The local governments have objected to the decision of the federal government to suspend all kinds of procurements through user groups for now.

The suspension came after various government reports identified anomalies and irregularities in construction works involving consumer groups.

The groups have, meanwhile, accused the government of attempting to undercut the local committees and siding with professional contractors.

Late last month, the Ministry of Urban Development decided to suspend all kinds of procurement through consumer groups until a clear working procedure is formulated.

The ministry said in a press statement in early November that it has formed a committee headed by the ministry’s joint secretary to prepare a working procedure regarding the works awarded to user/consumer groups. The statement said all kinds of procurement being undertaken by consumer groups have been suspended until a new working procedure comes into force.

The ministry has cited reports about irregularities in such procurements and substandard quality of work as the reasons for the suspension.

The local governments, however, have alleged that the federal government sided with big contractors and took the decision and they reject the suspension.

“We condemn the decision that bars local participation in development projects,” Ashok Kumar Byanju, chairperson of the Municipal Association Nepal, an umbrella body of the municipalities across the country, told the Post. “The decision has been made at the behest of professional contractors.”

He also claimed that construction works carried out by user groups have better quality than those done by professional contractors because the user groups have a sense of ownership of the works.

The Urban Development Ministry has decided to prepare the working procedure at a time when the Public Procurement Monitoring Office has already proposed a working procedure for public procurement through user groups targeting all government offices.

“Public Procurement Regulations have allowed us to prepare working procedures for executing public-sector construction through user groups. So, we prepared the working procedure. But, the move by the urban development ministry has highlighted anomalies in the works done by user groups,” said Rajesh Kumar Thapa, director at the procurement monitoring office.

Based on the ministerial decision of October 31, the urban development ministry wrote to its subordinate offices not to involve user groups in public procurement until a new working procedure comes into effect.

The ministry has also pointed to many anomalies in the works done by user groups such as the lack of uniformity in work, lack of competition, poor quality, and shortcomings in following the laws and regulations as observed by agencies including the Office of Auditor General, the Commission for Investigation of Abuse of Authority and the ministry itself.

Referring to a report of the anti-graft body, the ministry said in the press statement that the works done by user groups have not been effective and they have promoted corruption. Monitoring carried out by the ministry and its subordinate agencies also found many user groups have failed to ensure quality in their works and failed to stop irregularities.

According to observers, the involvement of the local politicians in user groups was one of the main reasons for the anomalies.

“In fact, politicians sought to provide benefits to their cadres who supported them in the elections by allocating budget to user groups represented by political party cadres,” said Rajuman Manandhar, a former joint secretary at the Department of Urban Development and Building Construction.

The local governments reject the allegations of irregularities and poor work quality saying the ministry was trying to generalise on the basis of a few incidents. “There is a constitutional anti-graft body to take action if there are irregularities,” Bansalal Tamang, general secretary of the National Association of Rural Municipality of Nepal, an umbrella body of rural municipalities, told the Post. “I object to the attempts to portray consumer groups in poor light.”

Even though the concept of carrying out construction works through user groups was introduced to create employment opportunities at the local level, those involved in user groups have increasingly sought to profiteer from the increased budgetary allocations for the user groups, according to officials and observers.

As per rule 97 of the Public Procurement Regulations, any construction project with estimated cost of up to Rs10 million can be implemented through a user committee if the committee has only the local residents or project beneficiaries as members.

“If a budget of Rs 10 million has been allocated for a certain project, the user group concerned subcontracts the work for around Rs7 million while pocketing the remaining three million rupees,” said Manandhar.

Rule 97 (9) of the Public Procurement Regulations bars user committees from using heavy machinery like loaders, excavators, rollers, bulldozers, grader bitumen distributors, and bitumen boilers. The intention behind this is to do the work manually and provide employment to more people. So the budgets of the projects awarded to user groups are usually high. “If machinery and heavy equipment are used then the costs of these projects come down by around 60 percent,” said Manandhar, adding, “So many user committees have been profiting by using machinery instead of manpower.”

The leaders of the umbrella body of the local governments say the federal government first needs to revise the Public Procurement Act before deciding to bar consumer groups from procurements. “How can a minister take a decision against the law,” said Tamang.

Professional contractors meanwhile say the cost of work done by user groups is always high because their work is labour intensive. Rabi Singh, the president of the Federation of Contractors’ Association of Nepal, said the cost of a project could go up by 3-4 times as user committees are not allowed to use heavy machinery.

Even though the regulations have barred user groups from using heavy machinery in construction works, they are silent on penalty for those violating the provision. This point has also been raised by the Commission for Investigation of Abuse of Authority in a 2020 report titled Corruption at the Local Level. “There is no provision about what penalty those using heavy machinery would face in the public procurement regulations,” the report says recommending provision of penalty for rule violators.

In its 30th Annual Report 2019-20, the anti-graft body has pointed out many anomalies in the public works carried out through user groups. According to the report, the local governments have been making advance payments to user groups without following due legal procedure, people represented in the users’ groups have been using such advance amounts for personal benefits and there is a tendency of giving work completion certification without ensuring that the work has been completed.

The report has also pointed out the tendency of subcontracting the construction work to professional contractors, using heavy equipment and making payments without carrying out technical assessment of the construction work. There is also a tendency of approving budgets for user groups without ensuring cost-sharing from user groups, the report says. As per clause 97 (2) of the public procurement regulations, there is a provision of cost-sharing between the government and the user groups.

Manandhar also said the user groups hardly share the cost on their part given the tendency among user groups representatives of pocketing project funds.

Singh said the government could penalize unruly contractors in many ways but user groups have hardly been penalized for violating the rules. “The user groups do not need to submit a security deposit before being awarded construction contracts and they are also not responsible for repair and maintenance after the completion of the work,” said Singh, adding, “In fact, they enjoy full immunity from any wrongdoing.”

Given such reports about the anomalies, the Public Procurement Monitoring Office came up with a working procedure to tame the wayward user groups.

Thapa of the procurement monitoring office said his office has proposed scrapping the registration of user groups involving professional contractors and user groups that subcontract work to professional contractors should be blacklisted.

The proposed working procedure also bars user groups from being involved in public sector procurements except those related to construction projects. “There is also the trend of users’ groups getting involved in supplying various materials to government entities and we have proposed barring this,” said Thapa.

Given the involvement of local politicians in user groups, which invites conflict of interest, the proposed working procedure has barred elected representatives, officer-bearers of political parties, employees of government entities, teachers, and contractors from participating in user committees formed to carry out public construction works.

“There is a tendency of forming user committees involving people with vested interests on the instruction of elected representatives at the local level,” the anti-graft body stated in its report. “The committees are represented by people having political and administrative access, serving teachers and elected representatives themselves.”

Observers say it is necessary to prepare a working procedure categorising the development works which can and cannot be carried out by consumer groups. They say procurement through consumer groups should be limited to non-technical works that do not require high skills. “It is necessary to itemise the works that can be implemented through local consumer groups,” Khem Raj Nepal, a former secretary, told the Post. “I, however, stand against a blanket ban on procurement involving user groups.”