Amendment to Public Procurement Act
KATHMANDU, Jan 28: Contractors bidding 15 percent lower than the project cost will have to furnish additional performance guarantee if the bill to make amendment to Public Procurement Act 2007 is passed.
Government officials as well as experts say the provision is necessary to discourage low bidding which often leads to poor quality and delay in project execution.
The proposed amendment requires bidders to submit half of the difference between 85 percent of the project cost and the bid amount on top of 5 percent performance guarantee if they are bidding 15 percent lower than the project cost.
Development partners, however, have expressed reservation on the provision. Leading development partners -- World Bank and Asian Development Bank (ADB) - say such provision discourages genuine contractors as additional performance guarantee on large scale projects will become a burden for them.“
"World Bank and ADB have expressed reservation, saying that the performance guarantee is too mu”h," Naresh Kumar Chapagain, spokesperson of Public Procurement Monitoring Office, told Republic“
"Though projects funded by donor agencies are not required to follow public procurement laws, some development partners want to follow government laws and therefore seek a harmonization between their guideline and government la”s," Chapagain said.
The amendment bill was been tabled in the parliament last week following discussion in parliament's Good Governance Committee.“
"Low bidding is a major problem in development works as contractors often compromise quality to make more mon”y," Deepak Bhattarai, professor of Nepal Engineering College, said.
Bid evaluators consider only the lowest bidding while awarding projects, fearing corruption charge. Such projects are often delayed and quality is compromised in the absence of monitoring by concerned government agencies.
Bhattarai said low bidding has to be discouraged to control national contract bidders. However, Birendra Bahadur Deuja, former government secretary, termed the additional performance guarantee provision as regressiv“. "Bid evaluators should have the guts to pick capable bidders rather. Asking bidders to furnish additional performance guarantee is not the soluti”n," said Deuja.
Responding to Republica's request for comment on the provision through email, ADB Country Director Kenichi Yokoyama said the additional performance guarantee may exacerbate the problem as contractors will be further constrained, which can work as an incentive to go for irregular practices to end up with serious compromises in quality, quantity, and timeliness of works completed. Stating that additional performance guarantee in blank approach does not help, he said that provision can only be applied on a case by case basis with careful assessments of its implications for timely, efficient, and quality implementation“ "But there are cases where price bid is too low or contractor's financial resources are too thin. Such bid should better be reject”d," he added.
World Bank office in Kathmandu did not respond to Republica's request for comment.
Lawmaker Bikram Pandey, who is the also the promoter of Kalika Construction Company, said such provision should not be applicable for international bidder“. "But it is necessary for domestic bidders who bid as low as 60 percent of the project cost but tend to compromise quali”y," he added.
Kalika Construction was recently recognized the best performing contractor by Asian Development Bank for its outstanding works in handling a critical bridge construction works.
Indian contractors constructing five sections of Hulaki Rajmarga (postal highway) had walked out of contract. Reason was low bidding and the additional performance guarantee they had to post to the Government of India, which had selected the contract on its own to develop the project in its line of credit assistance in Nepal.“
"Half of the problem of low bidding can be addressed by making project executors responsible and stronger to take action against contractors who go out of contact after picking up 20 percent mobilization fu”d," Tulsi Prasad Sitaula, former secretary of Ministry of Physical Infrastructure and Transport, said.
Project managers can take action against contractor if they are absent for more than 30 days and spend mobilization fund in other businesses.