Heilongjiang Road Network Development Project
sector: Transport | country: China, People’s Republic of
1. The use of available modern technologies to capture hazardous methane gas, when considered carefully and implemented properly, can produce attractive returns to project developers while addressing the issues of climate change, energy security, and safety of mine workers. The project also demonstrated the strong willingness of consumers to switch to cleaner energy sources once these are provided reliably and at affordable rates. [Main text, para. 48]
2. The strong commitment and ownership of the project proponents is critical to the success of a demonstration project that uses the latest technologies for the first time in a country. Similarly, some flexibility in project design is needed to strengthen key aspects of the project. In this case, the drilling of 80 additional coal bed methane wells ensured methane gas supply to the power plant and other users, resulting in better-than-anticipated results. [Main text, para. 49]
3. The project clearly demonstrated the ability of ADB to design and formulate projects even in a traditionally polluting industry such as coal mining to provide large greenhouse gas mitigation and environmental benefits and contribute to a shift in a country toward a cleaner and sustainable energy pathway. [Main text, para. 50]
4. Changes in regulations not anticipated during project design and approval can adversely affect the project. Contingency provisions that will allow for such unanticipated changes during project implementation should have been considered during project planning and design. [Main text, para. 51]
The importance of rural link roads. The project was able to deliver benefits to the project area through the inclusion of both the provincial highway upgrade and the rural link roads in the project design. The socioeconomic benefits of these roads were very important, allowing all-weather access to jobs and services (health care, transport). The Heilongjiang Provincial Department of Transportation advised that it is frequently difficult to gain funding for rural roads because they are of lower priority than the expressways and highways, and ADB support for these projects provided valuable social impacts.
Consideration of local practices and knowledge. The Heilongjiang Provincial Department of Transportation has extensive experience in road design and construction, knowledge of ADB practices and requirements, and clear boundaries for its responsibilities. Although international practices can be usefully included in projects, they do not always work well in the local context. The agencies have nearly 20 years of experience with ADB and it is likely there are well-qualified local resources available to lead the project preparatory technical assistance studies to prepare project designs and implementation plans that are streamlined to deliver the project in the local context and in compliance with ADB requirements.
Hidden costs of low-cost bids. The difference between the budget and actual cost of supervision and training for the project indicates that the project required substantially more supervision than originally planned. The Heilongjiang Provincial Department of Transportation attributes this higher cost, at least in part, to the selection of the low-cost bidders for portions of the civil works. The project completion report (PCR) states ‘four [of the 26] contracts (procured under international competitive bidding) were awarded on an exceptional basis [due to the very low prices] without determining the combination of bids offering the lowest evaluated cost.’ Although these contracts were subjected to higher performance securities, such bids rarely include adequate management and contingency budgets. Therefore, to ensure appropriate quality, greater executing agency supervision and monitoring during construction is required. Comparisons of bids on the basis of established provincial reference prices and the expected quality of the higher cost bids should be undertaken before contract awarding, with no exceptions granted for exceptionally low-cost bids, is likely to result in a better project implementation process within the expected supervisory budget.