Government Approves Public Procurement Act Amendments

Sabika Shrestha

The Nepal government has amended the Public Procurement Act, introducing major changes to the contract awarding system.

Under the new provision, bidders will no longer be allowed to submit bids that are more than 30 percent below the estimated cost.

The government brought this measure to prevent the practice of securing contracts at unrealistically low prices and leaving projects incomplete.

Previously, contractors often won bids by offering prices 40 to 50 percent lower than estimates, but many failed to complete the work on time, leaving projects stalled for years.

The amended Act also requires that a project’s budget must be secured and the construction site must be prepared before issuing a tender.

Similarly, the performance security required from contractors has been reduced and limited to 5 percent.

The process for approving variation orders has also been simplified. Authority to approve variations will now be delegated to officials at different levels based on the percentage of the variation, with the government expecting faster decision-making and fewer delays.

Companies participating in joint ventures will now have equal responsibility for project implementation.

Previously, one company could use its qualification to secure a contract while another company provided investment but avoided responsibility for the work.

Under the revised law, if a contract needs to be terminated, the completed work will first be evaluated, and only the remaining work will be considered for the seizure of bank guarantees and blacklisting procedures.

The tender process has also been shortened.

Ram Prasad Acharya, Acting Secretary of the Public Procurement Monitoring Office, said, “We have not been able to spend a significant portion of the capital budget. There are several reasons for this, but issues related to public procurement and the provisions of the Public Procurement Act are among the key factors. The amendments proposed to the Act will help improve the quality of capital expenditure and contribute to increasing its overall execution.”

The deadline for international bids has been reduced from 45 days to 30 days, while the period for national bids has been reduced from 30 days to 21 days.

The amended Act includes provisions to reward contractors who complete projects on time and take action against those who cause unnecessary delays.

It also introduces a system for monthly payments to contractors, which is expected to ensure timely wages for workers, employees and suppliers.

The law has also made it mandatory for construction workers to be enrolled in the Social Security Fund.

The government says the revised Public Procurement Act marks the beginning of a new era of transparency and accountability while timely completion of infrastructure projects.