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LESSONS:

Surat-Manor Tollway Project

| country: India

The Project serves as a model for good quality and project readiness at entry. This was the result of (i) project preparation by the National Highways Authority of India (NHAI) through its own resources; (ii) deployment of a project team by NHAI at headquarters and the field office in the initial stage to supervise project preparation, and undertake procurement activities and preconstruction activities; and (iii) advance action on civil works procurement, recruitment of construction supervision consultants, and preconstruction activities such as shifting of utilities, cutting of trees, and land acquisition. NHAI fulfilled the conditions for contract award on preconstruction activities and awarded all the contracts soon after Board approval of the Project.

The total contract value for all the civil works contracts at the time of contract award was Rs5.658 billion ($130 million equivalent) compared with an appraisal estimate of Rs6.707 billion ($180.5 million equivalent), resulting in substantial loan savings. There were also substantial loan savings from the Western Transport Corridor Project. The lessons were incorporated by ADB in its subsequent loans through careful review of cost estimates and adoption of a sector loan modality, which allows inclusion of additional subprojects subject to compliance with the eligibility criteria.

The loan surplus allowed incorporation of additional works on the project road to improve road safety and remove capacity constraints at congested urban locations. These works were not envisaged at the time of project formulation and design, as the Project was one of the earliest under the National Highways Development Project (NHDP). From NHAI’s experience in formulating and designing vast stretches under NHDP and from projects completed through ADB and World Bank assistance, these additional works were considered necessary to improve road safety and remove capacity constraints. With the use of loan savings, the additional works were timely incorporated as part of the Project, as they were integral to the original works and would have been difficult to implement at a later stage.

Although NHAI had initiated the process of seeking Government approval for the additional works under the Project in October 2001, such approval was considerably delayed. The public investment board (PIB) clearance was issued in December 2003 and the cabinet committee on economic affairs (CCEA) approval in October 2004. The delay in the two clearances was one of the reasons for the delay in contract package 1 and the claims made by the contractor. The Government needs to streamline the procedures for speedy PIB/CCEA clearance.

NHAI took considerable time in deciding on contractual matters such as contract variation, extension of time, interest against delayed payments, and release of performance security. Delegating certain contractual and financial authority at NHAI headquarters and in the field offices, and streamlining the procedure for contractual decisions would expedite project implementation.

The contractors for contract packages 1 and 2 were joint-venture firms, with a foreign lead partner and a domestic partner. The participation of the foreign lead partners in executing the contract for both packages was not satisfactory, as they did not provide adequate financial resources, equipment, and key personnel. Implementation of the contracts suffered due to lack of adequate participation by the lead partner. A similar problem with joint-venture contractors was also experienced in the Western Transport Corridor Project. The qualification requirements for the other partner and the contractual obligations of the lead partner have since been strengthened in the subsequent projects to avoid such situations.

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