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KATHMANDU, Aug 31: Kathmandu Upatyaka Khanepani Limited (KUKL) has issued tender bids for wastewater management projects in the valley that will likely benefit a certain group of contractors.
KUKL has sought proposals for contracts worth more than Rs 6.5 billion in collusion with the contractors so that only selected ones qualify for the projects.
The plotting was done for the construction of wastewater treatment plants at three places in the Kathmandu Valley for which the KUKL Project Implementation Directorate (PID) has called for tender bids. KUKL has allegedly invited tenders so that only a handful of construction companies can participate in the bidding process contrary to the Public Procurement Act 2063. Despite the international tenders, the bids have been designed in such a way that the two big companies of Nepal, namely Kalika Construction and Sharma & Company, will qualify for the bidding process.
Under the Kathmandu Valley Wastewater Management Project, the KUKL has started the unfinished work of the wastewater treatment plants at Sallaghari, Kodku and Dhobighat. It is suspected that the eligibility for the tender has been tampered with. According to the notification issued in the first phase, the deadline was fixed for August 30, but the application deadline has been extended by one week to September 8.
In terms of eligibility for the tender notice, the company competing for the contract must have a minimum annual turnover of US$ 80 million (Rs 10.58 billion) and must have worked with an annual turnover of US $ 80 million for the past five years. According to this criteria, there is not a single Nepali construction company which has an annual turnover of more than Rs 10 billion annually. None of the Nepali construction companies seem to be fundamentally qualified to meet this eligibility criteria.
Foul play suspected as KUKL fixes criteria for water treatment...
But in another clause of the criteria fixed by the KUKL, it is mentioned that if two companies work in a joint venture (JV) and at least one of the two companies has experience of working abroad, then they can qualify for the projects. It is clear that the KUKL is trying to manipulate the criteria of the wastewater treatment plant by stepping on this provision.
“It is clear that the KUKL manipulated the qualification bid in the interest of a handful of construction companies of Nepal,” said a senior employee of the Ministry of Water Resources, “From the outside, it looks like the Nepali companies cannot compete, but internally, turnover has been arranged to benefit two Nepali companies.”
Since this project will be built with the financial support of the Asian Development Bank (ADB), it seems that ADB's standard bidding document will be applied to it. ADB's Users Guide to Procurement of Work Standard Bidding Document published in 2016 has a special provision for calculating the average annual turnover. In point 2.3.4 of that document, the turnover can be calculated by multiplying the cost estimate by 1.5 percent and dividing it by the construction time. In ADB's bidding document, there is a provision that when joining in a JV with a foreign company, the JV can be accepted if 25 percent of the total turnover is with another company. That is, any Nepali company with a turnover of 25 percent of the US $ 80 million of this contract (ie US $ 20 million) will be eligible to enter in a joint venture with a foreign company. Based on this provision, only a few companies in Nepal are eligible to perform joint ventures with foreign companies to build wastewater treatment plants.
Kalika Construction and Sharma & Company are the only two companies with an annual average turnover of more than Rs 2 billion. Both these companies are experienced companies that have participated as JVs in the construction of wastewater treatment plants in Nepal.
The contract for the Guheshwori Wastewater Treatment Plant was granted to the Indian company. Within the framework of this contract, the Nepali construction company Sharma & Company contributed as a subcontractor. Similarly, the contract for the construction of the Tukucha Khola Waste Water Treatment Plant under the Bagmati River Basin Improvement Project, overseen by the Bagmati Civilization Integrated Development Committee, was awarded to Passavant Kalika Snet JV at a total cost of Rs 1.52 billion along with VAT. Notably, the Indian company was also a contender for this contract. While the Indian company had submitted a bid of Rs 1.85 billion in the tender, it was ultimately outbid by Passavant Kalika Snet JV, securing them the contract. It's worth mentioning that only these two companies met the financial proposal criteria for qualification.
“There is room to suspect collusion in the qualification of the bid,” former Joint Secretary of the Government of Nepal, Shiva Hari Sapkota, adding, “It seems that the criteria has been prepared to benefit a certain company.”
Other 'A' category builders of Nepal are not eligible to join JVs because their annual turnover is less than Rs 2 billion. Rajendra Sapkota, executive director of KUKL PID, said that he has no idea whether any Nepali construction companies will qualify as a JV or not because of the annual average turnover. "We have not been able to conduct a market survey of all Nepali construction companies," he said, “The tender criteria prepared to benefit limited Nepali companies is not true. We have prepared this bid according to ADB's standard guidelines.”
As part of the Kathmandu Valley Wastewater Management Project, the work of sewage treatment plants was started six years ago at Sallaghari, Kodku and Dhobighat in three places in the Kathmandu Valley. At that time, the construction of wastewater treatment plants in three places was started at a cost of about Rs 4 billion. The contract for the wastewater treatment plant was awarded to the Chinese company SafBon Water Services (Holding) on May 7, 2017. According to the contract agreement, the work of all the three wastewater treatment plants was to be completed within 30 months.
Kodku's wastewater treatment plant has a capacity to treat 1.75 million liters of water per day. The center of Sallaghari was set to treat 14.2 million liters of water per day. The capacity of Dhobighat processing center is supposed to be 37 million liters. According to the KUKL PID, the construction of wastewater treatment plants at Sallaghari, Kodku and Dhobighat has been canceled due to negligence of the contractor.
The directorate claims that the overall progress under this agreement was 27.1 percent in the last five years until the termination of the contract. Sapkota claimed that the project contract was dismissed due to the collapse of the Chinese contractor company due to Covid-19. “Now we have called for new bids,” he said, “About Rs 800 million has been paid so far. We have also recovered Rs 490 million from the bank guarantee of the contractor company.”
After the PID unilaterally breached the contract in 2079, the Chinese company has now filed a complaint. The case is yet to be resolved. Section 59 of the Public Procurement Act 2063 states that a party entering into the procurement contract cannot terminate the contract without giving prior information to the public body. Not only that, in accordance with section 59 (5) of the Act, the public body has a provision to pay for the work completed before the end of the contract. The KUKL PID says that the contract has been terminated after completing all the procedures.
Ravi Singh, president of the Federation of Contractors' Association of Nepal (FCAN) claims that the Nepali construction companies are not qualified to meet the criteria fixed in the tender issued by the KUKL PID. “It seems that the PID has maintained its eligibility criteria to prevent Nepali construction companies from competing,” he said. Sapkota said that Nepali construction companies cannot compete in this wastewater treatment plant due to eligibility criteria of turnover and experience for similar nature of work. The possibility of Nepali construction companies competing on the basis of turnover is very low.
