Selecting a contractor for construction works is one of the major factors that can influence the success of any projects. That is why client - which in the case of Nepal is mostly the government agencies - need to set appropriate qualification criteria so that the project can meet the desired quality and be completed in time, staying within the budget.

But the criteria should be set in a realistic manner so that it does not stifle competition among contractors or compromise on the quality of the project. The Federation of Contractors´ Association of Nepal (FCAN), an umbrella organization of construction contractors in Nepal, feels that the present qualification criteria is highly impractical and unreasonable and invites many problems in the construction industry.


If the criteria are too rigid, there may not be enough competitors, and so the cost of the project will be high. But if the criteria are too soft, any contractor can bid and complete the project with low quality and cost.

The present qualification criteria is unrealistic because it does not take the following things into consideration: existing number and capacity of contractors in the market, total number and size of projects to be launched and similar nature and size of the projects executed in the past by Nepalese contractors, said AD Lama, coordinator of technical committee at FCAN.

The qualification criteria set for the contractors demand very high average annual turnover given the present capability of Nepalese contractors. Also to be eligible for a certain project, contractors are also required to have completed one to three projects of similar nature.

“This criterion is biased against newcomers and small construction firms and limits their growth,” Lama said, adding that the present qualification criteria also does not give due importance to projects currently being handled by a contractor. “A few firms have many contracts in hand. But they are not doing the actual work. It is their joint venture (JV) partner that is doing the work.”

To meet the rigid selection criteria, contractors are teaming up (from two to five companies) to form JV by paying 1 to 5 percent commission to JV partners for their power of attorney and are operating projects single-handedly.

“More than 95 percent of JV contracts are executed single-handedly,” Lama said.

This shows that companies are capable of completing the project in time and deliver the expected quality even if they operate single-handedly. Strict selection criteria, therefore, is just an unnecessary hurdle for companies as it does not improve their quality but increases their operating cost.

The government is currently drafting a Standard Bidding Document that will bring all contracts within the jurisdiction of the Public Procurement Act 2063 and Public Procurement Rule 2064.

FCAN has urged the government to relax the annual turnover criteria in the Standard Bidding Document as only a few contractors are eligible to compete for big projects. It is also proposing that contractors completing a project worth 80 per cent of the estimated cost of the project, or two projects worth 50 percent of the estimated cost, or three projects worth 35 percent of the estimated cost in the last 10 years be eligible to compete for a bid.

FCAN believes that this would invite more competition and give a chance for smaller and new companies to compete with established companies. “Also, we want the government to carefully monitor the current project that is being handled by the contractors before handing them the project,” he added.

The government had consulted with FCAN while drafting Standard Bidding Document.

Indra Bahadur Shrestha, joint secretary at Public Procurement Monitoring Office, said they have tried to incorporate issues raised by FCAN in the final draft. “The draft will soon been forwarded to the government for approval,” he added.

courtesy:(Ang Sanu Lama, myrepublica, 2010-04-12)