Even as the government warns of stringent action against non-performing and under-performing contractors, little attention has been paid to possible collusion among the contractors to limit competition.

A report of the Public Procurement Monitoring Office (PPMO), the government entity that monitors public contracts and procurements, has exposed collusion in a number of projects in a way to cost the national treasury dear.

The report titled ‘A Collection of Reports on Public Procurement Monitoring and Complaints’ points to possible collusion among bidders while participating in and bagging contracts for road and bridge projects in the under-construction Dharan-Chatara-Gaighat-Katari-Sindhuli road and the Galchhi-Trishuli-Mailung, Syabru-besi-Rasuwagadhi road project.

The report also hinted at collusion when the Department of Health Services invited tenders for services related to medical equipment.

In case of the Dharan-Chatara-Gaighat-Katari-Sindhuli road, two packages were designed each for road works and bridges while works under the Galchhi-Trishuli-Mailung-Syabru-besi-Rasuwagadhi project were in a single package. Thus, there were a total of five packages in the three projects.

Only three contractors submitted bids for each of the five packages, in hard copies, instead of participating through e-tender. Surprisingly, only one bidder quoted a little less than the estimated cost while the other two bidders quoted slightly higher than the estimate.

As per the Public Procurement Act, the lowest bidder is awarded the contract. So deals were signed with contractors quoting the lowest amount. In all packages, certain bidders were repeated frequently. In five packages, only nine Nepali and two foreign contractors submitted bids. The report says it might not have been a mere coincidence.

These projects could have been packaged in different reasonable sizes but were broken into so large components that only certain firms could participate in the bidding process. In order to limit competition, an unusually high average annual construction turnover was demanded.

Since foreign contractors cannot bid for projects worth less than Rs1 billion, there are a small number of contractors who qualify to undertake enlarged projects, according to PPMO officials.

Arjun Thapa, chief of the bridge division at the Department of Roads, said he had no idea how the contract for bridge component of the Dharan-Chatara-Gaighat-Katari-Sindhuli road was awarded. “Even the Commission for Investigation of Abuse of Authority had investigated the contract process for these projects,” he told the Post.

In its annual report for the fiscal year 2016-17, the PPMO has pointed out the trend of oversizing project packages to curb completion, which is misuse of public money, while a limited number of companies getting most contracts delays completion of the projects. Not only in road projects, efforts have been made to limit competition in other public procurement works too.

According to the report, while selecting firms for maintenance of medical equipment, the Department of Health Services set criteria in a way to limit competition.

A tender notice issued on July 14, 2016 required five-year experience of the bidder in Nepal’s hospital sector and an overall turnover of last three years against the practice of seeking average annual turnover of three years.

The maintenance services were sought in three lots. Due to limited competition, the department approved the bid which quoted prices almost equivalent to the estimated cost for the first two lots.

Its approved bid in the third lot was competitive due to the entry of a foreign firm, the report said. “Such a situation was created where many firms could only purchase tender documents,” the report said.

Jayaram Lamichhane, chairman and managing director of the Swachhanda Nirman Sewa, which got the contract for one of the Dharan-Chatara-Gaighat-Katari-Sindhuli road packages, denied charges of collusion in the projects where his company participated. “If there are not big differences in quoted prices, it may just be a coincidence,” he said.

He said that limited competition in big projects was natural because there were only a small number of Nepali contractors who qualify for such contracts.