Public Procurement Process: Can Nepal Achieve Faster and More Effective Outcomes?
Delays in procurement and construction activities in Nepal have historically stemmed from certain public procurement arrangements, but authorities now claim these issues will be resolved.
Following key amendments to the Public Procurement Act, 2083, there is an expectation of accelerated work progress, according to the spokesperson of the Public Procurement Monitoring Office.
An official from the Nepal Constructors Association acknowledged the government’s efforts toward significant improvements compared to the past, but noted that sufficiently effective measures are still lacking.
Similarly, an expert has expressed concern that the changes introduced by the government to the procurement process might actually prolong the evaluation period.
Previously, public procurement was criticized for prioritizing the lowest price over quality.
Major Changes
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One notable provision emphasized by officials in the amended Public Procurement Act, 2083 involves bidding.
Where previously the lowest bid was accepted, the system now follows the ‘average bidding’ approach, favoring proposals closest to the average price.
This shift towards average pricing is expected to curb decisions based solely on minimal cost, which often compromised quality.
“This represents a significant change. There had been continuous issues due to lowest bidding and failure to execute work,” said Narayan Prasad Bhandari, spokesperson of the Public Procurement Monitoring Office.
He added that the revisions have reduced the time taken for contract procedures. “The duration for international tender calls has been shortened from 45 days to 30 days, and for national tenders from 30 days to 21 days,” Bhandari explained.
Experts indicate that previously, officials hesitated to approve contract variations due to fears of anti-corruption investigations.
However, such delays are now expected to be eliminated. Earlier, variations above 15% required approval at the secretary level, but in the new system, authorization is distributed according to percentage thresholds from officers up to department heads.
“Approval for variation orders no longer has to reach the secretary level; the authority has been delegated downwards,” Bhandari noted.
Additionally, new measures have been put in place concerning payments owed when a contractor terminates a contract prematurely.
Previously, if a contractor company withdrew, the expenses for completing remaining work were borne by the original company; now, the responsible party must cover any additional costs for unfinished projects.
Authorities anticipate that these improvements will have a positive impact.
“This is expected to simplify and strengthen the complexities related to construction work and procurement processes, which the government believes will yield beneficial effects,” Bhandari said.
“We are confident it will have a positive influence, reducing the complications found in construction and purchasing processes.”
Expert Opinions
Experts in public procurement have expressed mixed reactions regarding the government’s reforms.
A former secretary acknowledged some improvements but suggested that certain measures may have limited impact.
“With average bidding, the winner is not known until evaluations are complete, unlike lowest bidding where it was clear from the start,” said Kamal Pandey, former Secretary of Physical Infrastructure.
“In average bidding, the highest and lowest bids are excluded, placing importance on the middle values. This process risks being a mere formality,” he added.
Pandey also highlighted the risk of contractors obtaining multiple contracts simultaneously.
“Before evaluations conclude, a contractor may have already secured contracts elsewhere, raising the possibility that a single company could be awarded numerous contracts at once,” he explained.
He acknowledged the historical difficulty in shortening the evaluation process.
Regarding the reduced tender calling period, he stated, “Efforts to improve evaluation speed should have also been made; preparations for faster processing were necessary.”
However, he welcomed the move to ban contractors who submit bids 30% below the estimated price.
He also viewed the new rules on contract termination positively, stating, “This provides relief to construction businesses.”
Construction Industry Perspectives
Construction businesses perceive some of the new regulations in the Public Procurement Act as positive changes.
“The current government appears to be striving to simplify the procurement process,” said Ravi Singh, outgoing president of the Nepal Constructors Association.
He noted that the adoption of average bidding should eliminate the tendency for contractors to secure contracts in every case.
“Previously, contracts were easily awarded under Lowest Bidding, but that is no longer the case,” Singh remarked.
He emphasized the need to strictly enforce the current rule that limits contractors to a maximum of five projects.
“Average bidding could reduce opportunities for some firms, since the highest and lowest bids are discarded. This might exclude many companies from receiving contracts,” he explained.
He welcomed the shorter submission deadlines as a positive development.
“Previously, reaching sites took a lot of time, but now it is possible to reach most parts of the country within two to three days. Digitalization has also made profile creation easier,” Singh stated.
However, he expressed concern that the new regulation on contractors terminating contracts before project completion may create problems.
“Terminations might increase because previously companies had to pay the full amount for remaining work, but now only a fixed amount is payable,” Singh explained.
“There should be provisions to blacklist companies that break contracts for three years and collect additional costs in place of remaining expenses.”
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