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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 71738-UA
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF
US$450 MILLION
TO
UKRAINE
FOR THE
SECOND ROAD AND SAFETY IMPROVEMENT PROJECT
August 14, 2012
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective April 12, 2012)
Currency Unit = Ukraine Hryvnia (UAH)
US$1.00 = 8.02 UAH
US$1.49 = SDR 1.00
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AC Accounting Chamber
APL Adaptable Program Lending
CAS Country Assistance Strategy
CBA Cost Benefit Analysis
CIS Commonwealth of Independent States
CPAR Country Procurement Assessment Report
CPS Country Partnership Strategy
CQ Consultant Qualification
DPL Development Policy Loan
EBRD European Bank for Reconstruction and
Development
EIA Environmental Impact Assessment
EIB European Investment Bank
EMP Environmental Management Plan
ERR Economic Rate of Return
EU European Union
FMS Financial Management System
GDP Gross Domestic Product
GPN General Procurement Notice
IC Individual Consultants
ICB International Competitive Bidding
IEG Independent Evaluation Group (World
Bank)
IFIs International Financial Institutions
ILO International Labor Organization
IMF International Monetary Fund
KRU State Control and Revision Office
LARP Land Acquisition and Resettlement Plan
LARF Land Acquisition and Resettlement
Framework
LCS Least Cost Selection
MOF Ministry of Finance
NBU National Bank of Ukraine
NCB National Competitive Bidding
OPRC Operational Procurement Review
Committee
PDO Project Development Objective
PIU Project Implementation Unit
PMCP Ukravtodor Database on roads physical
conditions
POM Project Operational Manual
QCBS Quality and Cost-based Selection
RPF Resettlement Policy Framework
RPM Regional Procurement Manager
RSIP Roads and Safety Improvement Project
SBA Standby Arrangement (of the IMF)
SBD Standard Bidding Document
SDR Special Drawing Rights
SIL Specific Investment Loan
SOE Statement Of Expenditure
STU State Treasury of Ukraine
UAD Ukravtodor (State Road Agency of Ukraine)
UDI Ukrdorinvest (State Enterprise – Ukrainian
Road Investment)
VOC Vehicle Operating Costs
WTO World Trade Organization
Regional Vice President: Philippe H. Le Houérou, ECAVP
Country Director: Qimiao Fan, ECCU2
Sector Director: Laszlo Lovei, ECSSD
Sector Manager: Baher El-Hifnawi (Acting), ECSS5
Task Team Leader:
Co-Task Team Leader:
Andreas Schliessler, ECSS5
Jung Eun Oh, ECSS5
UKRAINE
Second Roads and Safety Improvement Project
TABLE OF CONTENTS
Page
I. STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 2
C. Higher Level Objectives to which the Project Contributes .......................................... 6
II. PROJECT DEVELOPMENT OBJECTIVES ................................................................7
A. Project Development Objective .................................................................................... 7
B. Project Beneficiaries ..................................................................................................... 7
C. PDO Level Results Indicators ....................................................................................... 8
III. PROJECT DESCRIPTION ..............................................................................................9
A. Project Components ...................................................................................................... 9
B. Project Financing ........................................................................................................ 10
IV. IMPLEMENTATION .....................................................................................................10
A. Institutional and Implementation Arrangements ........................................................ 10
B. Results Monitoring and Evaluation ............................................................................ 11
C. Sustainability............................................................................................................... 12
V. KEY RISKS AND MITIGATION MEASURES ..........................................................12
A. Economic Analyses ..................................................................................................... 13
B. Technical ..................................................................................................................... 14
C. Financial Management ................................................................................................ 15
D. Procurement ................................................................................................................ 16
E. Social (including Safeguards) ..................................................................................... 17
F. Environment (including Safeguards) .......................................................................... 18
Annex 1: Results Framework and Monitoring .........................................................................20
Annex 2: Detailed Project Description .......................................................................................23
Annex 3: Details of Economic Analysis ......................................................................................27
Annex 4: Implementation Arrangements ..................................................................................31
Annex 5: Operational Risk Assessment Framework (ORAF) .................................................36
Annex 6: Governance and Anti-Corruption (GAC) Action Plan ............................................39
Annex 7: Implementation Support Plan ....................................................................................42
Annex 8: Map ...............................................................................................................................44
.
PAD DATA SHEET
Ukraine
SECOND ROAD AND SAFETY IMPROVEMENT PROJECT (P127156)
PROJECT APPRAISAL DOCUMENT .
EUROPE AND CENTRAL ASIA
ECSS5
.
Basic Information
Date: 8-August-2012 Sectors: Rural and Inter-Urban Roads and Highways (95%), General
transportation sector (5%)
Country Director: Qimiao Fan Themes: Infrastructure services for private sector development (80%), Trade
facilitation and market access (20%) Sector Manager/Director: Baher El-Hifnawi (Acting) /Laszlo
Lovei
Project ID: P127156 EA Category: A - Full Assessment
Lending Instrument: Specific Investment Loan Team Leader(s): Andreas Schliessler
Jung Eun Oh
Joint IFC: No .
Borrower: Ukraine
Responsible Agency: UKRAVTODOR
Contact: Mr. Mezdrin Title: First Deputy Chairman
Telephone No.: +380-44-287-2449 Email: [email protected] .
Project Implementation Period: Start Date: 15-Oct-2012 End Date: 30-Jun-2016
Expected Effectiveness Date: 15-Oct-2012
Expected Closing Date: 31-Dec-2016 .
Project Financing Data (US$ M)
[ X ] Loan [ ] Grant [ ] Other
[ ] Credit [ ] Guarantee
For Loans/Credits/Others
Total Project Cost (US$M): 540.00
Total Bank Financing (US$M): 450.00 .
Financing Source Amount(US$M)
Borrower 90.00
International Bank for Reconstruction and Development 450.00
Total 540.00 .
Expected Disbursements (in US$ Million)
Fiscal Year 2013 2014 2015 2016 2017
Annual 40.00 110.00 110.00 110.00 80.00
Cumulative 40.00 150.00 260.00 370.00 450.00 .
Project Development Objective(s)
The objectives of the Project are an improved condition and quality of sections of the M-03 road and increased safety on roads in Ukraine.
The proposed project is a follow-on (or repeater) project to the ongoing Roads and Safety Improvement Project (RSIP, Loan No. 7677-UA)
which was approved by the Board in 2009 in the amount of $400 million. The ongoing RSIP is being implemented with satisfactory ratings
and US$ 208 million (52 percent) disbursed as of August 2012. This proposed repeater project (RSIP2, hereafter) has the same development
objective as the ongoing RSIP. The proposed project will rehabilitate and upgrade additional sections of the same M-03 road and will
improve road safety conditions on several road sections and corridors in Ukraine. .
Components
Component Name Cost (US$ Millions)
Road Rehabilitation 397.00
Road Safety Improvements 50.00
Institutional Support and Strengthening 3.00 .
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .
Does the project require any waivers of Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X
.
Legal Covenants
Name Recurrent Due Date Frequency
Environmental Safeguards 15-Oct-2012
Description of Covenant
The Borrower shall ensure that all measures necessary for the carrying out of the Environmental Management Plan and the Framework
Addendum thereto (―Framework Addendum‖) shall be taken in a timely manner and that all legal and administrative planning and
environmental permits and authorizations necessary to carry out the Project are secured in a timely manner and with due diligence.
Name Recurrent Due Date Frequency
Land Acquisition and Resettlement 15-Oct-2012
Description of Covenant
In the event that land acquisition or resettlement is required under the Project, the Borrower shall ensure that the Project Implementing
Entity notifies the Bank, of any intended acquisition of land or resettlement and of each Resettlement Action Plan prepared in accordance
with the Resettlement Policy Framework.
Name Recurrent Due Date Frequency
Resettlement Action Plan Disclosure 15-Oct-2012
Description of Covenant
In the event that land acquisition or resettlement is required under the Project, the Borrower shall ensure that the Project Implementing
Entity discloses the Resettlement Policy Framework and each Resettlement Action Plan and all relevant information relating thereto in a
manner satisfactory to the Bank no less than sixty (60) days prior to carrying out any land acquisition or resettlement.
Name Recurrent Due Date Frequency
Mid-term Review 30-Jun-2014
Description of Covenant
Not later than June 30, 2014, the Borrower, through the Ministry of Economic Development and Trade and the Project Implementing Entity,
shall carry out together with the Bank, a mid-term review of the progress made in carrying out the Project, including but not limited to (a)
progress made in meeting the Project’s objectives; and (b) overall Project performance indicators.
Name Recurrent Due Date Frequency
Effectiveness
Description of Covenant
1. The Conditions of Effectiveness consist of the following:
(a) The Subsidiary Agreement has been executed on behalf of the Borrower, through the MOF, and the Project Implementing Entity;
(b) The Project Operations Manual, satisfactory to the Bank, has been approved and adopted by the Project Implementing Entity; and
(c) The Project Implementing Entity has provided evidence satisfactory to the Bank of its adoption of the GAC Action Plan.
2. The Additional Legal Matter consists of the following: that the Subsidiary Agreement has been duly authorized by the Borrower,
through the MOF, and the Project Implementing Entity and is legally binding upon the Borrower and the Project Implementing Entity in
accordance with its terms.
3. The Effectiveness Deadline is the date ninety (90) days after the date of the Loan Agreement.
Name Recurrent Due Date Frequency
Withdrawal Conditions; Withdrawal Period
Description of Covenant 1. No withdrawal shall be made:
(a) payments made for expenditures prior to the date of the Loan Agreement; and
(b) payments made for expenditures under Category (1) which relate to activities to be carried out on or in relation to any land that is
the subject of a Resettlement Action Plan until the Borrower has provided evidence, satisfactory to the Bank, that the Resettlement
Action Plan has been satisfactorily carried out. .
Team Composition
Bank Staff
Name Title Specialization Unit
Andreas Schliessler Lead Transport Specialist Task Team Leader ECSS5
Jung Eun Oh Transport Economist Co-Task Team Leader ECSS5
Rodrigo Archondo-Callao Sr Highway Engineer Highway Engineering ECSS5
Dmytro Kryshchenko Projects Officer Projects Officer ECSS5
Alexei Slenzak Senior Operations Officer Environment ECSS3
Adam Shayne Lead Counsel Lead Counsel LEGEM
Anarkan Akerova Counsel Counsel LEGAM
Jose Janeiro Senior Finance Officer Loan Administration CTRLA
Joseph Paul Formoso Senior Finance Officer Loan Administration CTRLA
Knut J. Leipold Senior Procurement Specialist Procurement ECSO2
Funda Canli Program Assistant Program Assistant ECSSD
Yulia Tomilenko Program Assistant Program Assistant ECCUA
Chukwudi H. Okafor Senior Social Development
Specialist
Social Development ECSS4
Tamar Sulukhia Country Sector Coordinator Country Sector Coordinator ECSSD
Kseniia Malenko Finance Analyst Finance Analyst CTRLA
Irina Babich Financial Management Specialist Financial Management ECSO3
Said Dahdah Transport Specialist Road Safety TWITR
Sophia V. Georgieva Social Development Specialist Social Development ECSS4
George Banjo Gender Focal Point/Transport Gender ECSS5
Julie Babinard Gender Specialist Gender TWITR
1
I. STRATEGIC CONTEXT
A. Country Context
1. The global economic and financial crisis of 2008 hit Ukraine particularly hard due to its
pre-existing macroeconomic imbalances and structural weaknesses. As the crisis unfolded,
capital inflows came to an abrupt stop, terms of trade reversed as steel prices declined and export
markets shut down. In 2009 Gross Domestic Product (GDP) declined by 15 percent. The crisis
also accentuated the vulnerabilities of the banking sector, leading to a systemic liquidity and
solvency crisis, including the withdrawal of deposits. Domestic demand sharply contracted in
2009, with investments in fixed assets falling by 46 percent. Between October 2008 and
February 2009 the national currency lost about 40 percent of its value against the US dollar. In
July 2010, the IMF Board approved a new 2½ year Stand-By Arrangement (SBA) in the amount
equivalent to SDR 10 billion (US$14.9 billion). This followed the earlier SBA of SDR 11 billion
(US$16.6 billion) that went off-track in November 2009 (after disbursing around US$10.5
billion). In December 2010, the IMF Board completed the first review of the new program. The
second review of the SBA has been delayed (since March 2011) until pension reform, utility
tariff increases, and other measures are enacted and implemented.
2. Ukraine’s economy returned to growth in 2010-2011, but the recovery remains fragile.
After a 14.8 percent GDP decline in 2009, real GDP grew 4.2 percent in 2010 and posted a 5.2
percent growth in 2011. Domestic demand has played an increasing role in driving growth in
2010 and 2011, in contrast with 2009. Industrial production has also recovered but with volatile
growth rates, highlighting the dependence on few commodity prices such as steel. Lower food
prices, delays in utility price adjustments, and monetary tightening led consumer price inflation
to decelerate sharply to around 3 percent in early 2012 year-on-year (y/y), the lowest level since
2003. The Bank’s base case scenario anticipates GDP growth to slow to 2.5 percent in 2012 as
Ukraine enters a period of lower external demand, higher funding pressures, and instability in
international markets.
3. The current account deficit has continued to widen (5.5 percent GDP in 2011 vs. 2.1
percent GDP in 2010) while external financing has become more challenging. Export growth
has slowed due to weaker external demand and softer commodity prices, but the adjustment of
imports has lagged. Delays in the exports of grain from the 2011 harvest also contributed to the
widening of external imbalances. Foreign Direct Investments (FDI) covered 70 percent (or
US$6.6 billion) of the current account deficit. However, higher risk aversion in capital markets
has increased external borrowing costs and reduced the availability of financing sources for both
the public and private sectors. The National Bank intervened in the forex market to defend the
UAH/US$ rate, and lost about US$6.8 billion (or 18 percent) of its gross international reserves in
6 months since their peak in August 2011.
4. The overall fiscal position remains fragile and structural deficits of Naftogaz have
persisted. Strong revenue performance on the back of sound economic growth and rising
imports helped keep the consolidated fiscal deficit on a declining trend since 2010. Pension
reform, enacted in September 2011, will significantly help in future years. However, Naftogaz’s
deficit failed to adjust as import prices increased and the needed tariff adjustments for gas and
heating for domestic non-industrial consumers were postponed. In this context, the overall fiscal
deficit target of 3.5 percent of GDP (including Naftogaz) for 2011 was missed.
2
B. Sectoral and Institutional Context
5. The transport sector is the backbone of Ukraine’s economic growth. The country generates
far more transport movements and volumes relative to its GDP than any other country in Europe
due to its reliance on agriculture and heavy industry. The share of the transport sector in
Ukraine’s GDP was 11.3 in 2009. Strategic improvements of the transport system would
therefore substantially improve aggregate productivity and competitiveness.
Development and Management of the Road Network
6. Ukraine is strategically located between Russia and the European Union and is thus a key
transit country. There are seven major transport corridors crossing its territory, both in East-West
and in North-South directions, carrying transit freight for all neighboring countries as well as for
countries further away (EU and Central Asia). Besides a well-developed railway network
carrying large volumes of mostly heavy bulk cargo, Ukraine also has a developed road network
of about 170,000 km, of which about 21,000 km are national roads and 149,000 km are regional
and local roads. While the corridors between Kyiv and Ukraine’s western border are being
improved with funding from the EU and EBRD, it is important to continue to complement this
effort through the improvement of corridors east of Kyiv towards the industrial heartland of
Ukraine and the border with Russia, to get a maximum return on these major infrastructure
investments. In 2010, Ukraine adopted a new transport sector policy which seeks a balanced
development of different transport modes, with rail transport retaining its role as the dominating
mode for heavy bulk goods, while the road network is being further developed to serve higher-
value goods and to support better connection with Ukraine’s neighbors.
7. Ukraine’s economy, which traditionally has relied on metal production, heavy industry
and agriculture, is shifting to an increased reliance on semi-finished products that have a higher
value per ton. As the delivery of goods increasingly needs to comply with international standards
in terms of timeliness and reliability, road transport will be increasingly important for carrying
higher-value freight at both national and regional levels. This gradual shift to higher-value export
products calls for the modernization of Ukraine’s main road corridors.
8. The chronic shortage of budget funding for roads that lasted since the breakup of the
Soviet Union has created a large backlog of periodic maintenance and rehabilitation, resulting in
poor riding quality and poor safety on a very substantial portion of the country’s road network.
The Government is implementing a Transport Strategy1 which includes a program for the
upgrading of the major national road corridors with the highest traffic levels to European
technical and safety standards; the proposed project is part of that program.
9. Ukraine’s road sector is managed by the State Road Agency—Ukravtodor—a central
executive body under the Cabinet of Ministers of Ukraine, whose activities are directed by the
Vice Prime Minister of Ukraine and Minister of Infrastructure. Ukravtodor is responsible for
administering the country’s network of main roads (about 51,000 km); these are the roads
considered of national importance and all international transit roads. The management of
secondary and local roads is carried out at the Oblast level by the Oblast Road Services, which
report to Ukravtodor. Road maintenance and a part of road construction are undertaken by the
State Joint Stock Company ―Roads of Ukraine‖ (DAK), with 100 percent of its share capital
1 Transport Strategy for Ukraine until 2020, adopted by the Cabinet of Ministers in 2010
3
managed by Ukravtodor on behalf of the Government. Maintenance of regional and local roads
is performed at the oblast level by DAK oblast subsidiaries (Oblavtodors), under contracts with
the Oblast Road Services. Maintenance of national roads is undertaken by linear units (DED),
which are subsidiaries of the DAK. Several road design and research institutions provide
services to both Ukravtodor and the Oblast Road Services.
Road Sector Reform Agenda
10. The Government’s existing plan to reform the management of the road system, approved
by the Cabinet of Ministers on August 3, 2011,2 aims to improve the quality of the road network
and the efficiency of road management through decentralization of responsibilities and resources.
The reform agenda also includes improvement of financial sustainability, development of
coordinated technical and economic policies, and improvement of road quality standards.
During the first phase of the reform between 2011-2013, the Government has set the following
goals:
(a) To introduce a new road classification system that distinguishes state (or national) public
roads and local public roads (legislative changes were approved by the Parliament in
December 2011);
(b) To upgrade the monitoring system for road conditions (under implementation);
(c) To define responsibilities for road management between central and regional road
authorities and local administrations (planned for 2012);
(d) To introduce appropriate changes to the Laws of Ukraine: ―On Roads‖, ―On local state
administrations‖, ―On financing of roads of Ukraine‖, and decrees of the Cabinet of
Ministers on financing and management of roads (planned for 2012);
(e) To develop a road and pavement management system including a database and
analytical tools (planned for 2012); and
(f) To transfer management of local public roads to regional authorities.
11. During the second phase (2014-2015), the reform will focus on the improvement of road
maintenance, including the reorganization of DAK and the scaling-up of performance-based road
maintenance contracts. This is aimed at improving the efficiency of the utilization of funds made
available for road maintenance.
12. Road sector financing has improved very significantly over the last ten years.
Government has substantially increased the fuel excise tax rates (from €20-40 per ton for
gasoline and €10 for diesel in 2000, to €182 for gasoline and €66 for diesel in 2011). The
additional revenues were allocated entirely for the road sector, resulting in a ten-fold increase of
road sector funding between 2002 and 2011 (Table 1). The Government has also increased the
share of road sector financing from the fuel excise tax revenues, which now accounts for about
80 percent of the total sector financing.3 This means that road sector financing is now more
closely correlated with the use of the road network; in other words, an increasing share of the
wear and tear caused by traffic is being paid for by users. Overall road sector resources now
amount to about 1.17 percent of GDP (2011).
2 Cabinet Decree No 739. The initial concept was approved in 2006 and amended subsequently.
3 Previously the largest share of the road sector revenue came from special turnover tax for businesses, which is
unrelated to the road use.
4
Table 1: Ukraine Road Sector Funding (UAH, million)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(plan)
2012
(forecast)
State budget funds of which 969 1,824 2,751 3,058 5,271 7,003 8,877 7,193 7,516 13,762 15,715
Special fund 969 1,822 2,748 3,045 5,255 7,003 8,830 7,193 7,507 12,713 15,715
Balance from previous years - - - 97 114 343 879 181 384 - -
Excise taxes on fuel 923 1,644 2,341 2,094 2,901 3,182 4,041 6,277 5,949 11,080 13,885
Import duties on fuel, vehicles, tire 46 178 407 854 2,233 3,479 3,895 683 1,158 1,616 1,812
Excess axle load tax - - - - - - 15 8 16 17 18
Other - - - - 7 - - 45 - - -
General fund, reserve fund, grants 2 3 13 17 47 - 9 1,049 -
Local budget funds of which 386 246 271 324 398 538 637 26 153 47 0
Vehicle owners tax 375 236 261 317 388 524 625 11 146 - -
Other sources of funds 12 134 11 4 5 7 4 - 4 - -
Total revenues (UAH) 1,367 2,204 3,034 3,387 5,674 7,548 9,518 7,218 7,673 13,809 15,715
Debt issues of which
Proceeds from new loans 6 85 2,723 733 2,007 4,983 522 1,465 5,037 4,976 2,500
Refinancing of existing loans - - - - - - - 7,398 - - -
Payments with promissory notes - - - - - - - 1,620 - - -
Total debt issued (UAH) 6 85 2,723 733 2,007 4,983 522 10,482 5,037 4,976 2,500
Total sources of funds (UAH) 1,373 2,289 5,757 4,120 7,681 12,531 10,040 17,700 12,710 18,785 18,215
13. Notwithstanding the recent improvement in road sector funding, the Government is
committed to further improvements through charges and taxes that are directly linked to the use
of the road network. An additional 10 percent increase in fuel excise tax in 2012 has been
proposed and submitted to the Cabinet of Ministers for approval. The tax increase in 2011 is
estimated to have brought additional UAH 5 billion (approximately US$623 million) in
revenues; the proposed increase that would take effect in 2012 is forecast to bring additional
UAH 3.5 billion (approximately US$436 million). In addition to the fuel excise taxes, an
increase in the vehicle owner’s tax for cars (VOT) by two to five times has been proposed. This
would increase revenues by up to UAH 3.5 billion a year.
Road Traffic Safety in Ukraine
14. The road safety situation in Ukraine is very alarming. People in Ukraine are four or more
times likely to die from road traffic injuries than those in Western Europe, in spite of the much
lower motorization rate and the relatively shorter trip distances. Ukraine has in fact one of the
highest road traffic mortality rates in Europe and Central Asia: above 20 traffic deaths per year
per 100,000 people,4 compared to less than 5 in several European Union countries. Road traffic
injuries rank among the top 10 causes of death in Ukraine. Recent official statistics indicate that
more than 22,000 people died and about 90,000 people required medical treatment as a result of
road traffic injuries during the period 2007-2009.
15. Such high rates of road traffic injuries and fatalities, also characterized by the high share
of pedestrian fatalities, disproportionally affect the economically active population in Ukraine;
hence, the economic and social consequences are significant, estimated at about US$5 billion per
year for Ukraine.5 The key factors that contribute to the poor road safety records are: (i) poor
4 According to the World Bank report ―Confronting Death on Wheels‖ published in 2009
5 According to the ―World Report on Road Traffic Injury Prevention‖, jointly published by the World Health
Organization and the World Bank in 2004, the aggregate economic cost of road deaths and injuries in countries in
the Europe and Central Asia Region exceeds 1.5 percent of GDP.
5
road conditions and the lack of safety features in road design, which the proposed Project aims to
improve; (ii) unsafe driving behavior; and (iii) ineffective enforcement of traffic laws and
regulations. Prevalent among drivers are speeding, driving under the influence of alcohol, and
the use of communication devices (cell phones), while seat belts and other safety measures are
not widely used. Since 2006 the World Bank has had a dialog with the Government on a range
of needed measures to improve road safety.6 Despite some recent efforts, however, the country’s
road safety management capacity is still inadequate: the Ministry of Interior—the designated
lead agency for road safety—does not have the legal mandate, funding, nor capacity to deliver
the necessary institutional functions for road safety management. Several strategies and action
plans have been developed in the past, but often without the necessary high-level political will
and support, measurable targets, clear ownership, or realistic funding; hence they did not lead to
successful implementation.
16. Notwithstanding the behavioral and institutional issues, from the road sector’s point of
view, it is most urgent and critical to improve the physical features of the roads to reduce the
likelihood and severity of crashes. The current regulatory framework and requirements for road
design and construction need to be improved. A formal road safety audit should be required not
only for new construction, but also for road rehabilitation and capital repair, which comprise the
majority of Ukravtodor’s projects and provide ample opportunities to change the geometric
design of roads and add other road safety features for improved safety. The general road design
standards also need to be revisited in order to provide necessary protective features for road users
and pedestrians.
Joint Support for the Road Sector by Development Partners
17. Ukraine’s road sector faces the following main challenges: (a) the need for large-scale
road infrastructure rehabilitation and upgrading in support of the country’s competitiveness and
regional integration; (b) the need for institutional reforms to improve road sector governance and
the efficiency of road asset management; and (c) the need to improve road traffic safety, which
would bring both economic and social benefits. Since the start of preparation of the ongoing
RSIP in 2007, the Bank and other development partners have coordinated their support for the
sector in addressing those challenges, in what may be seen as programmatic support for road
sector development, as described below:
(a) Road infrastructure development: The multilateral development partners active in
Ukraine’s road sector (World Bank, EBRD, EIB and EU) are supporting the
Government’s road infrastructure development program by funding road investments
included in the program. The Bank’s ongoing RSIP and the proposed RSIP2 are integral
parts of the Government’s overall road investment program. The European development
partners largely focus on the priority road corridors defined by the European Union,
which connect Ukraine to its Western neighbors. The Bank projects’ focus is to extend
and complete the road connection to the eastern part of the country, strengthening the
connectivity and integration of Ukraine and the larger Eastern European region.
(b) Road sector institutional reforms: The European partners, in particular the EU and
EBRD, are leading the reform dialog with the Government and are supporting the
reforms through policy-based lending, support for performance-based road maintenance
6 The World Bank carried out a Road Safety Management Capacity Assessment for Ukraine in 2006.
6
contracts, and increasing the role of the private sector (vis-à-vis state owned enterprises)
in road maintenance. The long-standing and continuing reform dialog with the
Government helps enhancing road sector governance and the strategy for road network
development and management. The support for the introduction of performance-based
road management and maintenance is helping to improve the cost-efficiency of road
maintenance through market-based mechanisms.
(c) Road safety: The Bank is leading the development partners’ cooperation with the
Government in the area of road safety. This started under the ongoing RSIP and will be
continued under the proposed RSIP2, by supporting the design of state-of-the-art
corridor-based road safety improvements and implementing those on several high-risk
road corridors in Ukraine. Despite the present absence of the necessary high-level
political support for a broad and comprehensive approach to road safety, the proposed
RSIP2 also aims to improve the institutional and technical capacity of at least some road
sector institutions to design and implement road safety measures, through technical
assistance to be provided under Component 3.
C. Higher Level Objectives to which the Project Contributes
18. The proposed Project is fully consistent with the new Country Partnership Strategy (CPS)
for Ukraine for FY12-16 which was approved by the World Bank’s Board of Executive Directors
in February 2012. The Bank's support in the new CPS period is organized around two pillars,
both emphasizing the importance of improved governance for sustained socio-economic progress
in Ukraine. Pillar I supports deepened relations between government and citizens, focused on
improving public services, sustainability and efficiency of public finances, and a more
transparent and accountable use of public resources. Pillar II supports more productive
cooperation between government and business by focusing on growth, competitiveness and job
creation, improvements in the business climate, the promotion of domestic investment and
foreign direct investments (FDI) to achieve productivity improvements, and channeling public
investment into critical public infrastructure. During the previous FY08-11 CPS cycle, the
ongoing RSIP has been one of the Bank’s better-performing projects, in terms of disbursement
and implementation ratings, testifying for relatively strong institutional readiness and
implementation capacity of the road sector.
19. The proposed Project is also consistent with the Bank’s strategy for Europe and Central
Asia Regional which was updated in 2011, particularly with the first of its three pillars:
“deepening reforms for competitiveness‖. Under this pillar, the Bank aims to improve the
transport and energy infrastructure and the sector governance in infrastructure service delivery.
The RSIP2 would promote road sector reforms and good road sector planning through the
support to the preparation of the Government’s new Road Sector Strategy. It would also support
good governance through the implementation of the Anti-Corruption Action Plan.
20. The project will also help to achieve results for Ukraine in the context of the United
Nations Decade for Road Safety.
7
II. PROJECT DEVELOPMENT OBJECTIVES
A. Project Development Objective
21. The objectives of the Project are an improved condition and quality of sections of the M-
03 road and increased safety on roads in Ukraine. The proposed project is a follow-on (or
repeater) project to the ongoing Roads and Safety Improvement Project (RSIP, Loan No. 7677-
UA) which was approved by the Board in 2009 in the amount of $400 million. The ongoing
RSIP is being implemented with satisfactory ratings and US$208 million (52 percent) disbursed
as of August 2012. This proposed repeater project (RSIP2, hereafter) has the same development
objective as the ongoing RSIP. The proposed project will rehabilitate and upgrade additional
sections of the same M-03 road and will improve road safety conditions on several road sections
and corridors in Ukraine.
B. Project Beneficiaries
22. The primary beneficiaries of the proposed project are road users and the public at large; in
particular the owners, operators and occupants of motor vehicles, as well as pedestrians and the
users of non-motorized transport using roads. Road users will benefit at three different levels:
(a) At the level of the M-03 road between Lubny and Poltava (Component 1), road users
will benefit from the improved road conditions and road capacity which will result in
reduced vehicle operating cost, better travelling comfort and the much lower risk of
injury and death due to traffic crashes. Road user costs will be reduced at least by five
percent for the different types of vehicles. Head-on collisions due to unsafe overtaking
of slow vehicles cause most fatalities on this road section; these will be largely avoided
due to the widening from 2 to 4 lanes.
(b) At the level of all road corridors improved under the proposed Road Safety Component
(Component 2), road users will benefit from the lower risk of injury and death due to
traffic crashes. Road fatalities on the corridors and the road sections improved under
this component will be significantly reduced.
(c) At the national level, road users will benefit from Ukravtodor’s improved capacity to
prepare a coherent strategic program for road development, and to plan road safety
interventions throughout Ukraine, which is to be achieved through project Component 3.
This will result from better targeting of road investments, and a reduced risk of injury
and death due to traffic crashes. At this level, however, benefits will accrue in the
medium term and it will not be possible to show measurable results during the life of the
project.
23. The secondary beneficiaries of the project are local residents of the settlements along the
M-03 road between Lubny and Poltava, due to the reduced risk of traffic crashes (mostly
pedestrian fatalities) which will result from the construction of three bypasses under Component
1 of the project. The annual number of traffic fatalities per vehicle-km in those settlements
(including pedestrians hit by vehicles) are estimated to be reduced by about 20-40 percent.
Although there is no hard gender-specific data available on pedestrian traffic and on traffic
injuries and deaths in those settlements, it seems likely that women will benefit in particular from
the increased pedestrian safety measures, since they tend to walk in those settlements in order to
8
access social services and markets (stores). The general public will benefit from the overall
improvement in the competitiveness of goods produced in Ukraine through the expected lower
transport costs resulting from improved road infrastructure.
24. Both women and men are expected to benefit from the improved mobility and safety along
the project road (Component 1).7 In addition, the proposed Project will ensure that both genders
benefit from improved access to markets and social services. Particularly under Component 2,
road corridors for safety improvements will be selected based on not only safety risks for drivers
and vehicle occupants (which in their majority are men) but also on risks for pedestrians and
users of non-motorized traffic (which include a large share of women). The design of physical
road safety interventions will emphasize the importance of access to social services in local
communities, including those primarily used or visited by women, such as hospitals, schools, or
childcare centers.
C. PDO Level Results Indicators
25. The achievement of the PDO will be measured with the following key results indicators:
(a) Improved riding quality along the section between Lubny and Poltava of the M-03 road
(measured in terms of a reduction of roughness from IRI>5 to IRI<2);8
(b) Improved quality of the M-03 road corridor, measured by the length of road sections
upgraded from 2 to 4 lanes.
(c) Improved road safety on the Lubny – Poltava road (measured by a reduction of traffic
fatalities and serious injuries per 100 million vehicle-km); and
(d) Improved road safety on road corridors improved under Component 2 of the project
(measured by a reduction of traffic fatalities and serious injuries per 100 million vehicle-
km).9
26. Key output indicators will be:
(a) Length (in km) of M-03 road sections rehabilitated/upgraded (Component 1); this is a
Core Indicator;
(b) Length of road corridors and sections (in km) on which road safety improvement
measures are implemented (Component 2);
(c) Road safety survey and assessment completed for at least 12,000 km of motorways and
national roads using iRAP methodology.
(d) Readiness of a Strategic Program for Road Development up to 2030, which will also
cover the social and gender dimensions of the program.
7 See also the treatment of gender issues for this project under Section VI.E (Social Assessment).
8 International Roughness Index (IRI) is a standardized method for measuring riding quality for road users.
9 In Ukraine, data on traffic injuries and fatalities are collected by the traffic police as part of a nationwide system
(not gender-disaggregated).
9
III. PROJECT DESCRIPTION
A. Project Components
27. The proposed RSIP2 project will essentially be a continuation of the ongoing RSIP, which
became effective in September 2009. It will include the following components:
28. Component 1: Road Rehabilitation (US$397 million excluding taxes). This component
will finance the rehabilitation and upgrading of the M-03 road between Lubny and Poltava. The
civil works to be funded from the loan will cover about 108km. The M-03 road connects the
industrial areas in eastern Ukraine to Kiev, and is also part of the European road corridor E-40.10
Physical works will include the rehabilitation of the existing 4-lane road sections and the
widening of other sections from two to four lanes, to ensure that the entire road is in line with the
Ukrainian motorway standard I-b.11
In addition to the increase in road capacity and the
improvement of road conditions, this component will result in major road safety benefits.
Widening to four lanes will greatly reduce the risk of head-on collisions, which are today the
main cause of crashes and traffic fatalities of this road. Rehabilitation works will incorporate
several modern road safety features into the road design, including pedestrian over-passes and
underpasses, lighting, guardrails, etc. Three bypasses will be built along the road and will reduce
through traffic in populated areas, much reducing the risk of collisions between motorized
vehicles and pedestrians, a large proportion of which are women and children. They will thus
improve community interaction.
29. Component 2: Road Safety Improvements (US$50 million excluding taxes). This
component will finance two types of activities: (i) safety improvements along several high risk
road corridors; and (ii) introduction of improved road safety features on the existing M-03
sections in urbanized areas which will remain even after bypasses will be built around those
under Component 1. For the former, a comprehensive road safety assessment is being carried
out under the ongoing RSIP, using the Risk Mapping and Star Rating approach of the
International Road Assessment Program (iRAP). This assessment will identify between two and
four high risk corridors and recommend specific engineering solutions to be introduced. This
component will then finance the actual implementation of the engineering solutions, which will
include civil works and various types of road safety equipment. For the latter, this component
will finance the re-design of the village sections of the M-03 and the implementation of various
types of measures to reduce traffic speed (such as traffic calming) and improve pedestrian safety.
30. Component 3: Institutional Support and Strengthening (US$3 million excluding taxes).
Under this component the Bank will complement the institutional assistance already being
provided by other development partners, in support of the Government’s concept for the road
sector reform program enacted through the Cabinet of Ministers’ Decree No 739 dated August 3,
2011. This component will support: (i) the development of a Strategic Program for Road Sector
Development until 2030; and (ii) the enhancement of the capacity of Ukravtodor, the Ukrainian
State Institute for Design of Roads (Ukrdiprodor) and other Ukrainian institutions, for designing
and building safer roads. Technical assistance will be provided to help Ukravtodor in developing
10
The M-03 road (Kiyv-Kharkiv-Dovzhansky) is part of the European E-40 Corridor that connects Calais in France
with eastern Kazakhstan near the border with China, and is thus part of the so-called ―Silk Road‖ linking western
China with Western Europe. 11
Road Standard I-b is a four-lane motorway with two lanes in each direction, separated by a median.
10
a Strategic Program for Road Development, covering also institutional strengthening, financial
sustainability and the social and gender dimension of the program. With funding from this
component, international specialists will work with the staff of local institutions to carry out a
road safety assessment of a large part of Ukraine’s network of main highways (at least
12,000km), identify appropriate safety measures and institutional arrangements, and prepare
detailed designs for road safety improvements along the network of national roads. Through this
experience, one or more Ukrainian institutions are likely to be qualified for accreditation by
iRAP, an official recognition of the capacity to carry out iRAP road safety assessments in
Ukraine and elsewhere. Beyond the activities described above, other activities to be supported
under this component may be agreed upon between the Government and the Bank if the need
arises.
B. Project Financing
Lending Instrument
31. The project cost (excluding VAT) will be financed through a Specific Investment Loan
(SIL) with a Flexible Loan at 6 months LIBOR for US Dollars plus variable spread, with a 17
year maturity, including 6 year grace period, commitment linked and with level repayment
pattern. The loan will be offered under the current terms with no commitment fee and will be
subject to a one-time front-end fee of 25 basis points, which will be financed from the loan. (to
be confirmed)] The Borrower will be Ukraine (―Borrower‖ or ―Ukraine‖), and the representative
of the Borrower will be the Ministry of Finance of Ukraine.
Project Cost and Financing
32. The total cost of the proposed RSIP2 is US$540 million, including value-added taxes
(VAT). The Bank will finance US$450 million, which is the portion excluding VAT; the state
budget will fund the VAT, which is expected to amount to US$90 million equivalent.
Table 2: Project Costs and Financing
Project Components Total Project Cost (US$
million, including VAT)
IBRD Financing
(US$ million)
Government Financing
(US$ million)
1. Road Rehabilitation 476.4 397.0 79.4
2. Road Safety Improvements 60.0 50.0 10.0
3. Institutional Support 3.6 3.0 0.6
Total Project Costs
(incl. physical/price contingencies)
540.0 450.0 90.0
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
33. The RSIP2 will be the second World Bank funded road project executed by Ukravtodor as
the implementing agency. Over the past ten years, Ukravtodor and the project implementation
unit (PIU) for externally funded projects, presently named Ukrdorinvest, have gained much
experience in the execution of large externally funded road projects (mostly by EBRD, IBRD
and EIB). Given the good track record of Ukravtodor and Ukrdorinvest in the preparation and
execution of externally funded projects, the project implementation risks are considered to be
11
moderate. Risks are expected to be minimal also during the project preparation stages (road
design, feasibility studies, environmental and social assessments, etc.) where the performance of
Ukravtodor, Ukrdorinvest and the Ukrainian State Institute for Designing of Road Facilities,
Ukrdiprodor, has been satisfactory.
34. Despite the widely recognized governance issues in Ukraine at the country level, these
high country risks have so far not translated into problems in the execution of externally funded
projects in the road sector. The operational performance of Ukravtodor and the project
implementation unit Ukrdorinvest has in fact improved over the past years. There have not been
any reports of interference by higher-level authorities in the management of road projects by
Ukravtodor. Externally funded road projects benefit from tight scrutiny and oversight by the
external funding agencies. Additionally, all projects in the road sector, independent of the
funding source, are subject to internal auditing and control through the Ministry of Finance and
other Government agencies. Under the ongoing RSIP, regular technical audits by an independent
international auditor are being carried out to verify that all road works have been executed in
compliance with the technical specifications. The same type of technical audits will also be part
of the implementation arrangements for the RSIP2, as described in detail in Section V.
35. The existing arrangements for procurement and financial management under the ongoing
RSIP will also be applied for the RSIP2, given the satisfactory level of performance of the
current PIU staff, who are well-trained and experienced. In order to handle the expected increase
in the work load for preparing the new project, the PIU has hired a new procurement staff who is
being trained and who has already taken on some procurement responsibilities. In order to
improve the quality and efficiency of project accounting, the PIU has acquired an automated
accounting system and is currently finalizing the customization of the system.
36. As per the Resettlement Policy Framework and Resettlement Action Plan (see Section
VI), Ukrdorinvest has designated one full-time staff member to monitor compliance with the
Bank’s environmental and social safeguards policies (OPs 4.01 and 4.12), specifically in land
acquisition procedures. The designated staff has been actively involved in the preparation of
safeguards documents for the proposed RSIP2 (RPF, RAP and EMP). The World Bank will
provide opportunities for further training and skills development for the staff.
B. Results Monitoring and Evaluation
37. Ukrdorinvest is responsible for the monitoring of results of the ongoing RSIP and other
externally funded road projects (for EBRD and EIB); it will also play the same role for the
RSIP2. As has been the case under the RSIP, regular monitoring reports will be prepared by
staff of Ukrdorinvest, both for the IFI’s but also for other government agencies such as the
Ministry of Finance and the Ministry of Economy. During the regular implementation review
visits, IFI staff and Ukrdorinvest will continue working together for joint results monitoring.
The cost of Ukrdorinvest is fully covered by Ukravtodor (and thus by the Government budget),
based on a contractual relationship between the two organizations.
12
C. Sustainability
38. The longer-term sustainability of the proposed RSIP2 will be determined by two factors:
(i) adequacy of technical capacity to maintain the newly rehabilitated and upgraded road
sections; and (ii) adequacy of financial resources to be allocated for road maintenance.
39. On the first factor, Ukravtodor has a good track record in managing the construction of
good quality roads and maintaining Ukraine’s main national highways. The road sections that
are now in poor condition and need to be rehabilitated or upgraded through the RSIP2 or other
projects have typically lasted about 25 years since the prior rehabilitation; this excellent result is
partly due to good road maintenance during this period, but is also the result of good
construction quality. Of the network of National roads maintained by Ukravtodor, about 55
percent are in good or fair condition and the remaining part is scheduled for rehabilitation
(including through the RSIP2). As part of the road sector reform described earlier, the
management of secondary and local roads will be decentralized to local authorities. This will
help Ukravtodor to focus its technical capacity on the network of Motorways, National roads and
some important Regional roads, and this will increase the sustainability of the proposed Project.
40. The improvements in funding for road sector rehabilitation and maintenance are
described earlier in this document. The increased funding and better road maintenance practices
have improved the sustainability of the infrastructure investments in Ukraine, including those
that are to be implemented through the proposed project.
V. KEY RISKS AND MITIGATION MEASURES
41. Overall risks are assessed to be ―moderate‖ or ―low‖ both during preparation and
implementation stages of the project. Moderate risks are associated with the country-level
governance issues, the expected increase in the work load for the staff of the implementing
agency, Ukrdorinvest, and safeguards issues related to the construction of the three bypasses.
The ―repeater‖ nature of the proposed project and adequate experience and good track records of
the implementing agency lower the risks associated with stakeholders, project design and
implementation, and sustainability. Risks ratings are summarized in Table 3 and explained in
detail in Annex 4.
Table 3: Key Risks and the Ratings
Risks Associated with Rating Risks Associated with Rating
Project Stakeholder Low Project Program & Donor Low
Implementing Agency Capacity Moderate Project Implementation & Sustainability Low
Implementing Agency Governance Moderate Overall Project Preparation Moderate
Project Design Low Overall Project Implementation Moderate
Project Social & Environmental Moderate
42. While there has been no fraud and corruption case in any of the recent and ongoing
externally funded projects in the road sector, high risks associated with governance at the
country level is widely recognized. Therefore, the RSIP2 will apply an updated Governance
13
and Anti-Corruption (GAC) Action Plan which adopts all of the good practices from the
existing GAC Action Plan for the ongoing RSIP and introduces some new additional
measures. The purpose of the GAC Action Plan is to improve the capacity of Ukravtodor to use
effectively its own resources and the funds provided by the World Bank and other IFI’s, thereby
further ensuring compliance with the Bank’s fiduciary requirements. The GAC Action Plan is
presented in Annex 6.
APPRAISAL SUMMARY
A. Economic Analyses
43. The economic feasibility of the project was assessed based on an analysis of the first two
components of the project. For Component 1, the improvement of the quality and condition of
the road would lead to savings in vehicle operating costs and users’ travel time cost, and reduced
road traffic fatalities and injuries. For Component 2, road safety improvements in certain
corridors or sections would reduce road traffic fatalities and injuries. Benefits arising from road
safety improvements were assessed using the estimated reduction of fatalities and injuries along
major road corridors, and the monetary value of loss of human life, evaluated on the basis of the
current income level and projected economic growth of the country. The results of the economic
analysis are presented below. The details of the economic analysis are presented in Annex 3.
44. Table 4 below summarizes the economic evaluation results for the Road Rehabilitation
works (Component 1). Investments are economically justified with a net present value (NPV) of
US$92.3 million at 12 percent discount rate, and an overall economic internal rate of return
(EIRR) of 16.5 percent.
Table 4: Economic Evaluation Results – Road Rehabilitation
Road Work Type Section NPV (US$ million) EIRR (%)
NPV/ Investment Cost
Ratio
Widening km 210+000 - km 220+782 16.6 23.1% 0.57
km 228+000 - km 239+317 4.0 13.9% 0.09
km 258+000 - km 275+000 1.3 12.4% 0.02
km 282+000 - km 300+550 4.8 13.4% 0.07
Rehabilitation km 300+550 - km 323+000 6.0 14.2% 0.10
km 329+050 - km 336+873 13.7 25.6% 0.72
Pokrovskaya Bogachka Bypass km 220+782 - km 228+000 1.9 13.2% 0.06
Belotseryvka Bypass km 275+000 - km 282+000 5.5 14.4% 0.14
Poltava Bypass km 333+800 - km 339+300 38.4 24.8% 0.91
Total Total 92.3 16.5% 0.23
45. Table 5 shows the results of a sensitivity analysis, increasing costs and decreasing traffic
growth rate by 15 percent. The results show that even under the pessimistic scenario of
increasing costs by 15 percent and decreasing traffic growth rate by 15 percent, the project is still
economically justified with an EIRR higher than 12 percent. The switching values analysis
shows that costs would have to increase by 37 percent or benefits would have to decrease by 27
percent to yield an EIRR equal to 12 percent, which indicates a robust economic justification of
the project.
14
Table 5: Sensitivity Analysis Results
Sensitivity Scenarios EIRR (%)
Base Case 16.5
Costs + 15% 14.1
Traffic Growth – 15% 15.4
Costs + 15% and Traffic Growth -15% 13.1
No Generated Traffic 15.7
No Road Safety Benefits 15.2
46. For the Road Safety interventions under the project (Component 2), between two and four
high risk road corridors on the National road network will be selected for safety improvements.
In addition, the two existing road sections on the M03 road that go through the villages where
bypasses will be constructed under Component 1 will also be improved for better safety. The
improvements along the high-risk corridors are estimated to result in the reduction of the rate of
fatalities per vehicle-km by about 30 percent, based on experience with similar projects. Using
the iRAP estimated monetized value of fatalities in Ukraine, US$210,000 per fatality (i.e., 70
times the per capita GDP) and US$52,500 per serious injury (i.e., 18 times the per capita GDP),
the investments under Component 2 are economically justified with the NPV of US$3.8 million,
the benefit-cost ratio of 1.4, and the EIRR of about 13 percent.
B. Technical
47. Component 1. The proposed RSIP2 will upgrade sections of the M03 road between
Lubny and Poltava from km 210 to km 339, totaling 108 km, to a four-lane motorway. The
project comprises pavement rehabilitation of the existing four-four lane sections (30 km) and
pavement rehabilitation of the existing two-lane sections plus construction of two additional
lanes (58 km). In addition, three bypasses of settlements or urbanized areas will be constructed,
totaling 20 km. The road sections to be rehabilitated show severe surface distress and high
roughness values (IRI between 5.0 and 7.0 m/km). The road traverses some settlements and ends
at the city of Poltava, which has around 300,000 residents. Two bypasses will go around the
large villages of Pokrovskaya Bogachka and Belotseryvka, while the third bypass will be
constructed to avoid traffic having to go through the city of Poltava. All bypasses will be built as
four-lane roads.
48. The proposed project will use the same asphalt concrete pavement construction
technology and design standards that were already adopted on the RSIP, which are based on
sound technical criteria and in line with current Ukrainian standards. A representative pavement
structure comprises 50 mm mastic asphalt concrete wearing course, 160 mm open grade asphalt
leveling course, 150 mm cement treated base course, and 240 mm sub-base, which is appropriate
for the expected traffic volume and type. The road traverses a flat to slightly rolling terrain. The
topographic and geological conditions along the route are relatively homogenous. The road
sections to be rehabilitated and widened follow the existing alignment, and no major bridge
works are anticipated, thus, the construction is not expected to be problematic. The design speed
is 120 km/h and the typical cross section dimensions are: lane width 2 x 3.75 m, shoulder width
3.75 m, and median width 6.00 m, resulting on total road width of 28.50 m. The project will also
incorporate safety features including improved pedestrian crossings, guardrails, road signs,
pavement markings, and lighting at critical intersections, as well as bus stops. Necessary
15
drainage and protection works will be provided to prevent premature road deterioration.
Enhanced supervision, including the use of an independent technical sudit, will be done to ensure
proper quality of the finished works.
49. The Ukrainian State Institute for Design of Roads (Ukrdiprodor) has completed the
engineering designs and bidding documents. The internal review process is expected to be
completed in late March 2012 and the request for bids should be launched in April 2012.
Ukrdiprodor has a longstanding experience with road engineering designs and was responsible
for the designs and bidding documents for RSIP.
50. Component 2. The proposed RSIP2 will use the iRAP corridor-based approach instead of
the black-spot approach that had been used under the ongoing RSIP. Based on the experience of
the International Road Safety Assessment Programme (iRAP), the corridor approach is more
efficient and more suitable in terms of procurement than the latter. The black-spot approach is a
responsive remedy that focuses on locations that are statistically known to be unsafe. This
approach entails a risk of missing out high-risk locations in cases when crash statistics are
inaccurate or incomplete, or when some high-risk locations have currently low traffic hence
statistically insignificant crash intensity, but would become riskier with future traffic growth. On
the contrary, the iRAP corridor-based approach is a preventive solution that is based on comprehensive
and scientific assessment of various characteristics of roads, including physical design, traffic
volume, surrounding environment, pedestrian density, etc. Under this approach, a trained expert
identifies high-risk road sections through the analysis of visual images of roads, even when crash
statistics are not available, and more importantly, before actual crashes take place.
51. Under the ongoing RSIP the road safety component, which had included black-spot
treatments of the main road network, was only partially implemented mostly due to the lack of
interest from contractors to carry out the numerous small works scattered throughout relatively
large areas. The high mobilization cost and relatively small contract amounts made these
contracts unattractive to many potential bidders. Contracts under the corridor-based approach
will be generally larger in size and will reduce mobilization and management costs for
contractors.
C. Financial Management
52. Ukravtodor and its PIU for externally funded projects, Ukrdorinvest, are currently
implementing the Bank-financed RSIP, and financial management arrangements were confirmed
as moderately satisfactory during the April 2012 financial management monitoring visit.
53. For the proposed RSIP2, Ukravtodor will continue to rely on the FM arrangements that are
currently used for the ongoing RSIP. The staffing arrangements were confirmed to be
satisfactory by the Bank’s FM staff. Interim Unaudited Financial Reports (IFRs) have been
submitted on a timely manner, and the external auditors issued a clean (unqualified) audit
opinion on the project financial statements, covering 2009-2010. The latest Accounting
Chamber and State Financial Inspection (SFI) reports on Ukravtodor have been reviewed by the
Bank. While the Accounting Chamber and SFI noted some areas for improvement (unrelated to
the RSIP or other externally funded projects), the findings and areas noted for improvement pose
minimal risk to project design and implementation, and have been addressed in the Governance
and Anticorruption Action Plan. The system of internal controls in Ukravtodor and its PIU was
16
confirmed as satisfactory by Bank staff; also the project auditors did not note any weaknesses in
their letter to management. For the RSIP2 project, both the Bank and Ukravtodor will publicly
disclose the project audit report as required under the Bank’s Policy on Access to Information.
In order to further improve the quality and efficiency of project accounting, the PIU has acquired
an automated accounting system and is currently finalizing the customization of the system.
Ukravtodor will also use the same disbursement arrangements as are currently being used for the
RSIP.
54. For the purposes of disbursement of the loan, a Designated Account (DA) shall be opened
and managed in UKREXIMBANK. Replenishment for the DA will follow the procedures
already established under the ongoing RSIP. The account will be opened by the State Treasury
in the name of Ukravtodor. Additionally, Ukravtodor will open two own Transit Accounts in the
State Treasury, one in UAH (State Treasury) and one multicurrency account
(UKREXIMBANK). All of the above accounts will be used solely for payments related to the
implementation of the RSIP2, and only for payments below the minimum application amount for
direct payments of US$800,000. Disbursements from the IBRD Loan Account will follow the
transaction-based method following traditional Bank procedures: Advances, Direct Payments,
Special Commitments and Reimbursement (with full documentation and against Statements of
Expenditures (SOEs)). For payments above the minimum application size, as specified in the
Disbursement Letter, the Borrower will submit withdrawal applications to the Bank for direct
payments by the Bank from the Loan Account to contractors, consultants and suppliers. The
withdrawal applications will be prepared by the PIU, separately for the payment amount
exclusive of VAT (to be submitted to IBRD) and for the VAT (to be submitted to the MOF),
authorized by Ukravtodor and then submitted to MOF for final review and authorization.
D. Procurement
55. Procurement under the project is straightforward and includes mostly large civil works
contracts, and consultancy contracts for technical supervision and capacity building. The PIU has
extensive experience in managing this type of procurement under the current RSIP and similar
large projects funded by the EBRD/EIB. Procurement risks are less related to the procurement
expertise and experience of the PIU than to factors such as an increase in the work load of staff.
The identified procurement risks are listed in detail in Annex 3.
56. The identified procurement risks will be mitigated by ensuring that Ukrdorinvest with its
current procurement expertise will remain the PIU for the RSIP2 and conduct all procurement
activities, including complaints handling, in strict compliance with the Bank’s procurement
policies and procedures and the Governance and Anti-Corruption Action Plan. Competition will
be promoted by packaging contracts in line with the market for procured items. The PIU
procurement capacity has recently been strengthened through the hiring of one additional staff
and continued procurement training. The Bank will monitor procurement and contract
management and provide clear guidance and instructions during supervision. An initial
Procurement Plan for the entire project scope was prepared by the PIU and accepted by the Bank
with all contracts being subject to prior review. The process of prequalification of contractors is
well underway and it is expected that the procurement of most large civil works contracts and
consultant contracts will be completed in August 2012 so that contacts can be signed
immediately after project effectiveness which is expected for September 2012.
17
E. Social (including Safeguards)
57. The envisaged road improvements to be carried out under the project will have significant
positive social and economic impacts on the communities along the road corridors. As learned
during consultations with the local communities (which included both men and women), the
safety of pedestrians and livestock is one of the key concerns of the potential beneficiaries of the
proposed RSIP2. The project will address these aspects in two ways. First, the construction of
bypasses around large villages and urbanized areas under Component 1 will reduce the volume
of traffic passing through those areas, and hence reduce possible collisions with pedestrians, a
large proportion of which are women and children. The bypasses of large villages will ―reunite‖
those villages which have been separated by the M-03 road for many years. Second, the range of
activities under Component 2 will have very substantial impacts on pedestrian safety. After the
M-03 through traffic is diverted onto the new bypasses, traffic calming measures will be
introduced on the existing village road sections and additional pedestrian crossings and street
lighting will be constructed. Design improvements that will be introduced along the selected
high-risk road corridors will also substantially improve the safety of both pedestrians and the
users of non-motorized vehicles. Safer roads, with improved crossings and with slower and less
through traffic will have positive social impacts by fostering the integration of populations living
on either side of the roads. Despite the lack of gender-specific data on pedestrian traffic in
villages, it appears that any measures to improve pedestrian safety will be of particular benefit to
women and children who are likely to walk between their homes and places of social and other
daily activites (food markets, schools, health clinics, etc.).
58. Although the proposed RSIP2 does not include directly gender-specific activities, it is
expected to have several indirect positive impacts on women. Under Component 1, project
monitoring will ensure that widening and rehabilitation of the roads would not hamper safe
access to key social services, particularly those that are primarily used by women, including
hospitals, schools and childcare centers. Under Component 2, road corridors will be selected on
the basis of not only safety risks but also their importance in improving accessibility to those key
social services.
59. Road safety issues are relevant from the perspective of gender equality. As noted
elsewhere, Ukraine is among the countries with the highest road traffic injury death rates in the
Europe and Central Asia Region. Of all traffic deaths, about 43 percent are pedestrians and 35
percent are car/truck drivers.12
The available road traffic injury and death data is however not
segregated by gender. Consistent with the data on traffic injuries and deaths is the high adult
mortality rate and low life expectancy especially among men in Ukraine, which besides the high
traffic crash risk, is also the result of other factors including cardiovascular diseases, violence
and other health problems, with alcohol abuse exacerbating the risks. The lack of gender-
disaggregated data for traffic deaths makes it more difficult to understand to what degree traffic
accidents contribute to specific mortality rates among the prime age men and women. As part of
the Bank’s sector dialog with the Government, efforts will be made to convince the Government
to collect gender-disaggregated data on road traffic injuries and deaths.
60. The RSIP2 triggers the OP 4.12 policy on Involuntary Resettlement, as land acquisition is
required for construction of bypasses, interchanges and road widening. In most sections, the
12
World Bank report ―Confronting Death on Wheels‖, 2009, Table 4 on page 13
18
existing right-of way of the road is wide enough to accommodate the widening from two to four
lanes. Land acquisition and resettlement will therefore be required almost exclusively for the
construction of bypasses. Land acquisition will mostly affect agricultural land. In two cases, a
single-family house is affected due to road widening in the villages of Belotserkivka and
Konoplianka. Owners of the houses have already agreed in writing to voluntary resettlement to
alternative housing within their own village or the neighboring villages. No businesses or other
income-generating economic activities have been identified as potentially affected by the project.
61. As part of the preparation of the ongoing RSIP, Ukrdorinvest prepared a Land Acquisition
and Resettlement Framework. In preparation for the new RSIP2, the PIU assigned a staff to
prepare an updated and more detailed Resettlement Policy Framework (RPF) and a Resettlement
Action Plan (RAP). The RAP is prepared for road sections under Component 1 where land
acquisition or resettlement is expected. Ukravtodor has also designated the same staff to monitor
land acquisition and resettlement procedures and report to PIU and the World Bank any
irregularities and shortcomings in the actual implementation of the RAPs, both with respect to
identified impacts and additional unexpected negative impacts which could potentially occur
during project implementation.
62. The PIU will also utilize its existing close cooperation with regional authorities and
regional road services for monitoring resettlement and the compensation of project-affected
persons (PAPs). The Poltava Region Road Service is directly in charge of managing the two
cases of resettlement. It will also closely coordinate with the local District Administrations who
will be in charge of land acquisition. Ukrdorinvest will periodically select a random sample of
land plots to be acquired for the project, visit each, and report on the progress of land acquisition
and resettlement. The results will be summarized in a report to the Ukravtodor and the Bank. The
reports will use key performance indicators identified in the RAP as reporting topics.
F. Environment (including Safeguards)
63. In view of the large-scale works for road widening and the construction of new bypasses,
the RSIP2 is assigned environmental Category A. Ukrdiprodor and Ukrdorinvest explored
whether negative impacts of the project on established protected areas, forests and natural
habitats will take place and, following a review by the Bank, it was determined that project
interventions will not result in significant conversion or degradation of forests and natural
habitats. Based on this assessment, OP 4.04 (Natural Habitats) and OP 4.36 (Forests) was not
triggered.
64. Environmental impacts of road rehabilitation and repairs under the RSIP2 will mainly be
caused by road widening and road infrastructure safety improvements, and will be located within
the existing right-of-the-way of the road, for the entire road sections except the three bypasses.
These impacts are expected to be similar to those under the ongoing RSIP and broadly include
air pollution and noise from trucks, other construction machinery and asphalt plants, soil
disturbance, and tree-cutting, and impacts on surface water networks (siltation, accidental
pollution). These environmental impacts can be mitigated by good construction and general site
maintenance practices. All bypasses will go mainly through farmland, only small portions of the
bypasses will go through a forested area with low-value planted tree species. A designated
Compensating Tree Planting Plan will be developed by the Contractors as part of site-specific
Environmental Management Plans (EMPs) in coordination with Poltava Oblast Forestry
19
Department. No protected areas will be affected by the project. No physical cultural resources
would be affected, however, ―chance finds‖ provisions will be included in the standard bidding
contracts. After completion, the project will have positive indirect impacts on human health and
safety through reduced accidents and reduced air pollution that will result from more even travel
speeds on rehabilitated road sections.
65. After completion, the project will have positive indirect environmental impacts on human
health and safety through reduced accidents and reduced air pollution that will result from more
even travel speeds on rehabilitated road sections.
66. There are five documents concerning environmental safeguards of the proposed RSIP2:
two environmental impact assessment documents and three environmental management plans, as
listed below. Documents (a) and (b) were disclosed in 2007 and were re-disclosed in March
2012. Documents (c) and (d) were disclosed in late March 2012.
(a) EIA/OVOS 2007: In 2007, under the ongoing RSIP, a corridor-specific Environmental
Impact Assessment/OVOS was prepared, documenting baseline conditions and
environmental risks for the entire section of the M-03 road between Kyiv and Poltava.
(b) EMP 2007: Based on the EIA/OVOS 2007, a generic Environmental Management Plan
was prepared, disclosed, and consulted with the public in 2007.
(c) EIA/OVOS 2011: In order to cover the bypasses to be built as part of the RSIP2 (which
were not foreseen in 2007), an additional EIA/OVOS was prepared in 2011 based on
publicly available data, surveys, and two field visits undertaken by an EIA/OVOS expert
group 2011. This document was disclosed first in Ukrainian in October 2011, and is
scheduled to be disclosed in English in March 2012.
(d) Addendum to EMP 2007: Based on EIA/OVOS 2011, the Addendum to the EMP 2007
was prepared in 2011, covering the bypasses which were not included in the original
EMP. This document provides detailed guidance and information for contractors and the
general public, including detailed information on the forested areas and special
engineering solutions to minimize negative environmental impacts.
(e) Site-specific EMPs: Prior to the start of physical works, contractors will be required to
prepare and obtain approval for site-specific EMPs, as part of final working designs of
respective road sections, in accordance with the framework provided in the Addendum
to EMP 2007 prepared in 2011.
67. Ukrdorinvest has experience of working on environmental safeguards under the ongoing
RSIP. One Ukrdorinvest staff was assigned to work full time on environmental and resettlement
issues in close collaboration with the road design institute (Ukrdiprodor), local authorities, and
the Road Service of Poltava oblast. Ukrdorinvest successfully organized and undertook public
consultations on the terms of reference for EIA/OVOS, the draft EIA/OVOS 2011, and the
Addendum to the EMP 2007, during the period October to December 2011. A site visit by the
Bank team in March 2012 showed that the existing environmental safeguards management
arrangements for the ongoing RSIP are functioning appropriately. This was demonstrated by the
case where the number of trees that needed to be removed had to be revised: collaborative efforts
between the contractor, the supervision consultant, and Ukrdorinvest led to an orderly review of
the needs for tree cutting and a downward revision of the bill of quantity for the contractor.
20
Annex 1: Results Framework and Monitoring
.
Country: Ukraine
Project Name: SECOND ROAD AND SAFETY IMPROVEMENT PROJECT (P127156) .
Results Framework .
Project Development Objectives .
PDO Statement
The objectives of the Project are an improved condition and quality of sections of the M-03 road and increased safety on roads in Ukraine. The proposed project is a follow-on (or repeater) project to the
ongoing Roads and Safety Improvement Project (RSIP, Loan No. 7677-UA) which was approved by the Board in 2009 in the amount of $400 million. The ongoing RSIP is being implemented with
satisfactory ratings and US$208 million (52 percent) disbursed as of August 2012. This proposed repeater project (RSIP2, hereafter) has the same development objective as the ongoing RSIP. The
proposed project will rehabilitate and upgrade additional sections of the same M-03 road and will improve road safety conditions on several road sections and corridors in Ukraine. .
Project Development Objective Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Riding quality measured
by International
Roughness Index (IRI, m/km)
Number 5.00 2.00 Once at the end of
physical works
Actual
measurement Ukravtodor
Improved quality of the road corridor, measured
by length of the road
sections upgraded from 2 to 4 lanes
Kilometers 0.00 50.00
Once at the end of physical works
Actual measurement
Ukravtodor
Improved road safety on Lubny-Poltava road,
measured by fatalities
and serious injuries per 100 million vehicle-km
Number 24.00 14.40
Once at the end of physical works
Road police crash monitoring
Ukravtodor
Improved road safety on
corridors improved under Component 2, measured
by percentage reduction
in fatalities and serious injuries per 100 million
vehicle-km
Percentage 100.00 80.00 Once at the end of physical works
Road policy crash monitoring
Ukravtodor
.
21
Intermediate Results Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Roads rehabilitated, Non-
rural Kilometers 0.00 0.00 15.00 60.00 108.00 108.00 Once a year Project Reports UKRAVTODOR
Road with improved
safety features under Component 2
Kilometers 0.00 0.00 0.00 30.00 60.00 60.00 Once a year Project Reports UKRAVTODOR
Road safety surveys and
assessment completed Kilometers 0.00 0.00 6000.00 12000.00 12000.00 12000.00 Once a year Project Reports Ukravtodor
Readiness of a Strategic
Program for Road
Development up to 2030 which will also cover the
social and gender
dimensions of the program.
Text Strategic Program not
established
Strategic Program for
Road
Development prepared and
adopted
Strategic Program
established
At the end of Year
3
Qualitative
assessment Ukravtodor and the Bank
.
22
Annex 1 (continued): Results Framework and Monitoring
.
Country: Ukraine
Project Name: SECOND ROAD AND SAFETY IMPROVEMENT PROJECT (P127156) .
Results Framework .
Project Development Objective Indicators
Indicator Name Description (indicator definition etc.)
Riding quality measured by International Roughness Index (IRI, m/km) Riding quality is a key indicator that represents condition and quality of a road, as it directly affects user comfort and
safety and vehicle operating costs. The IRI measures pavement roughness in terms of meter per kilometer that a laser,
mounted in a specialized van, bounces up and down, as it is driven across the road surface. The lower the IRI number,
the smoother the ride.
Improved quality of the road corridor, measured by length of the road sections
upgraded from 2 to 4 lanes
Road sections that are currently Ukrainian Motorway Standard 2 or 3 will be upgraded to Motorway Standard 1-B,
which includes widening to 4-lane, managed access, and other qualities of the road.
Improved road safety on Lubny-Poltava road, measured by fatalities and
serious injuries per 100 million vehicle-km
Both the road rehabilitation component and the road safety component would contribute to the reduction of the
number of crashes androad fatalities. Widening of 2-lane roads into 4-lane would reduce head-to-head collisions
caused mostly by overtaking. After the construction of bypasses, the safety of the existing village sections would
improve through engineering improvements that would reduce the speed of vehicles passing through those sections
and introduce pedestrian safety measures.
Improved road safety on corridors improved under Component 2, measured by
percentage reduction in fatalities and serious injuries per 100 million vehicle-
km
The road safety component will identify high risk corridors for which safety improvement plans will be developed and
engineering solutions will be implemented. The corridor-based approach is expected to reduce the annual road traffic
fatality rate by 20 percent, when all physical works are completed. .
Intermediate Results Indicators
Indicator Name Description (indicator definition etc.)
Roads rehabilitated, Non-rural Kilometers of all non-rural roads reopened to motorized traffic, rehabilitated, or upgraded under the project.
Non-rural roads are roads functionally classified in various countries as Trunk or Primary, Secondary or Link roads, or
sometimes Tertiary roads. Typically, non-rural roads connect urban centers/towns/settlements of more than 5,000
inhabitants to each other or to higher classes of road, market towns and urban centers. Urban roads are included in
non-rural roads.
Road with improved safety features under Component 2 Length of road corridors or sections where road safety has been improved under Component 2 of the project.
Road safety surveys and assessment completed Road Safety surveys and assessments following iRAP methodology.
Readiness of a Strategic Program for Road Development up to 2030 which
will also cover the social and gender dimensions of the program.
-
23
Annex 2: Detailed Project Description
UKRAINE: Second Roads and Safety Improvement Project
Component 1: Road Rehabilitation (US$397 million excluding taxes)
1. The project will upgrade sections of the M03 Lubny - Poltava Road from km 210 to km
339, totaling 108 km, to a four-lane motorway. The project comprises pavement rehabilitation of
the existing four-four lane sections (30 km) and pavement rehabilitation of existing two-lane
sections plus construction of additional two-lanes (58 km). In addition, three bypasses will be
constructed totaling 20 km. The road sections to be rehabilitated exhibit severe surface distress
and high roughness values (IRI between 5 and 7.0 m/km). The road traverses some settlements
and ends at the city of Poltava, which has approximately 300,000 residents. Two bypasses will
go around the large villages of Pokrovskaya Bogachka and Belotseryvka, while the third bypass
will be constructed to avoid traffic having to go through the city of Poltava. All bypasses will be
built as four-lane roads.
2. The project will use the same asphalt concrete pavement construction technology and
design standards that were already adopted on the RSIP project, which are based on sound
technical criteria and in line with current Ukrainian standards. A representative pavement
structure comprises 50 mm asphalt concrete wearing course, 80 mm binder course, 80 mm
bituminous base course, and 180 mm sub-base, which is appropriate for the expected traffic
volume and type. The road traverses a flat to slightly rolling terrain. The topographic and
geological conditions along the route are relatively homogenous. The road sections to be
rehabilitated and widened generally follow the existing alignment, and no major bridge works
are anticipated, thus, the construction is not expected to be problematic. The design speed is 120
km/h and the typical cross section dimensions are: lane width 2 x 3.75 m, shoulder width 3.75 m,
and median width 6.00 m, resulting on total road width of 28.50 m. The project will also
incorporate safety features including improved pedestrian crossings, guardrails, road signs,
pavement markings, and lighting at critical intersections, as well as bus stops. Necessary
drainage and protection works will be provided to prevent premature road deterioration.
Enhanced supervision, including the use of an independent technical audit, will be done to ensure
proper quality of the finished works.
3. The Ukrainian State Institute for Designing of Road Facilities (Ukrdiprodor) is in charge
of preparing the engineering designs and bidding documents. Ukrdiprodor has a longstanding
experience with road engineering designs and was responsible for the designs and bidding
documents for RSIP, which are satisfactory.
Component 2: Road Safety (US$50 million excluding taxes)
4. Under Component 2, about US$40 million will be used to make targeted road safety
engineering improvements on two or three high risk road corridors on the National road network.
These will be selected on the basis of a road safety assessment based on the iRAP methodology
of about 1,500 km of high-risk roads. This would be Ukraine’s first pilot implementation of such
a corridor-based approach, which has been proven highly effective and cost-efficient in many
Western European countries. The remaining US$10 million will be used to improve the safety on
24
the two M-03 road sections now passing through the large villages of Pokrovskaya Bogachka
and Belotseryvka where most of the traffic will in future be diverted to the new bypasses to be
built under Component 1. These village roads will continue to carry some traffic and will need to
be redesigned to ensure lower traffic speeds and safe interaction with pedestrians and non-
motorized traffic. Component 2 is estimated to result in the reduction of fatalities rate per
vehicle-km by 20 percent, which may be equivalent to saving about 10 lives per year during the
early years of the proposed Project, and as the traffic grows, more than 16 lives pear year in the
20th
year. Economic evaluation (Section VI-A) shows that the NPV of this investment of US$ 50
million is estimated at US$3.8 million.
5. The high risk corridors will be selected out of four road corridors that were selected by
Ukravtodor. The list of the candidate road sections is provided in Table 2.1.
Table 2. 1: Network of 21 Motorway (M) road sections
Road Oblast Chainage (from
km-to km)
Length
(km)
Average
fatalities per
year (2007-
11)13
Annual average
fatalities per km
М-18 Kharkov –
Simpferopol` – Alyshta
- Yalta
Dnepropentorsk 147+600-190+300 42.7 10 0.09
195+500-255+100 59.6
Zaporozhie
255+100-283+861 29
30 0.15 288+250-289+655 1.4
299+491-405+091 105.6
412+354-458+460 46
Kherson 458+460-526+056 68 5 0.08
AR Crimea 525+860-651+960 126.1
44 0.21 662+750-734+300 71.5
М-12 Striy – Ternopol`
– Kirovograd -
Znamenka
Lvov 0+000-44+230 44.2 3 0.04
Ivano-Frankovsk 44+230-77+319 33.0
Ternopol` 76+302-143+840 67.5
10 0.08 152+415-191+307 38.9
Khmelnitsk 191+400-331+600 140.2 14 0.10
Vinitsa 331+586-513+515 181.9 22 0.12
Cherkasy 513+515-578+928 65.4 6 0.09
Kirovograd 578+928-755+519 176.6 10 0.03
M-14 Odessa –
Melitopol’ Novoazovsk
Nikolaev 142+827-177+531 34.7 4 0.16
Kherson 177+531-221+631 44.1 2 0.04
M-17 Kherson –
Krasnoperekopsk
Kherson 0+000-114+367 114.3 15 0.13
AR Crimea 114+367-143+000 28.6 2 0.07
Total 1,519
6. The 21 sections are along 4 Motorways (M12, 14, 17 & 18) which are important to the
economic development of Ukraine and yet have high road safety risk. Over the last 5 years
(2007-2011), 1684 fatalities have been recorded on these 4 Motorways, comprising 30 percent of
the number of fatalities recorded on the Motorway network.
13
For the total Motorway length in the Oblast
25
7. The International Road Assessment Program (iRAP) will be used to develop the road
safety engineering countermeasures to be financed under this component. The iRAP approach
has been successfully used in other European and transition countries, including also in Serbia,
Moldova and Russia. The iRAP project will consist of two parts:
(a) Video Survey of the 21 road sections (1519 km) and coding of the collected data for
each 100 m, and
(b) Development of star ratings and engineering countermeasures plan for the 21 sections,
and prioritization of an investment program for between two and four road sections
considering the available budget of about US$40 million for this activity.
8. Typical countermeasures will include: shoulder improvement, roadside hazard removal,
barrier installation, intersection improvement, road markings, pedestrian facilities and others.
9. In addition, as indicated above, the two village roads at Pokrovskaya Bogachka and
Belotseryvka along M03 road, where new bypasses will be constructed under Component 1,
have been identified as high risk sections. Table 2.2 shows the details of these two sections.
Traffic calming measures and separation of pedestrians from motorized traffic will be
implemented on these sections.
Table 2. 2: High risk road sections crossing settlements along M03
Section Length Killed and Injured ( 2007-2010)
M03 km 220+785 to km 228+000
(within Pokrovska Bagachka settlement) 7.2 km 36
M03 km 275+243 to km 277+100 (within
Bilotserkivka settlement) 1.9 km 30
10. Once the appropriate engineering countermeasures have been developed for this
component, the design engineers of Ukrdiprodor will prepare detailed designs and bidding
documents.
Component 3: Institutional Support and Strengthening (US$3.0 million excluding taxes)
11. Component 3 of the project will include support for the institutional development of
Ukraine’s road agency Ukravtodor and other Ukrainian road sector institutions.
12. A key element of Component 3 will be technical assistance for the development of a new
Ukraine Road Sector Strategic Plan for the period until 2030 that will encompass administrative
reforms, improvement of road financing, the updating of technical standards for roads, and a
strategic road sector investment program. Through this activity, the Bank will take the lead role
in the technical and policy dialog between IFI’s and the Government in the road sector. The
Strategic Program will include (i) traffic forecast modeling, (ii) recommendations for
development of the road network including international and national transport corridors, (iii)
justification of technical parameters of road development, (iv) recommendations for
improvement of the legislation on road financing, analysis and evaluation of possibilities for
applications of PPP approach to attract investments for road development, (v) recommendations
for reforming of public road state administration system, and (vi) additional research for strategic
program of road development in Ukraine up to 2030.
26
13. Component 3 will also focus on enhancing the local capacity to plan and execute road
safety interventions. A practical learning-by-doing approach will be used, where external
technical assistance funded from the loan will be used to pair international specialists with the
staff of local institutions. The main steps/activities are expected to be as follows:
14. Step 1 - Road Safety Survey capacity enhancement: An iRAP accredited road survey
company will be hired to carry out a safety survey of all National roads not already surveyed;
this will be in the order of 12,000 km. This step may be combined with the accreditation by
iRAP of the State Scientific Road Research Institute and/or of Ukrdiprodor by iRAP to undertake
this type of surveys, including the data coding task. This activity will also include collaboration
with the Kharkiv State Automobile Road University to build local capacity.
15. Step 2 - Training on iRAP analytical tools: The training will be held mainly for the
staff of the State Scientific and Road Research Institute and the Kharkiv State Automobile Road
University on the application of the iRAP analytical tools and protocols, in order to enable them
to develop risk maps, star rating of roads and safer roads investment plans for the entire road
National road network (M and H class roads).
16. Step 3 - Road Safety Engineering design support: This activity is mostly geared
towards enhancing the capacity of staff of Ukrdiprodor, the State Road Design Institute, to carry
out detailed designs of the iRAP recommended countermeasures under the road safety
component. Participation may be opened to other agencies or local private engineering design
firms.
17. Besides the activities described above, this component will also include technical
assistance to help Ukravtodor in developing a Strategic Program for Road Development for the
period until 2030, covering also institutional strengthening and financial sustainability. The
component may also include other activities and technical assistance for which the need will be
identified in function of the continuing reform of the Ukrainian road sector, and potentially also
for the preparation of new investment projects.
27
Annex 3: Details of Economic Analysis
UKRAINE: Second Roads and Safety Improvement Project
1. The economic feasibility of the project was assessed based on an analysis of the first two
components of the project. For Component 1, the improvement of the quality and condition of
the road would lead to savings in vehicle operating costs and users’ travel time cost, and reduced
road traffic fatalities and injuries. For Component 2, road safety improvements in certain
corridors or sections would reduce road traffic fatalities and injuries. Savings in vehicle
operating costs were evaluated using the Highway Development and Management Model, HDM-
4 (version 1.3), which computes annual costs for the road agency and for road users for each
project alternative over the evaluation period. Benefits arising from road safety improvements
were assessed using the estimated reduction of fatalities and injuries along major road corridors,
and the monetary value of loss of human life, evaluated on the basis of the current income level
and projected economic growth of the country.
Component 1: Road Rehabilitation
2. Using the HDM-4 software, benefits and costs of road rehabilitation and upgrading were
calibrated for the 20-year analysis period, 2012-2031. The net present value of the project costs
was calculated assuming three years of initial construction period, routine maintenance each
year, and periodic maintenance triggered in response to the accumulated traffic loads. The
financial costs of the RSIP2 were converted to economic costs by subtracting price contingency,
taxes, and custom duties, and by applying shadow price factors. As a result, the economic cost of
the RSIP2 is estimated at about 85 percent of its financial costs. The net present value of the
project benefits was calculated aggregating savings in vehicle operating costs and users’ travel
time, and reduction in accident costs, in comparison to the Without Project scenario. The key
inputs to the HDM-4 model, including the costs associated with vehicles and parts replacement,
fuel costs, wages, costs of various road maintenance activities, have been calibrated in order to
reflect the country-specific conditions.
3. For the purpose of the economic evaluation, the road to be rehabilitated and upgraded
under the RSIP2 was divided into nine sections based on their traffic, road work type and road
work costs (Table 3.1). On four road sections, the existing two-lane road will be rehabilitated
and widened to four-lanes; on two road sections, the existing four lane road will be rehabilitated;
and on three road sections, new four-lane bypasses will be build. The total financial construction
cost is estimated to be US$398 million, which corresponds to US$3.7 million per km. The four-
lane widening road works cost on average US$3.6 million per km, the rehabilitation road works
cost on average US$2.5 million per km, and the bypasses cost on average US$5.5 million per
km.
28
Table 3. 1: Road Sections Length and Road Work Costs
Road Work Type Section Existing
Road (km)
Project
Road (km)
Total Cost
(US$ M)
Unit Cost
(US$
M/km)
Widening 2 lane road to 4 lanes km 210+000 - km 220+782 10.8 10.8 29 2.7
km 228+000 - km 239+317 11.3 11.3 44 3.9
km 258+000 - km 275+000 17.0 17.0 66 3.9
km 282+000 - km 300+550 18.6 18.6 70 3.8
Rehabilitation existing 4 lane road km 300+550 - km 323+000 22.5 22.5 58 2.6
km 329+050 - km 336+873 7.8 7.8 19 2.4
Pokrovskaya Bogachka 4 lane bypass km 220+782 - km 228+000 7.2 8.4 30 3.6
Belotseryvka 4 lane bypass km 275+000 - km 282+000 7.0 6.5 40 6.2
Poltava (Section 1) 4 lane bypass km 333+800 - km 339+300 11.5 5.5 42 7.6
Total 113.7 108.4 398 3.7
4. The existing road has a bituminous pavement in poor condition with an average riding
quality, measured by the International Roughness Index (IRI), at 5.2 m/km. Under the Without
Project scenario, it was assumed that the existing road receives adequate routine maintenance
and is rehabilitated when the IRI reaches 10 m/km. Under the With Project scenario, the existing
roads are rehabilitated and/or widened, or a new road section is constructed with a bituminous
four-lane highway standard; and the roads receives adequate routine and periodic maintenance,
80mm overlays when IRI reaches 4.0 m/km. Table 3.2 shows the average roughness of the
existing road sections and the average annual daily traffic (AADT), in vehicles per day,
measured in 2010. The average annual daily traffic on the entire corridor in 2010 was 9,365
vehicles per day with 43 percent composed of trucks and buses.
Table 3. 2: Road Sections Riding Quality (IRI) and Average Annual Daily Traffic (AADT)
Road Work Type Section IRI (2010)
(m/km)
Normal Traffic (2010) (vehicle per day)
Total Trucks Buses Cars
Widening km 210+000 - km 220+782 6.1 8,951 3,401 448 5,102
km 228+000 - km 239+317 5.3 8,730 3,317 437 4,976
km 258+000 - km 275+000 4.4 7,971 3,029 399 4,543
km 282+000 - km 300+550 4.8 8,611 3,272 431 4,908
Rehabilitation km 300+550 - km 323+000 5.5 8,820 3,280 439 5,101
km 329+050 - km 336+873 4.9 13,360 5,344 512 7,504
Pokrovskaya Bogachka Bypass km 220+782 - km 228+000 6.2 8,860 3,352 445 5,063
Belotseryvka Bypass km 275+000 - km 282+000 4.9 7,680 3,020 392 4,268
Poltava Bypass km 333+800 - km 339+300 5.1 13,360 5,344 512 7,504
Average (weighted by length)
5.2 9,365 3,595 442 5,328
5. Normal traffic, i.e., traffic that is expected to materialize both in the With and Without
Project scenarios, is expected to grow at 4.5 percent per year from 2012 onwards.14
In addition
to the normal growth of traffic that will happen with or without the project, it was assumed that
additional traffic will be generated as a result of the economic development impact of typical
major road investments, at 10 percent of the normal traffic. This is considered a conservative
scenario compared to relevant past examples in the region. On bypass sections, only a portion of
the current traffic will be diverted to the bypasses when they open in 2015, since some traffic
14
This was based on the fact that the country’s average GDP grew at about 4.5 percent per year during 2001-2010,
and under the assumption that an elasticity of traffic growth to GDP growth is equal to one.
29
would still serve the need of the villages and towns being bypassed. It was assumed that only
about 40 percent of the traffic will be diverted on to the Poltava Bypass due to the high
percentage of local traffic near the city of Poltava. About 90 percent of the traffic is expected to
use the other two bypasses as opposed to the village sections, due to the free traffic flow on the
bypasses as compared to constrained flow within the villages.
Table 3. 3: Diverted Traffic on the Bypass Sections (AADT)
Works type Section Normal Traffic
(vpd)
Diversion Rate
(%)
Diverted Traffic
(vpd)
Pokrovskaya Bogachka Bypass km 220+782 - km 228+000 11,041 90 9,937
Belotseryvka Bypass km 275+000 - km 282+000 9,571 90 8,614
Poltava Bypass km 333+800 - km 339+300 16,649 40 6,660
6. The economic unit costs and basic characteristics of the vehicle fleet were obtained from
the recent feasibility study done for a similar road project in Ukraine, applying inflation based on
the consumer price index. The estimate of the road safety benefits was based on the monetized
values of fatalities and injuries, calculated using the International Road Assessment Program
(iRAP) methodology that relates the value of life to the GDP per capita of the country:
US$210,000 per fatality and US$52,500 per serious injury for Ukraine. On the existing road
from Lubny to Poltava, there were on average 32 fatalities per year and 100 seriously injured
persons per year during the last four years, which corresponds to 6 fatalities per 100 million
vehicle-km and 18 seriously injured persons per 100 million vehicle-km. It is forecasted that the
project will reduce casualty rates by 40 percent, to 3.6 fatalities and 10.8 injured persons per 100
million vehicle-km.
7. Table 4 summarizes the economic evaluation results. Investments under Component 1
are economically justified with a net present value (NPV) of US$92.3 million at 12 percent
discount rate, and an overall economic internal rate of return (EIRR) of 16.5 percent.
Table 4: Economic Evaluation Results
Road Work Type Section NPV (US$ million) EIRR (%)
NPV/ Investment Cost
Ratio
Widening km 210+000 - km 220+782 16.6 23.1% 0.57
km 228+000 - km 239+317 4.0 13.9% 0.09
km 258+000 - km 275+000 1.3 12.4% 0.02
km 282+000 - km 300+550 4.8 13.4% 0.07
Rehabilitation km 300+550 - km 323+000 6.0 14.2% 0.10
km 329+050 - km 336+873 13.7 25.6% 0.72
Pokrovskaya Bogachka Bypass km 220+782 - km 228+000 1.9 13.2% 0.06
Belotseryvka Bypass km 275+000 - km 282+000 5.5 14.4% 0.14
Poltava Bypass km 333+800 - km 339+300 38.4 24.8% 0.91
Total Total 92.3 16.5% 0.23
8. Table 3.5 shows the results of a sensitivity analysis, increasing costs and decreasing
traffic growth rate by 15 percent. The results show that even under the pessimistic scenario of
increasing costs by 15 percent and decreasing traffic growth rate by 15 percent, the project is still
economically justified with an EIRR higher than 12 percent. The switching values analysis
shows that costs would have to increase by 37 percent or benefits would have to decrease by 27
30
percent to yield an EIRR equal to 12 percent, which indicates a robust economic justification of
the project.
Table 3. 4: Sensitivity Analysis Results
Sensitivity Scenarios EIRR (%)
Base Case 16.5
Costs + 15% 14.1
Traffic Growth – 15% 15.4
Costs + 15% and Traffic Growth -15% 13.1
No Generated Traffic 15.7
No Road Safety Benefits 15.2
Component 2: Road Safety Improvements
9. Under this component, between two and four high risk road corridors on the National
road network will be selected for engineering improvements. In addition, the two existing road
sections on the M03 road that go through the villages where bypasses will be constructed under
Component 1 will also be improved for better safety. The engineering improvements along the
high-risk corridors are estimated to result in the reduction of the rate of fatalities per vehicle-km
by 30 percent. Using the iRAP estimated monetized value of fatalities in Ukraine, US$210,000
per fatality (i.e., 70 times the per capita GDP) and US$52,500 per serious injury (i.e., 18 times
the per capita GDP), the investments under Component 2 are economically justified with the
NPV of US$3.8 million, the benefit-cost ratio of 1.4, and the EIRR of about 13 percent.
31
Annex 4: Implementation Arrangements
UKRAINE: Second Roads and Safety Improvement Project
Project Institutional and Implementation Arrangements
Project administration mechanisms
1. Ukravtodor, the Ukrainian National Road Agency, is the implementing agency for the
ongoing RSIP and will also play that role for the new RSIP2. It will do so through the Project
Implementation Unit (PIU) named Ukrdorinvest as has been the case for the RSIP and other
externally funded projects. Under the ongoing RSIP, the technical capacity of Ukrdorinvest has
greatly improved, particularly in handling a large volume of externally funded road projects,
mostly by the Bank and EBRD, and with EIB as a new external partner. Given the good
progress made toward successful implementation of the RSIP, there is no need to bring about
substantive changes in the implementation and project administration arrangements, beyond
some small-scale technical assistance if and where needed. The Ukrainian State Road Design
Institute, Ukrdiprodor, is responsible for preparing the engineering designs and bidding
documents and will be working in close collaboration with Ukrdorinvest.
Financial Management, Disbursements and Procurement
Financial Management
2. The overall FM risk for this project is assessed as Moderate. Ukravtodor and its PIU for
externally funded projects, Ukrdorinvest will be responsible for the financial management and
disbursements functions. Ukravtodor is currently implementing one World Bank-financed
project (RSIP), and financial management arrangements were confirmed by Bank staff to be
moderately satisfactory.
3. Ukravtodor will continue using the same FM arrangements for the RSIP2 as currently are
being used for the RSIP. The same staff of Ukravtodor and the PIU will continue carrying out
FM and disbursement functions. Staff has experience in implementation of the RSIP as well as
other externally funded road projects. Ukravtodor has adequate internal controls for project
implementation, which have been periodically reviewed by the Bank, and which are defined in
the Project Operations Manual (POM). Following approval of the RSIP2 project, the POM will
be revised, and changes to the POM subsequently agreed with the Bank. In order to further
improve the quality and efficiency of project accounting, the PIU has acquired an automated
accounting system and is currently finalizing the customization of the system.
4. Interim Unaudited Financial Reports (IFRs) will be submitted on a quarterly basis, starting
from the first quarter in which disbursements occur, within forty-five days after the end of each
quarter. An eligible independent auditor will carry out annual audits of the project financial
statements in accordance with the International Standards on Auditing (ISA), and the audit
reports and management letters will be submitted within six months from the end of each fiscal
year. The cost of audits will continue to be financed from Ukravtodor own funds. In accordance
32
with the World Bank Policy on Access to Information, the audited project financial statements
would need to be publicly disclosed by Ukravtodor in a timely manner acceptable to the Bank. In
addition, the Bank will separately disclose the reports on its website. Ukravtodor will also submit
to the Bank reports on its external reviews by the Accounting Chamber and other state
authorities within one month of their receipt by Ukravtodor. The sample format of IFRs and the
sample audit TOR to be used for this project will be included in the POM.
Disbursements
5. For the purposes of the Project, a Designated Account shall be opened and managed in
UKREXIMBANK including appropriate protection against set-off, seizure and attachment.
Replenishment for the Designated Account would follow IBRD procedures – the account will be
opened by the State Treasury in the name of Ukravtodor. The DA ceiling will be established in
the amount of US$4,000,000. The minimum application amount for applying for direct payment
and for special commitments will be set at US$800,000. Additionally, Ukravtodor will open two
own Transit Accounts in the State Treasury, one in UAH (State Treasury) and one multicurrency
account (UKREXIMBANK). All of the above accounts will be used solely for payments related
to the implementation of the RSIP2, and only for payments below the minimum application
amount for direct payments of US$800,000.
6. Disbursements from the IBRD Loan Account will follow the transaction-based method,
i.e., traditional Bank procedures: Advances, Direct Payments, Special Commitments and
Reimbursement (with full documentation and against Statements of Expenditures (SOEs)). For
certain payments, above the Minimum Application Size, as specified in the Disbursement Letter,
the Borrower will submit withdrawal applications to the Bank for payments to suppliers and
consultants directly from the Loan Account. The withdrawal applications will be prepared by
the PIU, authorized by the Ukravtodor, and then submitted to MOF for final review and
authorization. For each event of withdrawal application, two separate applications shall be
prepared, one to the IBRD for the amount exclusive of taxes, and the other one to the Ministry of
Finance for the VAT amount. Payments from Special/Transit account will be authorized by the
Ukravtodor with no further countersignature of MOF.
7. All disbursements will be made on the basis of full documentation for (a) contracts for
goods costing more than the equivalent of US$200.000 each; (b) contracts for works costing
more than the equivalent of US$2.000.000 each; and (c) services under contracts of more than
the equivalent of US$200.000 each for consulting firms and more than the equivalent of
US$100.000 each for individual consultants. Disbursements below these thresholds will be
made according to certified Statement of Expenditure (SOEs). This documentation will be
retained by the implementing agency for at least one year after receipt by the IBRD of the audit
report for the year in which the last disbursement was made or for a longer period if required by
local legislation.
33
8. Allocation of loan proceeds
Category Amount of the Loan
Allocated
(expressed in US$)
Percentage of Expenditures to be
financed exclusive of Taxes
(1) Goods, Works, Training and
Consultants’ Services
448,875,000 100%
(2) Front-end-Fee 1,125,000 Amount payable pursuant to
Section 2.03 of the Loan Agreement
in accordance with Section 2.07 (b)
of the General Conditions
Total Amount 450,000,000
Procurement
9. Procurement for the Second Roads and Safety Improvement Project will be carried out in
accordance with the World Bank’s "Guidelines: Procurement of Goods, Works, and Non-
Consulting Services under IBRD Loans and IDA Credits & Grants" published January 2011
(Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants under
IBRD Loans and IDA Credits & Grants by World Bank Borrowers" published January 2011
(Consultant Guidelines) and the provisions stipulated in the Loan Agreement.
10. A procurement risk assessment including the capacity of the PIU was conducted in July
2011. The prime responsibility for overall implementation of the project lies with Ukravtodor
(UAD) and the deputy head of UAD is responsible for project implementation. Ukravtodor has
delegated the day-to-day project implementation to its PIU Ukrdorinvest through a contractual
arrangement. Ukrdorinvest was created in 2002 to help UAD with the implementation of
externally funded projects. It is well experienced in managing large projects financed by IFIs in
general (past EBRD/EIB projects of € 75 million, 100 million and 400 million, and ongoing
projects totaling € 900 million) and the World Bank in particular (ongoing RSIP of US$400
million). The recent Government decree according to which Ukrdorinvest will in future report
directly to the Ministry of Infrastructure rather than to Ukravtodor does not appear to have an
impact on the validity of the contractual agreements between UAD and Ukrdorinvest.
11. Ukrdorinvest has 30 staff, with the Deputy Head in charge of procurement decisions. The
Tendering & Contract Management Unit within the Ukrdorinvest consists of two procurement
specialists with 4 and 2.5 years of experience and a more recently hired staff, plus one financial
management specialist with 4 years of experience. In addition, there is a technical unit to provide
contract management support. Procurement training is attended whenever offered by the IFI’s
(e.g. November 2010 by the World Bank and in early 2011 by EBRD). However, the time
available to attend procurement training is limited due to the large workload of procurement
staff. Much training happens ―on-the-job‖. The handling of procurement under the RSIP2 will
benefit from the existing procurement expertise in the PIU. All procurement tools used under the
RSIP will be replicated for the RSIP2 (e.g. POM, Procurement Plan template, record-keeping
system). The World Bank and other IFI’s, especially EBRD, will continue to develop the
procurement capacity of Ukrdorinvest, particularly with regard to the few differences between
the 2011 and 2004 procurement guidelines of the World Bank. The procurement arrangements
34
are straightforward and potential risks with regard to the capacity of Ukrdorinvest do not result
from the existing expertise and experience but rather from the expected high workload of staff
working across multiple projects.
12. Procurement Plan and Procurement Arrangements. Ukrdorinvest developed a
Procurement Plan for the whole duration of the project (2012-2015), which will be approved by
the Bank during the negotiations of the loan agreement and will be subject to annual updates.
The Procurement Plan is available in the web-based procurement planning tool, SEPA, and on
the Bank’s external website. A General Procurement Notice has been published in UNDB online
during project preparation (early December 2011).
13. Procurement of Works. All works contracts will be procured in line with the procedures
for International Competitive Bidding (ICB), including Pre-Qualification (PQ) which was
launched in December 2011. All procurement decisions for these contracts will be subject to
Prior Review by the Bank. The existing Project Operational Manual for the RSIP will also be
applied for the RSIP2. Advance procurement will be applied (but no retroactive financing). The
total estimated cost for ICB Works amounts to US$437.37 million in three packages with 6, 3
and 5 contracts respectively. Although not foreseen at the present stage, other methods of
procurement may be applied if agreed with the Bank on a case-by-case basis. Limited
International Bidding (LIB) may be used for works contracts if agreed with the Bank.
Procurement Method Threshold Prior Review
ICB (Works) > $ 5 Million All
Shopping (Works) < $ 200 K All
Shopping < $ 100 K All
Direct Contracting* - All *All contracts subject to justification
14. Selection of Consultants. All consultant assignments for technical supervision and
capacity building will follow the Quality- and Cost-Based Selection (QCBS) and are subject to
Prior Review by the Bank. The total estimated cost for QCBS assignment amounts to US$11.5
million in 5 packages. Other methods of selection may be applied if agreed with the Bank on a
case-by-case basis.
Selection Method Threshold Prior Review
QCBS > $ 200K All
LCS - All
CQ < $ 200K All
FBS - All
Individual Consultants - All
Single/Sole Source* - All *All contracts subject to justification
35
Environmental and Social (including safeguards)
15. Policy on Environmental Assessment (OP/BP 4.01) is triggered. Widening of the M-
03 road and capital repairs will generally be undertaken within the existing right of way of the
road and environmental impacts can be mitigated by good construction and housekeeping
practices. Environmental issues will be similar to those under the ongoing RSIP. All bypasses
to be built under the RSIP2 will go through farmland and partially through small forested areas
with planted, low-value tree species. No protected areas will be affected by the project. An
Environmental Impact Assessment (EIA/OVOS 2011) for the new sections of the road
(bypasses) was prepared by Ukravtodor, since those bypasses were not covered in the original
EIA carried out in 2007. A Framework Addendum to the EMP was prepared by Ukravtodor and
will serve as a framework for preparation of site-specific EMPs (as part of preparation of final
working designs by Contractors). The EIA/OVOS and Framework Addendum to EMP were
disclosed by Ukravtodor and by Poltava oblast administration and public hearings were
organized.
16. Policy on Involuntary Resettlement (OP/BP 4.12) is triggered. The construction of
bypasses under Component 1 of the project will require land acquisition from private owners (an
estimated number of 64 owners) as well as transfer of publicly owned land (by village councils,
or different state authorities). The majority of land to be affected is agricultural land, planted or
leased by owners. The agricultural land to be acquired is mostly used for annual crops (corn,
wheat, rye), with few perennial crops and trees. In two identified cases under Component 1, road
widening will affect one single-family home each. The owners of the homes have already agreed
in writing to the resettlement to alternative houses and land to be identified in the same village of
Belotserkivka or a neighboring vilage. Possible resettlement effects from Component 2 of the
RSIP2 are so far impossible to identify as the road rehabilitation sections under Component 1
have not yet been selected. A Resettlement Policy Framework was prepared and a draft
Resettlement Action Plan is in preparation and to be completed prior to Project Appraisal; it will
be added as an Annex to the Project Operational Manual.
Monitoring & Evaluation
17. Ukrdorinvest will remain responsible for the monitoring of results of the RSIP2. As has
been under the RSIP, regular monitoring reports will be prepared by staff of Ukrdorinvest, both
for the IFI’s but also for other government agencies such as the Ministry of Finance and the
Ministry of Economy. During the regular implementation review visits, IFI staff and
Ukrdorinvest will continue working together for a joint results monitoring. The cost of
Ukrdorinvest is covered by Ukravtodor (and thus by the Government budget), based on a
contractual relationship between the two organizations.
18. In the case of road safety data, Ukrdorinvest will be responsible for collaborating with the
road traffic police and research institutions for obtaining crash data and monitoring impacts of
the engineering improvements to be introduced under Component 2.
36
Annex 5: Operational Risk Assessment Framework (ORAF)
Ukraine: Second Road And Safety Improvement Project (P127156)
.
Project Stakeholder Risks
Stakeholder Risk Rating Low
Description: Risk Management:
The Ukrainian road sector investment program was prepared several years ago and is
being implemented by UKRAVTODOR, the Government's Road Agency. Despite the
changes in Government during the past years, which also resulted in changes of senior executives at UKRAVTODOR, the road sector investment program was not changed and
is not being challenged by any political force in the country. The upgrading of the M-03
road to motorway standard is universally supported, both politically and also by road users; there is very low likelihood of this support being withdrawn, even if there are more
political changes in the years to come.
There are no particular risk mitigation measures envisaged, besides monitoring any possible (but unlikely) changes in the Government's
road investment program.
Resp: Bank Stage: Implementation Due Date: 31-Dec-2016 Status: In Progress
Implementing Agency (IA) Risks (including Fiduciary Risks)
Capacity Rating Moderate
Description: Risk Management:
As confirmed by the Government, Ukravtodor, the National Road Agency, will remain the Implementing Agency. Ukravtodor and its PIU for externally funded projects,
Ukrdorinvest, have a good track record in the execution of large externally funded road
projects, including the ongoing Roads and Safety Improvement Project (RSIP, P100580) and others funded by EBRD and EIB. During the design period, Ukradorinvest
collaborates with Road Design Institute (Ukrdiprodor), of which capacity has also
improved while implementing the ongoing projects.
The procurement and financial management capacity of Ukravtodor entails moderate risk,
as confirmed by the assessments carried out by Bank staff in early July 2011. With respect to procurement, the main risk is that due to the increase in the number of externally
funded projects, the existing experienced staff may be insufficient in number to cope with
the volume of work. In response to this risk, the PIU has recently hired a new procurement staff and is providing necessary training. With respect to financial
management, the main risk is related to the fact that project accounting at Ukrdorinvest is
done in EXCEL, complimented by automated, but not as detailed, accounting system at Ukravtodor.
The PIU (Ukrdorinvest) added one procurement staff. The automated accounting system at Ukrdorinvest has been installed through support from the ongoing RSIP.
Resp: Client Stage: Implementation Due Date: 28-Sep-2012 Status: In Progress
Governance Rating Moderate
Description: Risk Management:
Despite well-recognized overall Governance issues in Ukraine at the country level, these high country risks have not resulted in problems in the identification, preparation and
execution of externally funded projects in the road sector. The operational performance
of Ukravtodor and the project implementation unit, Ukrdorinvest, has in fact improved
This project and all other road investment projects in Ukraine are based on an overall road sector investment plan that has been found by the Bank to be technically and economically sound, and which has not been influenced by short-term political changes. The Bank team
will continue to monitor the overall Governance performance in the road sector and take action, if needed. In addition, a Governance
and Anti-Corruption Action Plan (GAC) has been prepared and agreed with the Government; this is an updated version of the GAC
37
over the past years and both organizations have not been embroiled in any scandals or wrongdoing. There is no known interference by higher-level authorities in the
management of road projects by Ukravtodor.
already in place under the ongoing RSIP.
Resp: Bank Stage: Implementation Due Date: 31-Dec-2016 Status: In Progress
Risk Management:
An external technical audit covering the ongoing RSIP is underway and will continue throughout the execution period. The technical
audit focuses on the drilling of cones (samples) on completed road sections and their analysis in independent laboratories, with the
objective to determine if the works have been executed in line with technical specifications. This type of audit will be extended to the new RSIP2.
In addition, a Governance and Anti-Corruption Action Plan (GAC) has been prepared and agreed with the Government; this is an updated version of the GAC already in place under the ongoing RSIP.
Resp: Client Stage: Implementation Due Date: 31-Dec-2016 Status: In Progress
Project Risks
Design Rating Low
Description: Risk Management:
This is a repeater project. Project design is straightforward and follows the design of the ongoing RSIP project. The project scope and scale are also similar to the ongoing project.
The road to be improved is the continuation of the same M-03 road being improved under
the ongoing project, with similar and proven technical design features. The approach for road safety interventions under the new project will be modified, to avoid the problems
under the ongoing project (lack of interest by contractors in small contracts scattered over
large geographical areas). The new project is a "pure" investment project and does not include a policy reform component; this is based on the lessons learned under the Bank's
portfolio reviews for Ukraine during the past years which showed that in Ukraine, policy
conditionalities should not be put into investment projects but instead be handled through Policy-based lending operations and sector dialog.
The project team was advised during the Concept Review Meeting to keep project design simple and not to include policy-related conditionalities or prior actions into the project.
Resp: Bank Stage: Preparation Due Date: 01-Mar-2012 Status: Completed
Social and Environmental Rating Moderate
Description: Risk Management:
Social: The procedures applied in Ukraine for Land Acquisition and Resettlement are generally satisfactory to the Bank. Potential social risks include: (i) negative impact on
livelihood of affected landowners, especially smaller holders who may lose a
relativelylarge proportion of their land; (ii) reduced government commitment and/or lack capacity to addressing social issues in consideration in line with agreed LARPF.
Environmental: Risks are limited to the typical risks associated with road rehabilitation
projects. The severity of potential impacts is moderate and mostly limited to the
construction period: (i) air pollution and noise from trucks and other construction
machinery, and asphalt plants, (ii) soil disturbance, and (iii) tree-cutting. The completed Environmental Assessment confirms that bypasses will go mainly through farmland and
partially through small forested areas, and hence protected areas will not be affected by
the project.
Social mitigation measures include: (i) preparation of Land Acquisition and Resettlement Policy Framework during project preparation (completed in January 2012); such framework was already prepared for the First Road Safety Improvement Project and will be updated
and expanded for the current project; (ii) preparation a Resettlement Action Plans (RAP) for road sections requiring land acquisition or
resettlement (completed in March 2012); and (iii) agreement with PIU during pre-Appraisal on staff skills, training and resources needed for adequate monitoring of land acquisition in accordance with OP 4.12. (completed in March 2012).
Environmental mitigation measures include: (i) a generic EMP which has already been prepared for the ongoing RSIP; (ii) site-specific
EMPs for particular roads sections based on the EA/OVOS will be prepared as part of the detailed working design prior to the start of
works.
Resp: Client Stage: Preparation Due Date: 26-Mar-2012
Status: Completed
38
Program and Donor Rating Low
Description: Risk Management:
The execution of this project is not dependent on any other project or donor.
Resp: Stage: Due Date: Status:
Delivery Monitoring and Sustainability Rating Low
Description: Risk Management:
The road infrastructure to be improved under the project (including the road safety improvements) will continue to be under the responsibility of the Road Agency
Ukravtodor. Ukravtodor has a demonstrated ability to manage the roads under its
responsibility. The result of the ongoing restructuring in the road sector, which will reduce Ukravtodor's responsibility to the main (national) roads only by decentralizing the
responsibility for secondary roads to local governments, its ability to adequately fund the
maintenance of main roads is expected to improve.
The VAT component of the project cost will be funded by the Government. The VAT
portion of contractor's invoices will be paid by the Ministry of Finance, as under the ongoing project. While there have sometimes been delays in payment, there is only a low
risk to the achievement of project objectives that could be related to the Government's
ability to pay the VAT portion of invoices, or to delays in such payments.
Closely monitor timely payment of VAT portion of contractor's invoices on a continuous basis during project implementation.
Resp: Bank Stage: Implementation Due Date: 31-Dec-2016 Status: In Progress
Overall Risk
Preparation Risk Rating: Moderate Implementation Risk Rating: Moderate
Comments:
39
Annex 6: Governance and Anti-Corruption (GAC) Action Plan
UKRAINE: Second Roads and Safety Improvement Project
1. While there has been no fraud and corruption case in any of the recent and ongoing
externally funded projects in the road sector, high risks associated with governance at the
country level is widely recognized. Therefore, the RSIP2 will apply an updated Governance
and Anti-Corruption (GAC) Action Plan which adopts all of the good practices from the
existing GAC Action Plan for the ongoing RSIP and introduces some new additional
measures. The purpose of the GAC Action Plan is to improve the capacity of Ukravtodor to use
effectively its own resources and the funds provided by the World Bank and other IFI’s, thereby
further ensuring compliance with the Bank’s fiduciary requirements. The GAC Action Plan
includes eight specific actions which are presented in the paragraphs below.
2. Publication of information on Ukravtodor’s existing website. Ukravtodor’s website15
includes a module dedicated to procurement of works and consulting services under the RSIP2;
this module was developed for the existing RSIP for which it has been used for the last three
years. In order to ensure transparency, the procurement plan for the project and information on
all procurement processes which take place under the RSIP2 will be published on that website,
along with other project documentation such as the PID, PAD, EIA, EMP, and others. The
documentation related to the procurement of specific contracts will be also be made public,
including, but not limited to: (i) invitations for expression of interest; (ii) requests for proposals;
(iii) minutes of bid-opening meetings; and (iv) contract award and post-award decisions, e.g.
extension of deadlines, revision of prices, contract addendums, etc. Interested parties will be
invited to provide comments to Ukravtodor and to the Bank.
3. Procurement Plan Execution System - SEPA. The project implementation arrangements
include the use of SEPA, a web-based procurement Management system that was developed by
the Bank to create, approve and execute Procurement Plans online, and to promote transparency,
accountability and compliance in Bank funded projects. SEPA also provides public access to
contracts executed under the project. It is an electronic web-based tool which presents
information related to planned/executed procurement activities under the project, their status, as
well as specific details about each contract financed under the project. Apart from promoting
transparency, the use of SEPA will also strengthen accountability and give the government and
implementing agencies an instrument for managing procurement activities.
4. Database to monitor unit costs of repair/construction based on awarded contracts.
Ukravtodor will continue to update its database (established under the RSIP) that includes
exhaustive information pertaining to all the relevant civil works contracts (major repairs,
rehabilitation, upgrading, road safety works, etc.). The data on each contract will include the
following: (i) work description; (ii) date of invitation to bidders; (iii) number of expressions of
interest received; (iv) number of bidders; (iv) name of the lowest evaluated bidder; and (v) a
detailed list of contracted and actual unit costs of road repair/construction under the contracts.
15
In Ukrainian at http://www.ukravtodor.gov.ua
40
This database will be used as an input for estimating the cost of new works and for monitoring
overall cost trends as a function of macroeconomic factors.
5. Procurement evaluation process. World Bank procurement guidelines will be used without
exceptions under the RSIP2. Based on the information from the database mentioned above,
procurement processes will be reviewed in detail by the Bank specialists as part of their
implementation support and monitoring. Outcomes will be the subject of detailed reports to be
provided to Ukravtodor and the Accounting Chamber of Ukraine. The reports will include clear
recommendations to the Ukrainian authorities, including information related to potential need for
investigations.
6. Complaint handling system. As part of the implementation arrangements for the ongoing
RSIP, Ukravtodor will establish a complaint-handling mechanism, which would include a log
and a filing system for complaints. This system will also be used under the RSIP2. All
complaints received shall be responded to by the PIU within seven business days of receipt, with
copies of the response being submitted to Ukravtodor and the Bank. The relevant information
will be made public on Ukravtodor’s website and updated on a monthly basis. Strict procedures
to ensure anonymity of the complainants will be put in place. The status of investigations (if
any) and the measures taken will be reported monthly to the management of Ukravtodor and the
Bank.
7. Staff training. The staff of Ukravtodor and Ukrdorinvest has been trained in the application
of the Bank’s procurement and financial management guidelines and in the procedures to be
applied under Bank-funded projects. The training initiated during the ongoing RSIP will
continue during the implementation of the RSIP2 and cover new staff not previously involved in
IFI funded projects.
8. Technical audits of completed road sections. The objective of the technical audit is to
allow an independent team to form a professional opinion on the compliance of road works with
the technical specifications and standards described in the relevant bidding documents. The
quality of completed works shall be determined through visual examination during site visits
and, most importantly, through laboratory testing and measurement of sample cores taken from
completed road sections. Sample cores shall be taken on a random basis, of at least one sample
for every two lane-km of completed road sections. The audits are to be carried out by an
engineering consultant firm that does not have any other engagement under the ongoing RSIP or
the proposed RSIP2, in order to best ensure the complete independence of the technical auditor.
Furthermore, the particular individuals and teams (not the firm) that will carry out the technical
audit should not have been involved in any other roads projects in Ukraine, currently as well as
in the past. The existence of such technical audits and the randomness of locations where sample
cores are taken are known to be a strong deterrent for potential corruption and collusion between
contractors, supervision consultants and other parties.
9. World Bank implementation support. When carrying out project monitoring and
implementation support, the World Bank team will review the performed work to identify any
possible risks of fraud and corruption and alert the relevant Ukrainian Government institutions
for further review and inspection, if necessary. Due to their large size, the procurement packages
under the RSIP2 will be subject to additional internal Bank review (by the Bank’s high-level
OPRC committee) as a safeguard that will ensure enhanced procurement scrutiny. Visits by Bank
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teams in Ukraine will also include physical checks of RSIP2 implementation sites, both on a
regular and on an as needed basis, and additional control carried out by the Supervising
Engineer. Particular attention will be paid to the quality of work.
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Annex 7: Implementation Support Plan
UKRAINE: Second Roads and Safety Improvement Project
Strategy and Approach for Implementation Support
1. The implementation support strategy will focus on need-based and area-specific
assistance, targeting to fill the gaps in the implementation capacity of Ukravtodor and
Ukrdorinvest. Through the ongoing project, the Bank team has formed a very detailed
understanding of the implementation capacity of Ukravtodor and Ukrdorinvest. For instance, the
implementing agency has been very thorough and diligent with contract management and regular
monitoring, and has produced very good quality progress reports. On the other hand, it is less
experienced in the monitoring of land acquisition and the resettlement of affected persons.
2. The RSIP2 will introduce a new approach to improve road safety, which requires some
fundamental changes in the way in which the road safety issue has been dealt with in Ukraine.
The changes are namely: (i) incorporating safety concerns throughout the road network planning
process, road design, and maintenance phases; (ii) improving corridors, on which traffic can flow
safely and continuously, rather than treating fragmented spots; and (iii) having regular
monitoring of safety conditions as part of Ukravtodor’s primary mandate in the road sector.
These changes require institutional development, additional staffing, and technical capacity
building for the existing and new staff, for which the Bank team will provide support.
Implementation Support Plan
3. Technical support before procurement: Under the ongoing RSIP, technical assistance is
being provided to Ukrdorinvest for further improving the quality of bidding documents for road
works, and more especially the presentation of technical specifications and requirements. A new
framework for Bills of Quantities is also being developed. These improvements were necessary
to meet international quality standards. This task has almost been completed and is expected to
contribute to the capacity development of Ukrdiprodor.
4. Procurement support: The current procurement staff in Ukrdorinvest is experienced in
handling large amount works and consultant contracts; they are familiar with the Bank’s and
other IFI’s procurement rules and guidelines. With the expected increase in the work load,
Ukrdorinvest has hired a new procurement staff. The Bank team will invite both the new and
existing procurement staff of Ukrdorinvest for training programs offered by the Bank in the
region.
5. Safeguards: While the legislative basis is established for proper compensation in the
cases where land acquisition and involuntary resettlement is required, the administrative
procedures for doing so are not well established and actual practices of such are still new in
Ukraine. It is therefore critical to ensure that the Bank’s safeguards policies are complied with
and the livelihood of the affected persons is protected. The Bank’s locally based safeguards
specialists have frequently held meetings with Ukravtodor and regional administration, and
provided technical support in document preparation and public consultation. Support will
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continue through the completion of all necessary documents and implementation of the
resettlement action plans.
6. Road safety improvement: The Bank team has been providing technical support to assist
a smooth transition from black-spot approach to corridor-based engineering solutions, and will
continue support during survey, data collection, risk rating, and development of safety
improvement plans. The technical support will aim at building capacity within a Ukrainian
agency to implement corridor-based approach with its own resources and staff.
7. The main focuses of implementation support during different phases of the Project are as follows:
Time Focus Skills Needed Resource Estimate
0-6 months Procurement Procurement specialist 6 staff-weeks
Land acquisition and
resettlement
Social safeguards specialist 5 staff-weeks
0-12 months Road safety capacity
building
Task manager
Road safety specialist
5 staff-weeks
6-48 months Contract management
Monitoring and
evaluation
Task manager
Highway engineer
12 staff-weeks
RAPs, EMPs
monitoring
Social and environmental
safeguards specialists
8 staff-weeks
8. Skills Mix Required:
Skills Needed Number of Staff Weeks Number of Trips Comments
Procurement specialist 6 3
Social safeguards specialist 9 6
Environmental safeguards specialist 4 4
Road safety specialist 4 2
Highway engineer 6 4
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Annex 8: Map