Government continues policy of using cooperatives in construction projects amid corruption concernsThe policy first announced last year has yet to be implemented in the absence of necessary legal provisions.
The government has once again announced that public construction work costing up to Rs100 million would be implemented through labour cooperatives, inviting fresh protests from contractors.
The budget for the fiscal year 2022-23 states that at least 500,000 poor unemployed youths would be mobilised in public construction projects to be implemented through labour cooperatives.
The youths from the target group can form labour cooperatives and register the groups with the local units concerned and compete with other similar cooperatives for construction projects of the federal, provincial and local governments, according to the budget.
Last year also, the government had made a similar declaration through the Replacement Bill on budget in September. But the plan has not been implemented in the absence of necessary legal provisions for the mobilisation of such cooperatives.
Contractors have been protesting the budgetary provisions since last year arguing that it is another way of mobilising user groups in construction projects and rendering small-scale contractors jobless.
But, the government which has not implemented the plan in the current fiscal year, has renewed the plan for the next fiscal year too.
“It is just another way of implementing projects through the users’ groups that do not even have the capacity to implement projects of up to Rs10 million,” said Rabi Singh, president of the Federation of Contractors’ Association of Nepal.
“It is a well-known fact that user groups are awarded projects without competition. They quote higher costs in the name of doing the work manually and later hire other contractors and heavy machinery to do the work and take the cut,” Singh told the Post.
Singh believes that the continuation of the plan along with many other populist programmes is guided by the upcoming provincial and federal elections in mind.
“With such schemes, the political parties seek to reward their cadres and mobilise them for political gains,” said Singh.
Though the contractors believe the labour cooperatives are another form of user groups, it is, however, still not clear how the government wants to mobilise labour cooperatives in the public construction projects.
“So far, no legal provision has been made regarding such cooperatives,” said Rudra Singh Tamang, joint secretary at the Ministry of Federal Affairs and General Administration.
While presenting a budget replacement bill in September last year, Finance Minister Janardan Sharma had said the government would make a legal provision allowing labour groups or labour cooperatives to participate in construction projects costing up to Rs100 million through competition among such groups.
If the labour cooperatives are mobilised like user groups, the question remains of whether they would be able to carry out large scale construction projects without the use of machines.
Rule 97 (9) of the Public Procurement Regulations bars user committees from employing heavy machinery like loaders, excavators, rollers, bulldozers, grader bitumen distributors, and bitumen boilers. The intention behind this is to provide employment to more people through manual work, so the budgets of the projects awarded to such users’ groups are usually high.
“If machinery and heavy equipment are used then the costs of these projects come down by around 60 percent,” Rajuman Manandhar, a former joint secretary at the Department of Urban Development and Building Construction, told the Post in November last year. “So, many user committees have been profiting by illegally using machinery in place of human labour.”
The government does not have a consistent policy regarding the mobilisation of the user groups in construction projects.
As per rule 97 of the Public Procurement Regulations, construction projects costing up to Rs10 million can be implemented through user groups. But at least two federal ministries last year issued notices ordering the suspension of construction works through the users’ groups amid complaints about irregularities in the implementation of the projects by the users’ groups.
In October last year, the Ministry of Urban Development suspended all kinds of procurement being undertaken by consumer groups pending issuance of new guidelines regarding their mobilisation.
After this, the Ministry of Federal Affairs and General Administration issued a circular to local governments ordering them not to implement construction projects through temporary user groups, claiming that would be illegal. But the circular was ignored amid strong protests from local governments.
The urban development ministry had pointed out 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 the 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 work done by user groups has not been effective and has instead promoted corruption. A monitoring carried out by the ministry and its subordinate agencies also found that many user groups had failed to ensure quality in their work and failed to stop irregularities.
Likewise, the federal affairs ministry had pointed out, referring to the 58th annual report of the Office of the Auditor General, that mobilising user groups which were not registered under Section 3 of the Associations Registration Act 1977 would be illegal.
“Since user groups are formed temporarily to implement certain projects and are dissolved after the completion of the work, they cannot be made accountable for operation, repair and maintenance, and they also don’t get their income and expenditure audited,” the circular of federal affairs ministry issued on December 7 last year states.
Representatives of local governments had, however, claimed that user groups have done better jobs than professional contractors in many cases. After strong protests by local governments, the federal affairs ministry had withdrawn its circular and formed a committee to draft a set of guidelines for mobilising user groups in development works at the local level.
Tamang, joint secretary at the Ministry of Federal Affairs and General Administration, however, claimed that user groups overall have done a good job despite some reports of anomalies. “User groups have built local roads as long as 80,000-90,000 km,” he said. “But the main problem with user groups is, in some cases, they are found to have taken up projects that are clearly beyond their expertise and capacity.”
The government’s new plan to use labour cooperatives to implement projects has also raised doubts if they will be able to handle bigger construction projects with budgets ten times larger than those implemented by user groups.
“There is obviously a question about the capacity of the labour cooperatives. I am not sure with what intention the new plan has been introduced. Maybe large construction works can be carried out through large cooperatives,” said Tamang.