Subcontracting major problem in project progress, say officials

Practice of construction firms grabbing as many contracts as possible and subcontracting them has created a mess

Jun 23, 2018-Kaski Police arrested Surendra Basnet, the owner of Justine Time Construction, a subcontractor for blacktopping of the Kotre-Gagangauda section of Prithvi Highway, on May 17 on the charge of failing to complete works even within an extended deadline.

The Kathmandu-based Siruwa Construction is the main contractor of the project having a Rs24.4 million deal. But it had subcontracted the task to Justice Time Construction which failed to complete the works by the extended deadline of mid-April. Based on the Home Ministry’s order, police arrested Basnet, who was later released after he promised to complete the work by June 29.

Construction works at the Gautam Buddha Airport were halted for several months owing to a dispute over payment between Chinese contractor Northwest Civil Aviation Airport Construction Group and its subcontractor Nirvik Chitrakar (Khanal), the son of former prime minister and senior Nepal Communist Party leader Jhala Nath Khanal.

According to the Civil Aviation Authority of Nepal, the Chinese contractor had illegally appointed Khanal without informing the project executing agency.

Government officials pointed to the trend of construction firms taking as many contracts as possible and subcontracting them. Home Ministry officials said works are lagging in projects involving subcontractors. The Home Ministry has collected lists of projects and contractors from across the country where progress is poor.

Although Public Procurement Regulation allows subcontracting of works, the bidder has to submit documents that prove qualification before concluding procurement contract.“However, people other than the main contractor work at the site with authorisation letter from the contractor,” said Mukti Gautam, spokesperson for the Department of Roads (DoR), a government entity mobilising one of the largest state resources for development projects. “Rather than subcontractor, they work as representatives of the contractor.” With the main contractors not paying proper attention to the works of subcontractor or their representatives, works are pending in many projects, according to DoR officials. The Public Procurement Regulation allows only up to 25 percent work to be subcontracted.

There is also the tendency of subcontracting a single work multiple times. Madhu Prasad Regmi, secretary at the Public Procurement Monitoring Office (PPMO), said he came to know in course of interaction with local stakeholders about a project that was subcontracted multiple times.

“After the contract was awarded in a Rs1.5 million deal, it was subcontracted for Rs1.2 million to another person while the final subcontracting was for Rs350,000,” he said, without divulging the details. “The first contractor might have got the contract at a price much lower than the estimated cost. When the last subcontracted amount is so low, how can such subcontractor complete the project with quality work?” he wondered.

Regmi said subcontracting a work multiple times is prevalent even though the law bars it. Officials said such practice could be controlled by tracking the involvement of any contractor in multiple contracts. “We don’t know how many projects a contractor is involved in and whether the contractor can handle additional contracts,” said Gautam. “We’ve been asking the PPMO to install a software to track multiple roles of contractors.”

The PPMO said it was considering setting up a surveillance system. “We’re discussing establishment of a tracking system involving at least ‘A’ class contractors,” said PPMO Secretary Regmi.

Published: 23-06-2018 06:55

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