Speaking at an interaction organised by the Parliamentary Finance Committee, government secretaries and joint secretaries said these problems were rampant and stressed the need to address them urgently.

Even as the government’s failure to spend the capital budget has been hitting

the headlines, officials said they were helpless due to

the Public Procurement Act which says that contracts should be awarded to the

lowest bidder and the regulation which allows the government to provide mobilization funds to contractors to

start work.

As per clause 27 of the act, public entities have to select the lowest bidder when awarding contracts.

This has created problems like non-completion of development projects on time as contractors, faced with low profit margins and losses, often flee or delay work giving various reasons, according to government officials.

“Bureaucrats cannot decide not to give the contract to the lowest bidder despite technical deficiencies as they have been penalized by oversight bodies for doing so,” said Anup Upadhyaya, secretary at the Public Procurement Monitoring Office.

The act does not say how much less the lowest bid should be than the second lowest bid.

“There is also the tendency of quoting the lowest price in consultation with the second lowest bidder and disappearing before contract is awarded allowing the government to seize the security bond,” said a joint secretary of the Ministry of Physical Infrastructure and Transport. “There should be provision in the act that such lowest bidders should be blacklisted.”

The misuse of the mobilization fund by contractors has also emerged as a big concern with Finance Minister Ram Sharan Mahat raising the issue frequently.

Almost all the secretaries and joint secretaries of development ministries said that contractors getting many contracts at a single time usually spend the mobilization fund in other profit making activities and starting the work late which delays development work.

They complained that even though the law has not made a compulsory provision for providing the mobilization fund, there is a tradition of distributing the money right after the contract is awarded.

Given this context, a committee headed by the secretary of the Urban Development Ministry had suggested providing the money to the contractors in various phases based on the progress of their work.

The recommendations made a few months ago had called for providing a certain portion of the mobilization fund while the contractor gets the construction equipment and material ready and another portion after the contractor has mobilized human resources to start the work.

Another option recommended by the committee is to allow banks to provide the mobilization fund based on the contract award document. The payment for the work will also be made through the same bank enabling it to recover the lent amount first.

Contractors, however, said that granting the mobilization fund was not a big problem, but the government’s failure to take action against contractors not working in the field with the mobilization fund should be blamed.

“As per the current legal provision, contractors have to give an A-level bank guarantee to receive the mobilization fund,” said Jaya Ram Lamichhane, president of the Federation of Contractors’ Association of Nepal. “If contractors are at fault, why doesn’t the concerned government agency confiscate the bank guarantee?”  

Government officials also raised the issue of rampant use of fake documents to secure the contract.

“It is very difficult to verify bogus documents as they bear fake stamps of the Notary Public and they look real,” said the joint secretary of the Physical Infrastructure Ministry.

In order to address this problem, the committee headed by the secretary of the Urban Ministry has suggested maintaining an electronic logbook about the contracts awarded to contractors so that they cannot lie about their experience while submitting experience certificates.

During the meeting, the lawmakers urged strong action against contractors not using the mobilization fund timely for development work. They also criticised the tendency of political parties to protect goons who are used to harass contractors for money.