New law aims to curb low bidding
The government brought Public Procurement Act Amendment through Ordinance.
The Public Procurement Act Amendment Ordinance 2015 – one of the three dozen Acts aimed at accelerating the development process – is expected to curb low bidding and timely and cost effective implementation of development projects and make officials of implementing agencies and contractors more responsible.
It also requires contractor to furnish additional performance guarantee on top of existing five per cent performance guarantee, if their bid amount is lower than 85 per cent of the project's estimated cost, according to the Ordinance that has fixed such additional performance guarantee up to 25 per cent of the bid amount. If the bid is below 85 per cent of the project cost, a bidder will have to furnish 50 per cent of the difference between 85 per cent of the estimated cost and bid amount as additional performance guarantee.
The Ordinance – that has been brought because of uncertainty over winter session of parliament – also states that implementing agencies will evaluate contractor's capacity and won't award contracts beyond the capacity.
The provision of additional performance guarantee is expected to help control the trend of contractors taking away mobilisation amount to pay loans of the previous project and remain idle until they get another contract to start works. The government pays contractors up to 20 per cent of the bid amount as mobilisation amount to start construction works. But the contractors doubt the evaluating capacity of government officials and suspect favouritism to foreign contractors.
Officials of the implementing agencies have to monitor construction works within a month of awarding of the contract, according to the ordinance published in Nepal Gazzette today. "If works are not started by a month, implementing agencies will have to declare the contract void and seize performance guarantee pledged by the contractor. They can also recover additional amount from contractor's property, if the projects costs overrun is not met by the performance guarantee."
The ordinance also makes officials of implementing agencies more responsible. It has prescribed departmental action against officials, if they fail to act promptly while evaluating contractors' performance. "In the absence of provision of punishment for officials of implementing agencies in the Public Procurement Act, government officials were not taking decision on the fate of the contract even if projects remained idle for long or contractors went out of contact," according to secretary at the Public Procurement Monitoring Office Tanka Mani Sharma.
According to the new Ordinance, contactors will not have to undergo technical evaluation for projects worth up to Rs 20 million. Earlier, contractors bidding for projects worth Rs 6 million or more were required to undergo technical qualification. Likewise, Public Procurement Monitoring Office can monitor the procurement process of development project to facilitate decision-making process.
The new law also allows concerned government secretaries to take decision on up to 25 per cent of variation order. Earlier, secretaries did not have any authority on variation order.
The government was forced to amend the Public Procurement Act as it was blamed for low development expenditure. Government officials blame low bidding and irresponsible contractors for slow progress of development projects that has hampered the development activities.