48. The World Bank-financed Gujarat State Highways Project (GSHP), implemented by the Government of Gujarat, stands out as an example of a well managed road project in India in recent times. The GSHP has been successful on various counts. This project is closing in December 2007.

49. Contrary to significant cost overrun in almost all highway projects in the country, GSHP is expected to be completed with a significant cost savings compared to the originally estimated project cost. The project was originally estimated to cost Rs. 21.2 billion ($533 million) but is now expected to be completed at a cost of Rs 17.6 billion, resulting in a net saving of about 17% of the estimate. The saving has been achieved in spite of marginal increase in the scope of the project. The upgrading works contracts were signed at an overall 18% lower price than the estimated costs, a significant measure of the project’s procurement efficiency. Moreover, only six of the 15 upgrading works contracts had an upward variation in contract price during implementation, whereas the remaining nine have been completed at lower than contract price, reflecting adoption of efficient contract management and cost control measures during implementation.

50. The project overall has taken two years more than the originally estimated project period. However, the delays were primarily due to a devastating earthquake in 2001 leading to diversion of resources to earthquake recovery, and unprecedented rainfall and floods during the years 2005 and 2006, and not due to delays in pre-construction activities or implementation delays usually experienced in other projects in India. Many works contracts performed well and were completed without much extension of the completion date. Four of the five upgrading works contracts in Phase 1 of the project were completed within two months of the original completion date, in spite of the diversion of the contractors' equipment for earthquake recovery. One upgrading works contract of Phase 2 was completed well before the original stipulated completion date.

51. GSHP has been also exceptional in the number of cases of contract claims or disputes. Only seven disputes have arisen in 15 upgrading works contracts, out of which only two cases were referred to arbitration and none was referred to the court. This is exemplary considering that in other large road projects in the country the number of disputes for each contract on average would exceed far more than the total number of

disputes in GSHP.

52. Preliminary analyses show that continuity of a highly motivated and dedicated project team of the Gujarat government for the entire duration of the project is one of the main reasons for such a stupendous success. The project received the full support and attention of the highest level of the state government at every stage, helping in smooth interdepartmental coordination and efficient implementation of the project.

53. Reasonably good business and working environment in the state has helped in obtaining competitive bids, often even lower than the estimated costs. Moreover, right from the initial project preparation phase the Government of Gujarat efficiently handled the project preparatory and pre-construction activities, which contributed to better quality project design and fewer contract variations, faster implementation progress and fewer contract claims and disputes. Further, during the implementation stage, the pragmatic and efficient project management by the state government and a true spirit of partnership that it fostered among all the three contracting parties (implementing agency, contractors and consultants) have helped in efficient and dispute-free progress of the works to a high quality standard. The state government's focus on value-formoney, willingness to adopt cost-effective and modern technology and better application of technical specifications stipulated in the contract also led to cost-effective road construction. Overall, this project demonstrates how a conducive business environment and efficient project administration can create an enabling environment for the construction industry to deliver timely, cost-effective and quality outputs.