The Department of Roads has said it will tighten the screw on contractors who are seeking additional payment for cost escalation caused by inflation of construction materials.

A meeting of the department’s senior officials on March 26 decided to not pay any additional amount to contractors if they extend their deadline, stating their price rate will be the same as that of their previous contract year.

“If the contract period is extended, the contractor will get the payment as per the rate of price adjustment made in the previous fiscal year,” said department’s newly appointed Director General Keshav Kumar Sharma. “If price adjustment rate is higher than that of the previous fiscal, payment will not be made for the added rate.”

For example, if the price adjustment index—which is determined by rise in prices of construction materials and fuel—is 6 percent in the final year of contract, the department will pay the amount equivalent to 6 percent. “If the index reaches 8 percent in the following year, we will not pay for the increased 2 percent,” DG Sharma clarified to the Post.

According to the department, the move is aimed at encouraging the contractors to complete their work within the deadline. The department has so far been making the extra payments.

“Currently, contractors have the tendency to delay the implementation of projects, as they continue to get payment as per inflation of construction materials and fuel in the market,” said Sharma.

Take Sikta Irrigation Project for instance. When the project was initiated in 2005-06, it was supposed to be completed by 2014-15 at an estimated cost of Rs12.8 billion. Officials now say the project may not be completed before 2019-20. By the time it is fully operational, the project is expected to cost Rs25.02 billion, according to a recent report presented by the National Planning Commission at a National Action Committee meeting headed by Prime Minister in September last year.

The cost of the Melamchi Water Supply Project has also escalated. When it started in 2001-02, the project was estimated to cost Rs17 billion. In 2008, the cost was readjusted to Rs31.73 billion before it was increased again to Rs35.54 billion in 2014, according to the NPC report.

A recent study by the Commission for Investigation of Abuse of Authority (CIAA) found that a total of 906 roads and bridges projects worth Rs20.76 billion have not been completed in time as of December last year. According to the CIAA report titled ‘Study and Analysis of the Status of Contract Management in Projects’, 1,848 projects related to eight ministries with large development budgets have missed their completion deadlines. The contract amount of those projects stands at Rs118 billion.