The government is preparing to amend the Financial Procedure Act with the addition of a new clause that will allow the authorities to terminate underperforming contractors from the state-commissioned projects.

The amendment plan comes at a time when poor performance of contractors and indecision on the part of government officials have delayed several development projects. As per the Public Procurement Act, the lowest bidding company is awarded the contract to develop project. But this provision has been exploited by many contractors. A number of contractors undertake multiple projects at once and fail to complete them on time.

Finance Secretary Rajan Khanal told the Post that the amendment proposal has been sent to the Law Ministry for feedback and suggestions.

The proposed amendment will also end the existing procedural delay in contract termination process.

Contractors, however, have said that the treatment of contractors should be based on contract signed between the two sides. “Obviously, poor performing contractor should be penalised but it should not be outside the contract signed between the two parties,” said Rabi Singh, president of Federation of Contractors’ Association of Nepal.

Although the government agencies award contract based on Public Procurement Act, Khanal said that the amendment to Financial Procedure Act would incorporate provision not included in the former to facilitate early completion of development projects.

Besides the provision of penalising errant contractors, the proposed amendment has also sought to make the government officials accountable for the projects they oversee.

“The government officials responsible for releasing the budget in time and failing to make timely payment to the contractors will face departmental action as per our amendment proposal,” said Khanal.

Contractors have long been complaining that the government’s failure to make timely payments have affected their performance.  

According to FCAN, contractors are yet to receive payment over Rs50 billion despite submission of bills.

“Payment has stopped in most of the projects from the beginning of running fiscal year because the handover and takeover process of many projects across the three layers of the government have not been completed yet,” said Singh.

The proposed amendment will also work as guiding document for the provincial and local governments.