Estimation of Project Costs

B. Estimation of Project Costs

1. Capital Costs

3. Project capital costs comprise actual financial costs for civil works and consulting services including detailed engineering and construction supervision. Data were based on contract payment records in the project completion report (PCR) prepared by the supervision

consultant and on actual project cost data in the ADB PCR. 5 The project capital costs for contract road section B were disaggregated based on the actual length of the respective routes.

Road section D excludes capital costs of around $1 million for the Khong Island works in late 2000 ─ 2001.

Vehicle registration data from the Ministry of Communications, Transport, Posts, and Construction indicated this was small, accounting for only 2% of the vehicle fleet in Champasack Province. Since Khong Island has become a key tourist destination, the gravel road completed under the Project has been paved using funds from other sources.

2 The surfacing technology and pavement design used has proven to be appropriate, and residual pavement quality remains satisfactory despite increased traffic since 2000 and a minimal level of maintenance. Sustainability of the

project roads depends on government capacity to annually fund the Road Maintenance Fund to appropriate levels. 3 ADB. 2005. Domestic and International Cost Escalation Factors (2005–2009). Manila.

4 Price data (1995=100) from the Economist Intelligence Unit and the International Monetary Fund. 5 PCR of the Ministry of Communications, Transport, Posts, and Construction.

46 Appendix 7

2. Road Maintenance Costs

4. The reestimation of maintenance costs in the base case “without” project scenario used assumed road maintenance practices at project completion. In addition to annual routine maintenance, periodic maintenance (i.e., resealing) of paved road sections is assumed to be carried out every 5 years beginning in 2000. Periodic maintenance for the gravel/earth road sections will be done every 4 years starting in 2002.

5. In the “with” project case, 4-year maintenance resurfacing programs were assumed based on a reassessment by the Operations Evaluation Mission (OEM) of existing road conditions, and priority (timing) need to keep these at the present acceptable level of service. Resealing was carried out in 2002 to repair some defects in road section A. Subsequent periodic maintenance works in section A are then assumed in 2009, 2013, and 2016. For section B1, resealing is anticipated in 2007 and then again in 2012 and 2016. In section B2, minor periodic maintenance was done in 2003. Periodic maintenance is assumed in 2007, 2010, 2012, 2015, and 2018. Repair of previously failed areas was carried out in section C in 2001 and 2003. More preventive periodic maintenance works are expected, and these are assumed to be done in 2006, 2008, 2011, 2014, and 2017. Major resealing works are not expected in section D until the next decade. During the 2005 traffic count, the bulk of through traffic comprised light vehicles such as motorcycles (67%) and cars/pickups (275). Minor resealing works are projected in 2006, 2010, and 2015, while more investments in periodic maintenance are needed from 2017 onward.

6. The routine and periodic maintenance unit costs in economic prices are shown in Table

A7.1.

Table A7.1: Maintenance Unit Costs, 2000–2019

(economic prices, average $ per kilometer)

Item

“With” Project

“Without” Project

Paved Roads

Paved Roads

Paved Roads Gravel/Earth Roads

(B2, C, and D) Routine maintenance

(A and B1)

(B2, C, and D)

(A and B1)

120 90 365 320 (annually)

a a b Periodic maintenance c 6,180 4,100 16,100 11,100 a Assumes an annual budget of at least $250,000 per year for periodic maintenance across road sections.

b Every fifth year from 2004. c Every fourth year from 2001. Source: Operations Evaluation Mission estimates.

7. In the “without” project case, financial unit costs for maintaining gravel/earth roads were assumed at $350 and $12,000 per km for routine and periodic maintenance, respectively. 6

Similarly, for paved roads, unit costs assumed were $400 and $17,000 per km, respectively.

6 In 2003, a Japan International Cooperation Agency feasibility study on the improvement of roads in the southern region (including Champasack Province) estimated that the financial unit costs for maintaining existing gravel and

earth roads were $300 per km/year and $11,000 per km for routine and periodic maintenance costs, respectively. For improved double bituminous surface treatment roads, the maintenance costs were estimated at $694 per km/year and $20,000/km.

Appendix 7

8. For the “with” project case, updated routine and periodic maintenance costs were obtained from the provincial Department of Communications, Transport, Posts, and Construction (DCTPC). Periodic maintenance costs were based on actual financial data from 2001 to 2005 and DCTPC forecasts of $250,000 per year from 2006 to 2008. The OEM assumed that annual allocations of $250,000 will then be forthcoming after 2008 and that, over time, the allocation will reach $300,000. This estimate is roughly calculated based on assumed annual allocations that all project road sections will be resealed twice between 2000 and 2019,

or on the average of one resealing for each km every 10 years. 7 Financial unit costs of routine maintenance from 2000 to 2006 are assumed at $100 per km for road sections A, B2, C, and D

(7 meters [m] wide), and at $300 per km for the wider portion under Contract B1 (10–12 m wide). 8 Routine maintenance costs are assumed to increase at 5% per annum from 2007

onward.