By Bharat P. Bhatta
Public Procurement (PP) includes all activities of acquiring goods and services ranging from the purchase of stationeries at government offices to financial and legal services and commissioning of large-scale infrastructure projects like roads, bridges, airports, buildings and so on. Made by a government department or any government-owned organizations, this always accounts for a significantly high proportion of the total government expenditure in Nepal. This shows that public procurement plays the important role in the country as it can contribute to promoting socioeconomic development, competitiveness, efficiency, transparency and good governance.
However, good governance is one of the key challenges in public procurement system in Nepal at present, according to Public Procurement Monitoring Office (PPMO) of the Government of Nepal. Although the single legislative provision relating to public procurement instituted in 2007 has resulted in significant benefits in bringing transparency, competitiveness, efficiency, and broadly good governance in the procurement system, there is a need for continued efforts in extending its coverage, monitoring its compliance as well as improving and facilitating support mechanisms.
Citing the problems in public procurement in Zimbabwe, Musanzikwa (2013) points out the major reasons as lack of professional procurement practices, the inadequacy of trained and skilled human resources in public procurement, lack of transparency, centralized procurement processes and decisions, and so on as. Like Zimbabwe, most developing countries have been facing similar challenges. However, there are yet no sufficient credible evidence with an exception of World Bank (2013) that investigate and analyze issues and problems being faced in public procurements processes and outcomes in Nepal. Moreover, according to the report by the World Bank (2013), inadequate capacity for efficient procurement, and insufficient policies and acts and pitfalls in the prevailing legal provisions are the two major problems being faced by public authorities in Nepal.
State of procuring some infrastructure projects form Province 7
Chameliya Hydropower Project, Darchula#
Table 1: Performance indicators of Chameliya Hydropower Project
|Initial estimated project cost||NRs 8.0 billion|
|Actual cost of the project upon completion||NRs 16.0 billion|
|Installed Capacity of the Project||30 MW|
|Start of initial construction||January 2008|
|Contractor||Gezhouba Group Corporation, China|
|Date of Contract||30.04.2009|
|Scheduled Completion Date||30.12.2011|
|1st time Extension||31.08.2013|
|2nd time Extension||14.03.2015|
|3rd time Extension||27.03.2016|
|Completion date (Date of inauguration)||10.04.2018|
|Project delayed by (against first scheduled date and contract)||6 years 3 months|
|Cost increases by (against initial estimated project cost)||Rs. 8.0 billion|
|Financial loss (other than cost overrun) to the Government of Nepal/Nepal Electricity Authority (NEA) due to the delay||?|
# As the data have not been verified with the Project Officials, facts and figures according to the Project/Government Officials might differ to some extent.
Chameliya Hydropower Project, based in Darchula in Province Number 7 and built by China Gezhouba Group Corporation, is one of the most delayed and one of the most expensive hydropower projects in Nepal. As evident from the figures, the project incurred significant time and cost overruns. The construction of the project started in January 2008 with an original plan to complete by June 2011. The project, however, got completed only in April 2018. The delays and problems skyrocketed the cost of the project to around NRs 16.0 billion. The project is apparently nearly three times costlier compared to hydel projects built by the private sectors in Nepal. We have not estimated financial and economic loss due to the delays of the project to the Government of Nepal or Nepal Electricity Authority (NEA) but it could be in several billion rupees.
Similarly, the major projects such as Mahakali Bridge, Rani-Jamara Irrigation Project (Kailali district), Seti Highway, Daiji Budar Road, Mid-Hill Highway, Mahakali Corridor linking Tinkar (Tibet border) with Darchula Khalanga), Mahakali Irrigation Project (third phase), and so on have lagged far behind the original plans. This will definitely result in time and cost overrun of the respective projects.
Further, the Office of the Auditor General Nepal has illustrated implementation status and irregularities of government-funded projects based on a serious financial audit. Table 2 shows an implementation status along with issues/problems of some projects in the last fiscal year ( 2016/17) as per the Annual Report of the Office of the Auditor General Nepal. As financial progress in the projects range from less than ten to less than fifty percent, which witnesses seriously low financial progress, physical signs of progress must also be in the similar range.
Table 2: Implementation statuses of some projects in FY 2016/17
(NRs in ‘000)
|Name of the projects||Contract amount, NRs||Expenditure in the FY||% of the expenditure||Remarks/Issues|
|Debsain Bridge, Bajhang||1035||103||9.95||Paid only advance, no approach road in the site|
|Pawernama Bridge, Kailali||131||65||49.62||Default design and no approval of redesign|
|Health Post Building, Achham (contract date FY 2011/12)||1.25||33.0||Work postponed|
Furthermore, according to the Mid-Term Budget Review of the current fiscal year (i.e. 2017/18), the physical and financial progress of even the national pride projects have not kept pace with the plans. Finance Minister Dr. Yuva Raj Khatiwada pointed out that confusion in the construction modality, the involvement of multiple-stakeholders in monitoring and evaluation, low bidding, hurdles in land acquisition, and the shortage of skilled technical human resources as the major problems in the execution of big infrastructure projects.
On top of these problems, ambiguity, and inconsistencies in legal provisions, the unclear responsibility of government officials and agencies, lack of coordination and cooperation among government officials/agencies, and so on are frequently claimed as serious problems in public procurement in Nepal. Problems and issues persist in all stages, namely procurement planning and preparation, tendering and bid submission, bid evaluation, award and contract, and contract implementation, of procurement process. Additionally, lack of adequate needs assessment, poor procurement planning and preparation, lack of budget or timely payment, poor disclosure of information and data, lack of public/stakeholders’ engagement in procurement process, low (or no) timely feedback and problem fixing, conflict of interest and corruption, poor monitoring and supervision of project execution, etc generally prevail in procuring infrastructure projects in Nepal
Possible solutions and way forward
First, it is important to carry out an assessment, at least a rapid assessment, to identify the state of implementation of procurement processes and outcomes of major infrastructure projects. In addition to designing a proper assessment methodology at the outset, the performance of procurement processes must be identified. These include various indicators and factors on how procurement is being implemented leading to (un)timely completion of the project and outcomes with designated quality at pre-estimated cost. The assessment can then identify specific problems and their potential solutions of selected projects.
Later on, we can explore typical problems at each stage of the procurement process. In addition to identifying specific problems and possible solutions, the assessment can devise a mechanism in concerned authority to improve procurement and performance monitoring in the infrastructure sector. As public procurement in Nepal is typically characterized by poor disclosure of information and data, lack of public/stakeholders’ engagement in procurement process, low (or no) timely feedback and problem fixing, poor monitoring and supervision of project execution, and so on, improving disclosure and involving public/stakeholders in contract implementation can help make the situation better.
Local/Provincial Governments can undertake performance monitoring of the implementation of infrastructure projects through the open dashboard with the help of technology. This will help create new, easy-to-use and citizen-centered portals. One of the advantages of these portals will be the interactive tools and charts on which local/provincial governments/officials will make their procurement activities including budget open to the public for viewing, comments, and critique. They will also portray updates and progress of ongoing/completed projects, as and when they happen, using this interface. A municipal mobile app can also be created to bring local governance closer to its citizens. Local/Provincial governments will also create open, digital map infrastructures with its technical assistance in training mappers and creating map data.
 http://www.nepalenergyforum.com/30-mw-chameliya-project-nepal-takes-a-decade-to-build-hydro-project/, http://moha.gov.np/district/custom/uploads/downloads/1374130932.pdf, http://kathmandupost.ekantipur.com/news/2017-12-24/nepal-takes-a-decade-to-build-hydro-project.html
 See, Annual Reports of Office of Auditor’s General in various years (http://oagnep.gov.np/en/annual-report/ ): Nepalese Journal of Government Auditing (http://oagnep.gov.np/en/journal-3/), Nepal Public Procurement Strategy Framework Phase II (2013-2016) (http://ppmo.gov.np/image/data/files/SBD/PPMO’s%20NPPSF%20Phase%20II_Final%20Report.pdf )