Tender and contract awarding process needs serious correction to avoid problems and delays
Sujata Awale
Kathmandu
Delayed construction of transmission line projects is no surprise in the context of Nepal. Problems like land acquisition, right of way, forest clearance, environment impact assessment, agitation by locals have plagued development projects and delayed process. Weak enforcement of the law, lack of coordination between government agencies, lack of prioritising development projects, unclear and contradictory provisions and lack of political will are reasons why the aforementioned problems remain unsolved.
Apart from these problems, the tender and contract awarding process also needs serious correction to avoid problems in projects. Reportedly, transmission line projects such as Lamosanghu-Singati 132 kV, Bharatpur-Bardaghat 220 kV, Hetauda-Bardaghat 220 kV, Hetauda-Bharatpur 220 kV and Kabeli Corridor 220 kV, among others projects are facing problems due to delays by construction companies and contractors. While a few companies are only supplying material rather than mobilising manpower, some are bankrupt and struggling for funds.
Financial problems
“We have already sorted out the problem of land acquisition and forestry, however, till date no construction work has started as the Indian contractors are yet to mobilise workers at the site,” says Rajan Dhungel, Project Manager of Lamosanghu-Singati transmission line. The Lamosanghu-Singati project was awarded to Arawari Indian Company, which recently supplied insulator hardware and conductors at the site but the work is still in limbo. The 40-km long project will have 120 towers from Lamosanghu to Singati. Despite continuous effort, the company cannot be reached for comments.
Dhungel also adds, “We are not informed formally why the contractor has delayed the project. But we have heard that there are financial problems in the company.” Citing that the problem has been invited by problematic procedures, he says, “As per the Public Procurement Act (PPA) the government should award the contract to the lowest bidder rather than a competitive bidder.” He informed that the tender is awarded based on presented documents. Later on there is no mechanism to trace the financial situation of contractors. On being asked what the next step would be to break this deadlock, he said, “The contractor is committed to start work so we will give them a last chance.”
Although there is the provision to terminate the contract, he stated that it almost next to impossible, as the whole process is lengthy and cumbersome. According to him, if the contractors initiate site work this fiscal, the project will be completed within one and a half year. Stating that cash flow and coordination among main contractors and sub-contractors are major problem seen, he said, “The Procurement Act should be amended as soon as possible to minimise delays by contractors and to cross check the financial status of the company.”
Unresolved issues
This is not just one case. There are many projects which are in a similar idle state but because of different reasons. “As employers fail to make timely decisions and provide favourable conditions to initiate work, we contractors have no option other than to sit and count days,” said Ajay Mudhbary, Managing Director of Mudhbary and Joshi Construction, contractor for Lamahi-Gorahi 132 kV and Kusum-Hapure 132 kV transmission line projects. He says, “It has been two years since we are awarded these projects, but Nepal Electricity Authority can’t solve the issue of right of way,” adding that they have already established the project office and supplied necessary materials.
Complaining about the government’s failure to address problems in transmission projects, Mudhbary says, “Why does the government call for tenders and award contracts when they have not acquired land, solved right of way and other issues. It should first acquire the land and only then start the contract bidding process.”
He says, “We know NEA and our employers and the problems that may crop up. Contrary to us, foreign contractors may not know the situation and may face financial and other problems because of such delays and this creates questions about the viability of such projects.”
Danger in delays
According to him, while awarded projects could not be completed within the time period of 18 to 24 months, overhead cost, inflation in construction materials, operating cost naturally goes above what was signed in the contract. “This creates a risky situation for contractors,” he said. Mudhbary suggests the government starts price justification while evaluating contractors so that fake contractors can be filtered automatically.
According to stakeholders, the process of awarding contracts to the lowest bidder also contributes to the present problems. Many projects which submitted proper cumentation for the tender process, later on are seen to have problems. Documents are presented only for acquiring the project and there is no mechanism to trace and cross check facts and financial situation which ultimately creates delays.
Who's to blame?
Kanhaiya Kumar Manandhar, Officiating Deputy Managing Director of the Transmission directorate at NEA, said, “If any contractor fails to work as per the contract, there is a provision in the PPA to impose upto 10 per cent liquidity damage of the contract cost, employers can lead the project, make terminations and black list the company as well.” Manandhar further said that no project till date has been blacklisted or terminated.
“Terminating the project means re-tendering the project and a waste of time and money, which is why we keep it only as the last option,” he added. He admits that delays are not only because of contractors. He says, “The government itself delays in acquiring land, forest clearance and solving other problems. In such cases, we have to extend the time for project completion.”
Awaiting amendments
Tanka Mani Sharma, Secretary at the Public Procurement Monitoring Office (PPMO) informed that they have already sent the Procurement Act for needed amendments to the Cabinet. He said, “We have amended 35 different clauses in the Procurement Act to make both government offices and private companies more accountable for completion of public projects within the stipulated time,” adding that the amendments will guide and provide clarity to the existing act.
As per Sharma, if the amendment is endorsed by Cabinet, the act will have a standard bidding rate and even provisions to take action against even government offices who are not able to complete projects on time. Contractors who are not able to complete projects on time will be blacklisted, collateral will be seized and the company will be fined and made to pay the additional expenses for the re-bid of the project. Moreover, the lowest bidder will have to pay 25 per cent extra collateral as bid amount. Time extension will not be granted except under grave consideration. Presently companies get up to 20 per cent cash as advance for mobilising and purchase of materials at the site. New amendments will require the bidder to supply material to the site before they can claim the mobilising amount. Citing that amendment process is with Parliament, he said, “Once the Act is amended we can implement it accordingly.”
Published on January 7, 2014 /THT Perspectives
Sujata Awale
Kathmandu
Delayed construction of transmission line projects is no surprise in the context of Nepal. Problems like land acquisition, right of way, forest clearance, environment impact assessment, agitation by locals have plagued development projects and delayed process. Weak enforcement of the law, lack of coordination between government agencies, lack of prioritising development projects, unclear and contradictory provisions and lack of political will are reasons why the aforementioned problems remain unsolved.
Apart from these problems, the tender and contract awarding process also needs serious correction to avoid problems in projects. Reportedly, transmission line projects such as Lamosanghu-Singati 132 kV, Bharatpur-Bardaghat 220 kV, Hetauda-Bardaghat 220 kV, Hetauda-Bharatpur 220 kV and Kabeli Corridor 220 kV, among others projects are facing problems due to delays by construction companies and contractors. While a few companies are only supplying material rather than mobilising manpower, some are bankrupt and struggling for funds.
Financial problems
“We have already sorted out the problem of land acquisition and forestry, however, till date no construction work has started as the Indian contractors are yet to mobilise workers at the site,” says Rajan Dhungel, Project Manager of Lamosanghu-Singati transmission line. The Lamosanghu-Singati project was awarded to Arawari Indian Company, which recently supplied insulator hardware and conductors at the site but the work is still in limbo. The 40-km long project will have 120 towers from Lamosanghu to Singati. Despite continuous effort, the company cannot be reached for comments.
Dhungel also adds, “We are not informed formally why the contractor has delayed the project. But we have heard that there are financial problems in the company.” Citing that the problem has been invited by problematic procedures, he says, “As per the Public Procurement Act (PPA) the government should award the contract to the lowest bidder rather than a competitive bidder.” He informed that the tender is awarded based on presented documents. Later on there is no mechanism to trace the financial situation of contractors. On being asked what the next step would be to break this deadlock, he said, “The contractor is committed to start work so we will give them a last chance.”
Although there is the provision to terminate the contract, he stated that it almost next to impossible, as the whole process is lengthy and cumbersome. According to him, if the contractors initiate site work this fiscal, the project will be completed within one and a half year. Stating that cash flow and coordination among main contractors and sub-contractors are major problem seen, he said, “The Procurement Act should be amended as soon as possible to minimise delays by contractors and to cross check the financial status of the company.”
Unresolved issues
This is not just one case. There are many projects which are in a similar idle state but because of different reasons. “As employers fail to make timely decisions and provide favourable conditions to initiate work, we contractors have no option other than to sit and count days,” said Ajay Mudhbary, Managing Director of Mudhbary and Joshi Construction, contractor for Lamahi-Gorahi 132 kV and Kusum-Hapure 132 kV transmission line projects. He says, “It has been two years since we are awarded these projects, but Nepal Electricity Authority can’t solve the issue of right of way,” adding that they have already established the project office and supplied necessary materials.
Complaining about the government’s failure to address problems in transmission projects, Mudhbary says, “Why does the government call for tenders and award contracts when they have not acquired land, solved right of way and other issues. It should first acquire the land and only then start the contract bidding process.”
He says, “We know NEA and our employers and the problems that may crop up. Contrary to us, foreign contractors may not know the situation and may face financial and other problems because of such delays and this creates questions about the viability of such projects.”
Danger in delays
According to him, while awarded projects could not be completed within the time period of 18 to 24 months, overhead cost, inflation in construction materials, operating cost naturally goes above what was signed in the contract. “This creates a risky situation for contractors,” he said. Mudhbary suggests the government starts price justification while evaluating contractors so that fake contractors can be filtered automatically.
According to stakeholders, the process of awarding contracts to the lowest bidder also contributes to the present problems. Many projects which submitted proper cumentation for the tender process, later on are seen to have problems. Documents are presented only for acquiring the project and there is no mechanism to trace and cross check facts and financial situation which ultimately creates delays.
Who's to blame?
Kanhaiya Kumar Manandhar, Officiating Deputy Managing Director of the Transmission directorate at NEA, said, “If any contractor fails to work as per the contract, there is a provision in the PPA to impose upto 10 per cent liquidity damage of the contract cost, employers can lead the project, make terminations and black list the company as well.” Manandhar further said that no project till date has been blacklisted or terminated.
“Terminating the project means re-tendering the project and a waste of time and money, which is why we keep it only as the last option,” he added. He admits that delays are not only because of contractors. He says, “The government itself delays in acquiring land, forest clearance and solving other problems. In such cases, we have to extend the time for project completion.”
Awaiting amendments
Tanka Mani Sharma, Secretary at the Public Procurement Monitoring Office (PPMO) informed that they have already sent the Procurement Act for needed amendments to the Cabinet. He said, “We have amended 35 different clauses in the Procurement Act to make both government offices and private companies more accountable for completion of public projects within the stipulated time,” adding that the amendments will guide and provide clarity to the existing act.
As per Sharma, if the amendment is endorsed by Cabinet, the act will have a standard bidding rate and even provisions to take action against even government offices who are not able to complete projects on time. Contractors who are not able to complete projects on time will be blacklisted, collateral will be seized and the company will be fined and made to pay the additional expenses for the re-bid of the project. Moreover, the lowest bidder will have to pay 25 per cent extra collateral as bid amount. Time extension will not be granted except under grave consideration. Presently companies get up to 20 per cent cash as advance for mobilising and purchase of materials at the site. New amendments will require the bidder to supply material to the site before they can claim the mobilising amount. Citing that amendment process is with Parliament, he said, “Once the Act is amended we can implement it accordingly.”
Published on January 7, 2014 /THT Perspectives
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