Additional performance guarantee provision works wonders for road projects

Though the Public Procurement Act Amendment Bill 2007, which was introduced as an ordinance, could not get through the parliament in July last year, it has made positive impacts especially in road projects picked by lawmakers. The ordinance, which came into enforcement from April to mid-July, 2015, had a clause that required contractors to post higher performance guarantee if they are bidding less than 15 percent of the estimated project cost. Project officials and lawmakers are happy with the impressive progress made by road projects in different electoral constituencies. The ordinance required contractors to post additional guarantee of 50 paisa per rupee if their bid amount is lower than 15 percent of the estimated project cost. Performance guarantee for low bidding of up to 15 percent is capped at 5 percent of the bid amount. Lawmaker Rabindra Adhikari said that the ordinance was one of factors behind impressive progress seen in road projects in constituencies. Though lawmakers had asked the government to allocate Rs 100 million to implement road projects in each constituency, the budget had allocated Rs 50 million per constituency to be implemented by the Department of Roads (DoR) through a multi-year contract. “Spending is very encouraging in these road projects. The reason behind this is the ordinance, which discouraged low bidding, and continuous surveillance and monitoring of the lawmakers,” Laxmi Dutta Bhatta, deputy spokesperson of DoR, told Republica. Average spending in development projects stands below 25 percent. However, progress in spending by these road projects till mid-April is above 65 percent. The government has allocated altogether Rs 1.4 billion for 240 road projects in the current fiscal year. All the contracts were awarded when the ordinance was in effect. Low bidding has become a chronic problem in contract management as unprofessional contractors tend to bid low to take mobilization fund. After that they remain idle for long, affecting project development. In its 53rd annual report published two weeks ago, Office of the Auditor General had said that contract management was far better when the ordinance was in place. Though the additional performance guarantee has worked wonders, development partners have strong reservation on the provision. They argue that it will add burden on genuine bidders, particularly international firms. Source: Republica