreciation of DPWH performance improved by at least 10%

100% of regional and national offices are using GIS for forward planning through integration with MYPS (Planning Services and Regions) Module

Achieved: GIS used in National and regional offices but not yet fully integrated with MYPS.

95 offices have upgraded/expanded IT Infrastructure “Voice and Data communication network”

Exceeded: 116 offices have upgraded IT infrastructure.

Average margin of bid award over official estimate less than 10%

Enhanced Data Governance Program implemented

Not achieved: Data Governance Program formally established, but not widely implemented.

OCCP (Organizational Culture Change Program) Road Map adopted by DPWH

Achieved: All modules conducted in 2014.

Component B.3: Road Funds performance improved; and Strategic sector reform plan is developed and adopted.

Updated Operating Procedures Manual of Road Board adopted New Road Board

Secretariat policy and procedures introduced to institute internal controls for approvals and release of funds

Achieved: New policies and procedures introduced in in 2014.

Expanded revenue base for Road Funds adoptedRoad Sector Reform Plan and new Road Management Model adopted by Road Board and DPWH

Component B.4: Project implementation quality enhanced.

Workshops and training on project management conducted.

600 staff trained in various subjects for enhancement of Project Implementation Capacity and road safety

Exceeded: 3,354 staff trained across business procedures, organizational culture change, asset preservation, change management, e-procurement, IT applications and road safety.

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Annex 3. Economic and Financial Analysis

Economic Re-evaluation of NRIMP-2 – Road Improvement Component A.1Prepared by DPWH

Summary: An economic re-evaluation was completed for selected road improvement sub-projects of NRIMP-2 using the actual construction costs and the updated annual average daily traffic (AADT) of the project roads. A summary of the economic evaluation results is shown below. The results indicate the road projects remain economically feasible with internal economic rate of returns (EIRRs) ranging from 11.5% to 35.3% which are all higher than the 10% EIRR hurdle rate prescribed by NEDA. The net present value (NPV) in million PHP at a 10% discount rate is also provided.

Summary economic analysis results 2006, 2012 and 2016

Road Improvement sub-project

Section 2006 2012 2016EIRR(%)

NPVPHP

million

EIRR(%)

NPVPHP millio

n

EIRR(%)

NPVPHP

million

RI-2.1 Magapit – Sta. Ana Road.

Magapit – Mission 19% 103 19.5% 266 30.7% 787


Bongabong – Jct. Roxas 21% 176 15.4% 233 11.5% 84


Bacolod-Bago 28% 541 44.9% 711 33.2% 601


Malita - Don Marcelino 25% 237 15.8% 198 35.3% 258


Digos - Kidapawan - - 45.3% 995 21.3% 624RI-2.7B Kidapawan - Pagalungan - - 34.4% 611 20.4% 461RI-2.7C Pagalungan – Jct.

Cotabato - - 12.1% 95 11.7% 133

Average EIRR (%) 24% - 27% - 23.4% -

Methodology: DPWH used the Highway Development and Management Model Four (HDM-4) model for both the original economic evaluation, and for the reevaluation in 2012. The results of the 2012 HDM-4 modelling were utilized in this economic re-evaluation but with adjustments in the project costs (actual construction costs were reflected) and in the AADT. DPWH supplied traffic data from 2016 which was used to adjust the economic benefits due to the improved roads. The financial costs were converted into economic values by deducting taxes and custom duties estimated at 18%. This was the methodology for the derivation of the economic costs in the 2012 evaluation (refer table below for comparison of costs and AADT).

The 2016 AADT was used to pro-rata the 2012 economic benefits which flowed from the improved roads. This was done by comparing the projected 2016 AADT used in the 2012 evaluation vis-à-vis the actual 2016 AADT data from DPWH (refer table below). The percentage difference between the

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projected and the actual 2016 AADT was applied in the adjustment of the vehicle operating costs (VOC) savings and time savings attributed to the road improvements.

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Projected vs. Actual 2016 AADTRoad Improvement sub-project

Section Economic cost 2016 AADT (vpd)Estimated (in 2012)

Actual (in 2016)

Estimated (in 2012)

Actual (in 2016)

% difference

RI-2.1 Magapit – Sta. Ana Road.

Magapit – Mission 522 373 748 2,657 255%


Bongabong – Jct. Roxas 410 437 6,094 6,294 3.3%


Bacolod-Bago 686 271 17,004 15,120 -11.1%


Malita - Don Marcelino 505 566 2,227 3,481 56.3%


Digos - Kidapawan - 616 9,320 8,631 -7.4%RI-2.7B Kidapawan -

Pagalungan- 354 8,249 8,631 4.6%

RI-2.7C Pagalungan – Jct. Cotabato

- 937 5,445 8,631 58.5%

Total 49,087 53,445 8.8%

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Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending

Agnes Albert-Loth Senior Financial Management Specialist EAPCO Financial management

Rodrigo Archondo-Callao Transport Specialist ETWTR Highway engineer

Jose Edgardo L. Campos Lead public sector specialist SASPR Capacity development

Pinki Chaudhuri Institutional specialist GCPDR Transport

Asger Christensen Consultant GSU08 Social safeguards

Edward Daoud Senior Finance Officer LOAG1 Team member

Victor Dato Infrastructure Specialist EASTE Team member

Ben L.J. Eijbergen Senior Infrastructure Specialist EASTE Task team leader

Moustafa Baher El-Hefnawy Senior transport economist EASTE Team member

Jo Ann Galimpin Finance analyst LOAG1 Team member

Hope Gerochi Project Analyst PPIAF Team member

Simon Gregorio Safeguards Specialist WBISD Social safeguards

Susan Hume Senior Operations Officer EACPQ Country program coordinator

Swaminathan A K Consultant GTIDR Team member

Victoria Florian S. Lazaro Operations Officer EASSO Team member

Rene SD. Manuel Senior Procurement Specialist EAPCO Procurement

Galina Menchikova Program Assistant EASTE Team member

Gia Mendoza Program Assistant EACPF Team member

Christopher T. Pablo Operations Officer GSU12 Team member

William D. O. Paterson Senior Transport Specialist EASTE Task team leader

Joseph G. Reyes Financial Management Specialist EAPCO Financial management

Christopher J. De Serio Senior Program Assistant EASTE Team member

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Saraswathi Sundaram Program Assistant GEE06 Team member

Maya Gabriela Q. Villaluz Operations Officer EASRE Safeguards

Mei Wang Senior Counsel LEGEA Legal

Supervision/ICR

Agnes Albert-Loth Senior Financial Management Specialist GGOGI Financial management

Kristine May S.J. Ante Program Assistant EACPF Team member

Edwin Alzate Consultant EACPF Economist

Dominic Reyes Aumentado Senior Procurement Specialist GGO02 Procurement

Geraldine Bacani Program Assistant EACPF Team member

Florence B. Chhakchhuak Program Assistant GSURR Team member

Victor Dato Senior Infrastructure Specialist GTIDR Team member

Ben L.J. Eijbergen Program Leader SACIN Task team leader

Kjosefina U. Esguerra Consultant EACPF

Petrus Benjamin Gericke Lead Transport Specialist GTI07 Task team leader

Simon Peter Gregorio Safeguards Specialist GSURR Safeguards

Aisha Lanette N. De Guzman Financial Management Specialist EASFM Financial management

Motoki Hayakawa Consultant EACPF

Moustafa Baher El-Hefnawy Lead Transport Economist GTI03 Transport

Maria Luisa G. Juico Program Assistant GTI02 Team member

Yitzhak A. Kamhi Consultant GTIDR Team member

Ashok Kumar Senior Highway Specialist GTI06 Task team leader

Danilo G. Lapid Safeguards Specialist GSURR Social safeguards

Victoria Florian S. Lazaro Safeguards Specialist GSURR Team member

Lilanie Magdamo Maitim Operations Officer EACPF

Gia Mendoza Program Assistant EACPF Team member

Nora Orfillosa Moreno Consultant GSURR Safeguards

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Gerardo F. Parco Senior Environmental Engineer GEN2B Environmental safeguards

Siele Silue Senior Transport Specialist EASIN Task team leader

Tomas JR. Sta.Maria Financial Management Specialist EAPFM Financial management

Roberto B. Tordecilla Safeguards Specialist GSU02 Social safeguards

Mari Anne DL. Trillana Program Assistant EACPF Team member

Catherine G. Vidar Program Assistant GSURR Team member

Maya Gabriela Q. Villaluz Senior Operations Officer EASPS

Karina Blessica J. Vinluan Program Assistant EACPF Team member

Oliver George Whalley Transport Analyst GTIDR ICR Lead Author

Agnes Albert-Loth Senior Financial Management Specialist GGOGI Financial management

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(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending

FY04 0.28 2.79

FY05 3.4 24.71

FY06 26.18 201.57

FY07 49.63 255.68

FY08 37.61 171.13

Total: 117.10 655.88

Supervision/ICR

FY08 0 -0.73

FY09 59.51 251.02

FY10 66.5 225.56

FY11 68.88 262.13

FY12 30.97 177.39

FY13 15.16 127.15

FY14 17.12 75.09

FY15 25.91 76.43

FY16 22.46 56.12

FY17 19.36 62.87

Total: 325.87 1313.04

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Annex 5. Stakeholder Workshop Report and Results

1. Background: During the week of October 10, 2016 a series of stakeholder consultation workshops and interviews were conducted to reflect on lessons learned from NRIMP-2. These consultations were a key part of the ICR’s preparation, and included separate discussions with staff of DPWH of various levels, contractors, consultants, suppliers and civil society organizations involved with the project. The results of these workshops were incorporated throughout the text of the ICR, with the following documenting the findings.

2. Objective: The objective of the consultations was to: (i) identify the positive outcomes of the project; (ii) identify negative factors that affected project implementation; and (iii) draw lessons learned for design and operation of future projects.

3. Methodology developed: The stakeholder consultations were divided into three sections. Firstly, a management meeting was held with DPWH’s Under-Secretaries, Assistant Secretaries and Directors to set the scene and seek early feedback from high level representatives of DPWH. Secondly, a combined plenary session was held with DPWH staff to set the context for the ICR and seek reflections on the project. Thirdly, a series of separate one-on-one meetings were held with DPWH staff, contractors, consultants, suppliers and civil society organizations to provide for frank and detailed reflection on the outcomes of NRIMP-2. The latter took the form of unstructured interviews, with a line of questioning tailored to meet the specific project experiences of each stakeholder. Lessons learnt were sought in these interviews, with reflection encouraged in the following areas: (i) project changes; (ii) institutional capacity development; (iii) physical works (road improvement, LTPBMCs and preventative maintenance); (iv) support to local government units; (v) procurement; (vi) management of environmental and social aspects; (vii) monitoring and evaluation; (viii) bank and GoP performance; and (xi) project results.

4. Questions asked: The following questions were used as a starting point for the unstructured interviews with stakeholders:

What was your involvement with NRIMP-2 and the NRIMP-APL? Do you believe the PDOs were achieved? How successful were each of the components? (road improvements, asset preservation,

ICD, technical assistance to LGUs) What are the risks to the development outcomes? What is you view of the original vision of NRIMP-2 and the APL? What is your view of the changes which occurred to this vision? How did the various stakeholders perform on the project? (Bank, DPWH, DoF,

Contractors, consultants, CSOs) What lessons have you learnt from your involvement with the project?

5. Participants: The consultations were organized with the assistance of DPWH UPMO, and World Bank country office staff. Four senior DPWH staff attended the management meeting, with approximately 15 participants attending the plenary session. Separate one-on-one meetings were held with the directors of seven DPWH bureaus, three contractors, three consultants, one civil society organization and one equipment supplier.

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6. Results: The consultations were very successful, with active participation and knowledge sharing in the management and plenary sessions, but particularly in the one-on-one interviews where the detailed reflections on the project provided invaluable insight to assist with preparation of the ICR. Positive results highlighted by stakeholders included: (i) The broad positive impact of institutional capacity development (ICD) activities; (ii) significant improvements in governance and transparency of the sector; (iii) improved efficiency in the sector; and (iv) strong data gathering.

7. Arguably more useful are the negative observations which stakeholders shared, from which lessons learnt can be gleaned. These included: (i) failure to achieve full scope due to delays; (ii) failure to disburse loan due to inefficiencies; (iii) conflict between Bank and GoP land acquisition processes despite requirements of loan agreement; (iv) overzealous restructuring may have harmed DPWH with too much outsourcing; (v) need for human resource management support for full effect of ICD work; (vi) need for analysis and use of data which is being gathered; (vii) loss of momentum between NRIMP-1 and NRIMP-2; and (viii) too much focus on outputs rather than outcomes.

8. Lessons learned: The main lessons learned from the project and program, as perceived by the broad range of stakeholders consulted were as follows. These lessons provided invaluable insight not only for the preparation of the project ICR, but also for the preparation of new operations in the Philippines and other regions:(i) While NRIMP-1 and NRIMP-2 helped to facilitate Governance changes within DPWH, the strong reform minded leadership which emerged was more critical;(ii) Partnerships with CSOs are the best way to bring about reform rather than merely delegating to them;(iii) Be wary of making too many changes at once as it can divert focus and dilute impact;(iv) Any activities need to be implementable. This requires flexibility from the Bank, but careful consideration by GoP;(v) More thorough planning was required during project preparation to address key causes of delay and avoid duplication of other donors’ work;(vi) Keep Bank supervision team consistent to avoid project implementation delays;(vii) Improved business processes and systems are a key enabler of change;(viii) Institutional capacity development work should include aspects of Human Resources Management (HRM);(ix) Speed of responsiveness could be improved by adding resources when adding components (e.g. for Typhoon Yolanda/Haiyan recovery);(x) Do not procure IT equipment under project due to difficulty using Bank procurement. For example, the way a computer is typically specified is difficult to capture in a specification which would be acceptable under the Bank’s procurement framework;(xi) Developing software is easy, but institutionalizing processes within an organization is the hard part.

9.

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Annex 6. Summary of Borrower's Comments on Draft ICR DPWH Comments

1. The draft appears to be a fair report that took the key concerns of the Department into account from both DPWH and WB perspectives of challenges and what needs improved upon for future loans, and hopefully, the lessons will be learned this time going forward. It was also very fair on the positive aspects despite these challenges.

2. Minor corrections on the following:a) On Abbreviations and Acronyms:

1) To replace “Department of Budget Management” with “Department of Budget and Management”.

2) To replace” Multi-year Programming and Scheduling System” with “Multi-year Programming and Scheduling Application”.

3) To include PCMA – Project and Contract Management Applicationb) On page 8, to move the phrase “improve governance and reduce cost and time” on top of the text

box.c) On page 29, "Plan" should be inserted after Rationalization as Rationalization of DPWH alone

has a totally different meaning.d) On page 41, paragraph 3, to capitalize” undersecretaries, assistant secretaries and directors” with”

Undersecretaries, Assistant Secretaries and Directors”.e) There were a lot of words that were joined (e.g. page 1, “aDepartment”, page 8,” fewerreform”)f) Annexes 6 and 7 were not included in this report.g) Paragraph 14 – delete “Japanese Bank for International Cooperation (JBIC)”h) Amend the phrase on paragraph 16- (i) the number of road improvement sub-projects was

reduced from 10 twelve (12) to ten (10) to seven, with one dropped due to procurement delays issue (i.e., twice failure of bidding), a second in Mindanao dropped due to peace and order issues, and a third and one implemented with GoP funding independent of NRIMP-2;

i) Amend the phrase on paragraph19 - The DPWH Bureau of Quality and Safety (BQS) also designed safety interventions for two of the LTPBMC sections, however, only one contract was able to implement under the loan effectiveness. which were added to these contracts.

j) Paragraph 50 – delete “JBIC”k) Amend Annex 9

3. Response on paragraph 35. Failure to achieve full disbursement– Loan cancellation was not resorted due to inclusion of eight (8) ICD packages under the loan restructuring but two (2) were not implemented and three (3) were not successfully procured. Several billings eligible for disbursement; that is, for payment of work accomplished/services rendered as of December 31, 2016, are still being processed due to late submission of the invoices of the contractors, consultants/suppliers and subjected to rigorous compliance review. These occurrences were not anticipated, and the Implementing Office had requested for the extension of the Disbursement Application Deadline up to June 30, 2017, which the World Bank granted to give ample time to process disbursement.

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Annex 7. Comments of Cofinanciers and Other Partners/Stakeholders No comments were available on this ICR in time for the required processing by the World Bank.

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Annex 8. List of Supporting Documents

1. Medium Term Philippines Development Plan 2004-2010. National Economic and Development Authority. Republic of the Philippines.


3. Philippines: Meeting Infrastructure Challenges. Report No. 31782. December 1, 2005. World Bank and Public Private Infrastructure Advisory Facility.

4. Country Assistance Strategy for the Philippines 2006-2008. Report No. 52897. May 17, 2005. World Bank Group.

5. NRIMP-2 Procurement Post Review Supervision Mission Report March 26 & April 19, 2013. World Bank Group.

6. NRIMP-2 Procurement Post Review Supervision Mission Report. September 17, November 19 & December 12, 2013. World Bank Group.

7. Project Appraisal Document on a proposed loan to the Philippines in support of Phase 2 of the National Roads Improvement and Management (APL) Program. Report No: 40764-PH. April 15, 2008. World Bank Group.

8. DPWH Performance Governance Scorecard, 2016. Retrieved from: http://www.dpwh.gov.ph/dpwh/pdf/PGS.pdf, 15 May, 2017.

9. Country Partnership Strategy for the Philippines 2015-2018. Report No. 78286-PH. May 14, 2014. World Bank Group.


11. NRIMP-2 Road Upgrading and Asset Preservation Sub-Components - Economic Re-evaluation. July 2012. Department of Public Works and Highways. Republic of the Philippines.

12. Project Appraisal Document on a proposed loan to the Philippines in support of the First National Roads Improvement and Management (APL) Program, Phase 1 of the National Roads Improvement and Management Program. Report No: 19754-PH. January 21, 2000. World Bank Group.

13. Country Assistance Strategy for the Philippines 2010-2012. Report No. 47916-PH. April 2, 2009. World Bank Group.

14. Implementation Completion and Results Report for the First National Roads Improvement and Management (APL) Program (Phase 1). Report No. ICR0000445. June 27, 2008. World Bank Group.

15. An Act facilitating the acquisition of the right-of-way site or location for National Government infrastructure projects. Retrieved from: http://www.gov.ph/2016/03/07/republic-act-no-10752/. 7

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http://www.gov.ph/2016/03/07/republic-act-no-10752/

March, 2016. Republic of the Philippines.

16. NRIMP-2 Independent Procurement Evaluation Report: Improvement of Malalag-Malita-J.A. Santos Road, Malita-Don Marcelino Section (CP-RI 2.6). November 17, 2010. Independent Procurement Evaluator.

17. Redacted report -National Roads Improvement and Management Program (Phase 1). January, 2009. World Bank Group Integrity Vice Presidency.

18. NRIMP-2 Evaluation Report and Recommendation for Award of Contract: Improvement of Malalag-Malita-J.A. Santos Road, Malita-Don Marcelino Section (CP-RI 2.6). November 15, 2010. DPWH.

19. A Practical Approach to Public Sector Reform: Following the Dollar in Reforming Road Maintenance (2016). Paul J. Kaiser, Jeremy Streatfeild. Development Policy Review, 34(5), pp 745-757.

20. Project Appraisal Document on a proposed loan to the Philippines in support of Phase 1 of the National Roads Improvement and Management (APL) Program. Report No: 19754-PH. January 21, 2000. World Bank Group.

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Annex 9. Revised Project ComponentsComponent First restructuring (12/06/2012) Second restructuring (12/23/2014)

A.1 National Road Improvement

Surigao-Davao Coastal Road dropped as implemented separately under SONA Projects of the President Gloria Macapagal Arroyo Administration

Cotabato City-Marawi City Road implemented with local funds due to procurement delays resulting from two failed rounds of bidding

Advisory Services dropped as they were no longer considered essential

Bridge and road improvement scope reduced (not specified in restructuring paper).

A.2 Road Asset Preservation

Scope of the preventive maintenance reduced to account for cost increases due to DPWH adopting a policy of more conservative pavement designs.

Four of the eight LTPBMCs dropped as outside NRIMP-2 implementation period

Maintenance engineering services (A2.3) merged under Component B – ICD

B Institutional Capacity Development

N/A Components B.1, B.2, B.3 and A2.3 merged

B.1 Business Process Improvements

IT equipment and software dropped as implemented with local funds

Merged under Component B – ICD

B.2 Corporate Effectiveness

Pilot commercialization of road management and public works service delivery at the district level dropped as rationalization plan was under implementation.

Merged under Component B – ICD Selected activities (not specified in

restructuring paper) were dropped as implemented with GoP funding.

B.3 Strategic Sector Reform

No change.

B.4 Training and Workshops

No change. Merged under Component B – ICD

C Technical Assistance to LGUs

N/A Component added for technical support to LGUs for Typhoon Yolanda/Haiyan reconstruction

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Annex 10. Project Development Objective Progress Prior to Second RestructuringSourced from ISR Number 12 (29 August 2014)

PDO Indicators

PDO Indicator Baseline Target Actual (08/29/14) Comment1: Administrative Efficiency - Project delivery time reduced

NCB: 12 monthsICB: 15 months

Consultant: 8 months

NCB: 6 monthsICB: 12 months

Consultant: 9 months

NCB: 5.3 months Partially achieved. NCB 113% achieved. No information reported for ICB and Consultants.

2: Sustainabilityof financing for NRS assetmanagement - Increased costrecovery from road users

>40% >60% 60% Achieved. Cost recovered through MVUCs consisting of driver licencing and vehicle registration fees

3: Value formoney - Medium-term average cost of preservingnational paved roads reduced

Not available 5% reduction No data Difficulty experienced in setting baseline and measuring this indicator.

4: Road userSatisfaction with roadcondition of paved NRS

59.5% >60% No data Difficulty experienced in measuring this indicator.

Intermediate Result Indicators

Intermediate Indicator

Baseline TargetActual (08/29/14) Comment

A1: National roads are upgraded to pavedroads at acceptable standards

0 km added by project to paved NRS road length

280 km added 295 km paved from gravel or deteriorated PCC

Exceeded. Indicator 105% achieved with project target exceeded.

A1: National arterial paved roads are maintained in good condition

(a) 52% of NRS paved length in fair condition or better.

(a) 55% of NRS paved lengthare in fair condition or better

(a) 55% of NRS paved length are in fair condition or better

Achieved.

(b) 21,006 km committed under preventative maintenance annually.

(b) > 635 kmcommitted underpreventive maintenance;and >680 kmcommittedunder LTPBMCs

(b) Not reported Not achieved.

A2: Improved road asset management of NRS by DPWH

Baselines not documented.

(a) At least 80 percent of the annual road program of DPWH is evaluated by technical

(a) 69 percent of the annual road program of DPWH is evaluated bytechnical and economic

Not achieved. Indicator only 86% achieved.

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and economic criteria through the use ofDPWH planningApplications by 2012

criteria through the use of DPWH planning application

(b) NCB works/goods within 9 months

(b) NCB works in 12 months

Not Achieved.

(c) Financial audits timely and adverseopinions reduced by50%

(c) Financial audits timely and adverseopinions reducedby 50%

Achieved.

(d) Cost and time over-runs reduced to less than 30% of contract terms in 70% of workscontracts under Project

(d) < 30% Achieved.

(e) Road, bridge and traffic data in RBIA kept current on at least 90% paved NRS network

(e) Road, bridge and traffic data in RBIA kept current on less than 90% paved NRS network

Not achieved.

B: Streamlined and effective corporate structure and processes in place to improve service delivery, accountability and integrity

(a) Functional andstructural reorganization ofDPWH is notoperational

(a) Functional andstructural reorganization ofDPWH operational

(a) Rationalization plan adopted for Regional and District Offices

Not achieved. Plan adopted but not operational.

(b) Slow documentprocessing time

(b) Improved compliance withdocument processing time standards: 96 percent improvement

(b) Track system inplace to follow thedocument processingreduced: 86.2 percent improvement (PGSMarch 2012)


(c) Road userappreciation ofDPWH Performance: no data

(c) Road user appreciation of DPWH performance improved by at least 10 percent.

(c) Appreciation of DPWH performance improved from gradeB (2008 report) tograde A (2009 report)

Unclear. While grade has improved from B to A, it is not clear what this translates into in terms of a percentage improvement.

(d) Average marginof bid award over official estimate is around 18 percent

(d) Average margin of bid award over official estimate less than 10 percent

(d) Average marginof bid award over official estimate less than 12 percent


(e) Independent integrity rating of DPWH: No data

(e) Independent integrity rating ofDPWH improved by 10 percent

(e) 2009 Report CardIntegrity level ofDepartment – Grade F;Sincerity in fightingCorruption- Grade B

Unclear. While grades have improved, it is not clear what this translates into in terms of a percentage improvement.

B: Road Fund performance improved; and Strategic sector reform plan is developed

(a) Preparation ofOperating ProceduresManual of RoadBoard underway

(a) Updated IRR and Operating Procedures Manual of Road Board adopted

(a) Operating Procedure Manual adopted.

Achieved.

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and adopted ready for implementation in NRIMP3

(b) Limited revenuebase for Road Funds

(b) Expanded revenue base for Road Fundsadopted

(b) In progress. Not achieved.

(c) Road SectorReform Plan and newRoad ManagementModel under preparation

(c) Road Sector Reform Plan and new Road Management Model adopted by Road Board and DPWH

(c) Policy and procedures have been improved to institute internal controls for approvals and release of funds. Policy and procedures have been improved to institute internal controls for approvals and release of funds.

Achieved.

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MAP

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