Ghost contractors a serious problem in project execution in Nepal, says ADB

Published On: February 28, 2017 09:27 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Feb 28: Ghost contractors have become a serious problem in executing development projects in Nepal, according to officials of the Asian Development Bank (ADB).

Foreign contractors are usually the lead partners while bidding big projects. But they are not interested to work in projects worth below US$ 30 million. That is why they tend to give the project to their Nepali JV partner. “Foreign contractors are absent from the work sites. Only Nepali contractors can be seen in the project site,” Narendra Chand, senior procurement officer at the Kathmandu-based office of ADB said.

“This type of activity has affected several transport and urban projects which in the range of $5-25 million. Around half a dozen such contracts were terminated in 2016 alone,” Chand said at a meeting organized on Monday to review ADB-funded projects. 

The Manila-based multilateral donor says not a single foreign contractor was present on work sites of four transport projects. Similarly, absenteeism has marred 11 out of 15 urban projects. 

Procurement law says foreign contractors can apply in projects in range of Rs 1 billion to Rs 6 billion by forming joint ventures with Nepali contractors. They can bid for projects worth above Rs 6 billion independently.

Chand also suggested increasing ceiling for Nepalis contractors if foreign contractors are not interested in small-scale projects. 

Currently, contracts up to Rs 1 billion are reserved for Nepali contractors only. 
“Foreign contractors make commitments of resources and equipment while bidding in joint venture with Nepali contractors. But their absence costs the project dear as they do not provide promised resources and equipment,” Chand told Republica. 

The policy of forming joint venture with foreign contractors was introduced to build capacity of Nepali contractors. But the growing problem of ghost contractors is a case of policy failure.

ADB officials say problems have been seen mainly in contracts below $25 million (approximately Rs 2.5 billion). Chand stressed on stern action against absenteeism to control this problem. 

Participation of few bidders in national competitive bidding is another critical issue in contract management, ADB has noted. ADB officials see collusion of contractors behind it bidding as only a handful of contractors apply for tender even though over a dozen bid documents are sold.

Over 15 bid documents were sold in contracts of half of bid packages in Community Managed Irrigated Agriculture Sector Project. But only three firms submitted bids. Likewise, only three bids were received against over 25 bid documents sold in the 67 percent tender packages of Earthquake Emergency Assistance Project. 
Both the projects are funded by ADB.

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