Government tightens procurement law with penalties, faster bidding and pricing reforms

Nepal has significantly reformed its Public Procurement Act 2007, introducing criminal liability for contractors who misuse advance payments. This amendment aims to enhance project delivery and curb delays by imposing stricter penalties and streamlining processes.

The revised law now holds contractors, suppliers, and consultants liable for fraud and forgery if they divert public funds intended for contracted work. This includes actions like abandoning projects after receiving payments or using mobilization advances for purposes unrelated to the contract, potentially leading to prosecution under criminal laws.

Previously, contractors could receive substantial advance payments, which were sometimes misused for personal investments like land purchases, leaving projects incomplete. The amendment also introduces provisions for price adjustments in construction contracts under exceptional circumstances, such as international crises or supply chain disruptions, provided Cabinet approval is obtained.

Construction companies have expressed approval of the amendments, particularly the move towards an average bid evaluation system instead of solely relying on the lowest price. They believe this will foster fair competition and elevate the quality of construction projects across the country.

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If an investigation or inquiry finds that false information or documents were submitted to receive payments, work was abandoned after receiving payments, or actions caused financial losses to the state or public agencies, the directors, representatives and responsible officials involved will be prosecuted under prevailing criminal laws, including those related to fraud and forgery.