Government Amends Public Procurement Act After 20 Years Via Ordinance
Kathmandu. To end the cumbersome process in Nepal's public procurement system and the tendency of development construction projects to remain stalled, the government has made extensive changes to the Public Procurement Act after 20 years.
With the issuance of the 'Public Procurement (Second Amendment) Ordinance, 2083' by President Ram Chandra Paudel on Thursday evening at the recommendation of the Council of Ministers, a new era has begun in the procurement process. The government chose the ordinance route for procurement reforms on a 'fast track' as it would take time to pass the bill from both houses of parliament. On the same day, President Paudel also issued another important ordinance related to cooperatives. This amendment has been brought with the aim of increasing development expenditure and ensuring the quality of projects by making the original act, formed in 2063 BS, timely.
Complete Ban on Awarding Contracts Without Site and Budget Assurance
The most revolutionary provision of the proposed amendment is making 'pre-procurement preparation' mandatory. Now, no public body will be able to start the procurement process without budget allocation. In the case of multi-year contracts, procurement actions will only proceed after the budget for the first year and the source for the remaining years are ensured.
More importantly, tender calls will not be allowed without ensuring the construction site (without site clearance), compensation and damages distribution, removal of trees/plants or structures on site, and approval of the environmental study report. Since most projects in Nepal are contracted without site clearance and get stuck in disputes for years, this provision is expected to solve the problem of 'sick projects'.
Furthermore, a clear definition has been added to the Procurement Act to promote domestic production. Now, only goods with at least 30 percent value addition produced in Nepal using domestic raw materials, labor, and materials will be considered 'domestic goods'.
Public bodies will be mandated to prioritize such domestic goods when procuring, but goods merely 'branded' or lightly packaged in Nepal after importing from abroad will not receive domestic goods facilities. This appears to provide significant relief to Nepal's domestic and small industries.
New Procurement Methods: 'Reverse Auction' and EPC Model
To make the procurement process more competitive and economical, the ordinance proposes the 'Reverse Auction' method. In this, the specified cost estimate will be considered the maximum limit, and direct competition will be held among bidders, with the one quoting the lowest amount being selected.
Similarly, for large projects requiring complex technical capabilities, a special provision has been made to award contracts on an 'EPC' (Engineering Procurement & Construction) model and on a 'Turnkey' basis. This means the responsibility from design to construction of the project will lie with the construction entrepreneur, which will control delays and cost increases in the name of design changes.
'Government Procurement Service Office' Under the Prime Minister
To provide expertise and efficiency to the procurement process, a provision has been made to establish a powerful 'Government Procurement Service Office' under the Prime Minister and Council of Ministers' Office. This office will collect demand for goods and services required by various public bodies, analyze the market, prepare cost estimates, and assist in supplier selection. This will remove the compulsion for each office to maintain separate procurement units and bring uniformity in procurement.
The ordinance has made a provision requiring compliance with the national standards approved by the government to systematize the procurement related to the development and operation of information technology systems. Similarly, after the tender is called through the electronic procurement system (eGP), there is a provision that the notice does not need to be published in other media, which is said to save both cost and time.
Incentives for Employees and Action Against Officials
The ordinance has adopted a policy of 'rewards and punishments' to boost employee morale and ensure accountability. Employees involved in procurement work and achieving quality results within the stipulated time will be provided with incentive benefits.
On the other hand, strict provisions for departmental action have been made against officials who award contracts without site clearance, cause project delays by not making timely decisions, or delay in approving variation orders. Officials who do not implement the decisions of the Procurement Review Committee will also be brought under the purview of action.
Rewards and Responsibilities for Construction Entrepreneurs
A system of rewards and certificates of appreciation has been put in place for construction entrepreneurs who do good work, while the provision for all members of a joint venture (JV) to bear joint and individual responsibility has been further tightened. Construction entrepreneurs will not be allowed to transfer their work responsibilities to another person.
Furthermore, activities such as advertising, security services, cleaning, air ticketing, and infrastructure management have been clearly defined as 'non-consulting services'. The cost estimation and procurement methods for such services have been further simplified.
Construction Entrepreneurs Dissatisfied
Former President of the Federation of Contractors' Associations of Nepal, Ravi Singh, has stated that the recently introduced amendment (ordinance) to the Public Procurement Act by the government is incomplete. He mentioned that this amendment, instead of solving the real problems of construction entrepreneurs, will empower employees further and put entrepreneurs at a disadvantage.
Singh complained that while the new ordinance has made it easier to proceed with contracts after termination, the penalties imposed on entrepreneurs have been made very strict and impractical. He said, 'The provision to recover additional costs to the extent that the company collapses upon contract termination is not just.'
He demands that just as there is a 25 percent limit (ceiling) on price adjustment, there should also be a certain limit on penalties.
Furthermore, Singh complained that the government does not want to provide price adjustments to entrepreneurs even though the prices of construction materials and fuel have increased significantly in the market. He stated that the construction entrepreneurs' demands have been ignored despite diesel and transportation fares increasing three times. He accused the government of showing indifference to the construction sector due to fear of spending money from its treasury.
'Transportation fares were adjusted immediately as it would burden the general public, but in the case of construction entrepreneurs, the government ignored it seeing its own expenses,' Singh said.
He stated that since the monsoon is about to start, work cannot proceed even if the government makes price adjustments now. He informed that many projects have been stalled due to the government not listening to the demands of entrepreneurs and rising costs.
He argued that the new system brought by the government will lead to more chaos in the construction sector and push entrepreneurs towards migration. He also expressed dissatisfaction that the government brought the ordinance unilaterally without sufficient discussion with the entrepreneurs.
This specific news has been automatically translated by AI. As a result, there may be some inaccuracies or language errors.
