KATHMANDU, April 18: With an aim to curb low bidding and timely and cost effective implementation of development projects as well as make officials of implementing agencies and contractors responsible, the government has issued Public Procurement Act Amendment Ordinance 2015.
The ordinance requires contractor to furnish additional performance guarantee on top of existing 5 percent performance guarantee if their bid amount is lower than 85 percent of the project's estimated cost.
Such additional performance guarantee can be up to 25 percent of the bid amount, according to government officials.
If the bid is below 85 percent of the project cost, bidders will have to furnish 50 percent of the difference between 85 percent of the estimated cost and bid amount as additional performance guarantee. The ordinance also says that implementing agencies will evaluate contractor's capacity and won't award contracts beyond their capacity to such contractors.
According to the ordinance which was published on Nepal Gazzette on Thursday, officials of the implementing agencies have to monitor construction works within a month of awarding of the contract. "If works are not started by that time, implementing agencies will have to declare the contract void and seize performance guarantee pledged by the contractor. They can also recover additional amount from contractor's property if the projects costs overrun is not met by the performance guarantee.
The ordinance also makes officials of implementing agencies more responsible. It has prescribed departmental action against officials if they fail to act promptly while evaluating contractors' performance.
In the absence of provision of punishment for officials of implementing agencies in the previous law, government officials were not taking decision on the fate of the contract even if projects remained idle for long or contractors went out of contact.
Talking to Republica, Tanka Mani Sharma, secretary of Public Procurement Monitoring Office (PPMO), said the government decided to issue the law through ordinance because of uncertainty over winter session of parliament.
Eight months of current fiscal year have already passed, but capital expenditure is still below 25 percent. Government officials blame low bidding and irresponsible contractors for slow progress of development projects.
"Earlier, even contractors without substantial experience could win contracts because of the flawed provision of evaluating contractors' capacity on the basis of their self-declaration," Sharma said, adding "Such bidders will not get fill marks in the bidding process now onwards."
As per the new ordinance, contactors will not have to undergo technical evaluation for projects worth up to Rs 20 million. Earlier, contractors bidding for projects worth Rs 6 million or more were required to undergo technical qualification. Similarly, PPMO can monitor the procurement process of development project to facilitate decision-making process.
New law also allows concerned government secretaries to take decision on up to 25 percent of variation order. Previously, secretaries did not have any authority on variation order.
Commenting on the new law, Lawmaker Bikram Pandey, who is also the Chairman of Kalika Construction Company, said the provision of additional performance guarantee will help to control the trend of contractors taking away mobilization amount to pay loans of the previous project and remain idle until they get another contract to start works.
The government pays contractors up to 20 percent of the bid amount as mobilization amount to start construction works.
Pandey, however, expresses doubt over evaluating capacity of government officials. "Officials often favor foreign contractors when it comes to evaluation. If the practice is not ended, Nepali contractors will always have to work as sub-contractors of foreign contractors," said Pandey.
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