On the Bill of Public Procurement (Amendment) Act, 2063 (2007)

(This is excerpt of opening remarks given by Dr Bipin Adhikari as Chairperson of Nepal Constitution Foundation at the bill review programme On the Bill of Public Procurement (Amendment) Act, 2063 (2007) organised on January 03, 2012)

Nepal has been going through the process of public procurement reform in recent years. A new Public Procurement Act enacted in 2007 made a significant progress in this regard. The capacity to enforce public procurement laws and regulations, and to manage and conduct procurement is still a challenge in the country often leading to ineffective use of scarce budgetary resources. As procurement reform often meets major resistance from vested interests within society there is a growing recognition of the need to understand and address the underlying factors that may undermine political will for reform and more systematically analyze the effects of political incentives on the feasibility and sustainability of such reforms.

The Public Procurement Act of 2063 (2007) was enacted with the intention to –

• make the procedures, processes and decisions relating to public procurement much more open, transparent, objective and reliable
• obtain the maximum returns of public expenditures in an economical and rational manner by promoting competition, fairness, honesty, accountability and reliability in public procurement processes
• ensure good governance by enhancing the managerial capacity of procurement of public entities in procuring, or causing to be procured, construction work and procuring goods, consultancy services and other services by such entities, and
• ensure equal opportunity for producers, sellers, suppliers, construction entrepreneurs or service providers to participate in public procurement processes without any discrimination.

The Act is being amended now on the basis of the experience of its implementation and enforcement. This Amendment Bill has been brought to make requisite and relevant changes to the Act.

Firstly, the Bill proposes Amendment to Section 2 containing definitions. The Amendment Bill seeks to change the sub clause (f) which defines "other services" which would now include - "any act of printing or publishing", "hiring motor vehicles, equipment or goods, carriage or repair and maintenance of goods" and "any service other than consultancy". The Bill also seeks to amend Section 10 which is about Qualification of Bidder or Proponent, by adding sub clause (5A) which says that regardless of anything in this section, no qualification shall be required for procuring any construction work amounting up to Rs. 2 crores until 2069 Asadh, other than construction works requiring special experience, manpower or machinery. Regarding Section 14 which is about invitation to bids, the Bill seeks to remove the phrase "if security to the bid is required". In the same section the Bills seeks to add the restrictive proviso to sub clause (6) which states that up till 2070 Asadh provisions may be made for presenting or sending bids for more than one public institution.

An important addition that this Bill seeks to make is the addition of Section 26A which provides for conditions that lead to assumption of collusion between bidders. Section 27 is regarding the acceptance of bid and procurement contract. The Amendment Bill seeks to add sub clause (6A) which states that the names, addresses and the bid amount of the bidders accepted as per sub clauses (5) and (6) must be informed to the other bidders. Two more sub clauses (8) and (9) are sought be added to Section 48, regarding the review committee. Sub clause (8) provides for circumstances when the post of chairperson is deemed to be vacant and sub clause (9) says that the work procedure of the review committee shall be as provided. Section 51 is regarding the withholding of procurement proceedings. The Bill seeks to make the review committee involved in this proceeding.

In Section 54(1) regarding variation order the Amendment Bills seeks to replace "the Council of Ministers of Nepal Government" with "Secretary under the recommendation of the specified committee". A new sub clause (f1) is sought to be added in Section 62 which says that one cannot present bid related papers in the same public agency more that two times in the same years. This is another provision seeking to discourage collusion. Section 67 lays down the conditions where the procurement process under this Act need not be applied. The Bill seeks to add (1) (c) which says that if the public agencies per section 2(b)(2) have to buy to keep their business savings (maujdat) or any raw materials.

The positive aspect of the Amendment Bill is that it follows the principle that laws need to be amended to make them practical in tune with the change of time. It also corrects several errors that existed in the Act in Sections- 14(3) (d), 36, 25, 40(2), and 41(3). The Bill provides a basis for assuming collusion between bidders, punishing such behaviour and disallowing such bids.

However, there are several simple errors that the Amendment Bill has not addressed that exist in Sections 2 (e), 8 (1), 10(1), 41(2) etc. Besides these there is a need for clarity in the Act. For example it is not necessary under the Act to present certificate of registration or permanent account number to be able to make a bid. However, the prevailing practice is such that in order to make a bid, it is necessary to present certificate of registration, tax registration etc. Therefore the Act must clarify that such registration is not necessary for the bidding process.

According to Section 14(11), in the case of procurement of public construction work, preference may be given to a foreign bidder which enters into joint venture with a domestic construction entrepreneur. This is not the best practice according to the UNCITRAL model and OECD DAC. Once the bidding process starts until the sale agreement is complete, the process, apart from the people involved in the evaluation process and the institution heads is kept confidential from the rest of the world. This is mentioned in an unclear manner in the Public Procurement Rules in Rule 61(3). This should be expressly mentioned in the Act.

In the current Amendment Bill, the inclusion of Section 10(5A) is like giving away Rs. 2 crores without expecting any work in return. This provision can enable even an unqualified person to get the contract and no qualified builder will come forward to compete against unqualified persons in this manner. It is absurd that before 2nd Asadh 2069 no qualification is required, whereas after the date qualification is required. Another part of the Amendment Bill, regarding Section 14(6) appears to be affecting the transparency of the whole process. Allowing bids to be registered at more than two places is against the minimum standard of international practice.

The Amendment attempts to specify the characteristics of collusive behaviour of bidders. However under Section 26(2) if there are only two bidders and one drops his bid, then you cannot consider it as collusion. It is notable that in many cases the officials of the agency are themselves involved in corrupt practices by favouring certain bidders. Therefore a set of rules must be formulated to make this more effective. Section 1(2) of the Amendment Bill states that it shall be effective from the day of being certified. Section 26A holds that in case of collusion, action shall be taken according to Section 62(2). This can result in retrospective application of criminal law.

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