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Construction entrepreneurs have welcomed the recently amended Public Procurement Act 2007 that talks mainly about wiping out the clause of awarding contracts based on the lowest bidding rates.

Through the second amendment of the Public Procurement Bill, the government has enforced the rule that the lowest bidding rate may be subject to disapproval of the contracts by defining specified standards and project evaluation processes. On July 2, the House of Representatives passed the bill, while the government enacted the bill by publishing it in the Nepal Gazette on July 9.

In the old system, there was a tendency to hastily award contracts without conducting a detailed study of the project, ensuring land acquisition, and conducting an environmental impact assessment. Ram Prasad Acharya, joint secretary at the Public Procurement Monitoring Office, said the new rule has been targeted to make the public procurement system not only process-oriented, but also more result-oriented and responsible.

The Federation of Contractors’ Associations of Nepal (FCAN) has termed the new provision a 'milestone' for the country's infrastructure development. In a press statement issued by the FCAN on Tuesday, it said that the end of the 'low bidding' practice (getting contracts at extremely low rates) and the inclusion of a system for awarding contracts based on average price is very positive. “This system will make a significant contribution to solving most of the problems seen in the infrastructure sector for a long time.”

The amended act stipulates that the procurement process cannot be started without budget allocation or ensuring resources and that bids should be invited only after the completion of preparatory work, including land acquisition, compensation distribution, construction site availability and environmental clearance. In addition, the cost estimate must be prepared according to the standards approved by the government, and the responsibilities of the employer, construction contractor, supplier and consultant have been clearly defined.

Similarly, the amended act also includes provisions such as providing incentives, bonuses and other facilities to employees who complete quality construction on time; providing incentives and certificates of appreciation to construction contractors who perform excellent work; limiting the performance bond to five percent, calculating the qualifications of both companies in the event of a company merger, reducing the time for submitting bids and making the implementation of the decisions of the Public Procurement Review Committee mandatory.

The FCAN has also urged the Government of Nepal to include a provision for price adjustment in all procurement contracts in the soon-to-be amended Public Procurement Regulations.