Public Procurement Law in Nepal

Procurement pertains to the process by which a public entity obtains commodities, consulting services, or other services, or executes or arranges for the execution of construction projects. The process by which government agencies obtain goods, services, or construction projects from outside vendors is referred to as public procurement. The process commences with the recognition of a specific requirement for a product or service and progresses through the bidding or negotiation phase, contract award, and dispatch of the goods or services.

1. Public Procurement Laws in Nepal

In conjunction with the establishment of Public Procurement Processes without Discrimination, the Public Procurement Act, 2063 (2007) improved the managerial capacity of Procurement of Public Entities and established the regulating legal provisions for the Procedure, Process, and Decisions to Public Procurement.

In addition, the Public Procurement Rules, 2064 (2007) stipulate the Protocol for the Preparation of Procurement Documents, Procurement Plans, Contract Selection, and Tenders.

2.1 Preparation of the Procurement Plan, Cost Estimate, and Procurement Proceedings

Acquisitions or arrangements for acquisitions shall not be executed without the written consent of the appropriate governing body. Prior to initiating procurement proceedings, no public entity shall have allocated the essential funds. When procuring goods, a public entity is obligated to utilise any method specified in these Rules, including those manufactured in Nepal, even if the cost of such goods is up to ten percent higher than that of goods manufactured abroad.

The public entity shall only procure from a person, firm, organisation, or corporation that has obtained a certificate of value-added tax registration and a permanent accounts number from the inland revenue office.

2.2 Description of Services, Products, and Operations

Prior to acquiring any services, construction projects, or products, a Public Entity is obligated to compile pertinent descriptions such as specifications, plans, drawings, designs, and special requirements. Objective technical and quality characteristics, as well as the functions of the products, construction projects, or services, ought to inform the descriptions.

In general, specific brands, trademarks, names, patents, designs, varieties, origins, or manufacturers should not be mentioned in the description. However, in the absence of a viable substitute and when such reference is required, it is appropriate to append the phrase “equivalent to.”

In bidding or prequalification documents, descriptions, requirements, symbols, or terminologies used to describe technical or quality characteristics should not be superfluous to the operation of the services, construction projects, or products in question. It is inappropriate for them to impede competition or erect barriers without justification.

2.3 Cost Estimate

For any procurement, a Public Entity must produce a cost estimate. Nevertheless, there is no requirement for a cost estimate on purchases exceeding twenty-five thousand rupees in value. As required, the Public Entity must revise the cost estimate.

Procurement Plan A Public Entity is required to develop a master procurement plan and an annual procurement plan for any expenditures that surpass the prescribed limit.

3. Preparation of Procurement Plan

3.1. Plan for Master Procurement

In the case of plans or initiatives that surpass a duration of one year or have an annual value of one hundred million Rupees, it is mandatory for a public entity to develop a master procurement plan. The plan encompasses various aspects, as determined by the Public Procurement Monitoring Office, including the method of procurement, provisions for competition maximisation, type, quantity, and estimated value of procurement; the number of contracts; prequalification proceedings; and a provisional schedule, among other details. Annual updates are mandatory and require the secretary of the public entity’s consent of the master procurement plan.

3.2. Plan for Annual Procurements

A public entity generates an annual procurement plan in accordance with the master plan if annual procurement expenditures surpass One Million Rupees. The annual plan comprises elements such as a description of the procurement, potential packages, a timeline, the procurement method, the type of contract, and any other provisions deemed necessary by the Public Procurement Monitoring Office.

The timetable delineates critical phases of the procurement process, commencing with the compilation of specifications and concluding with the finalisation of work. The annual plan, estimated programme, and budget are transmitted by the chief executive officer of the public entity to higher offices and the Ministry of Finance.

The chief revises and authorises the annual procurement plan following programme and budget approval, notifying the Treasury and Accounts Comptroller Office and the Public Procurement Monitoring Office, among other superior offices. Proximate higher offices oversee procurement proceedings to ensure their timely completion.

4. Methods of Procurement

A Public Entity, in making any procurement, should, as much as possible, invite open bids. The procurement process should provide equal opportunities to qualified bidders without discrimination.

  1. Methods for Goods, Construction Works, or Other Services:
    • International Level:
      • Open bids at international level.
    • National Level:
      • Open bids at national level.
    • Other Methods:
      • Inviting sealed quotations.
      • Direct procurement.
      • Participation of users’ committee or beneficiary group.
      • Procurement through force account.
  1. Methods for Consultancy Services:
    • Competitive Proposals:
      • Procurement by requesting competitive proposals.
    • Direct Negotiations:
      • Procurement through direct negotiations.

5. Procedure of Public Procurement Bidding

  1. Invitation to Bid:
    1. (a) Inviting open bids by determining prequalification.
    2. (b) Inviting open bids without determining prequalification.
  2. Bidding Stages:
    1. The open bid may be invited in a single stage or in two stages.
  3. Conditions for Invitation:
    1. Invitation to bid is made based on the conditions set forth in Sub-section (1) of Section 28.
    2. It may be made in two stages.
  4. Determining Prequalification:
    1. For large and complex construction work or high-value goods, the Public Entity prepares prequalification documents.
    2. Publicly invites proposals for the determination of prequalification.
    3. The Public Entity may also determine prequalification for other procurements.
  5. Prequalification Documents:
    1. Documents set qualification criteria for prequalification.
    2. Specifies the method for proposal preparation and submission.
    3. Provided to all interested parties upon request.
  6. Selection Process:
    1. Selection of qualified applicants based on the criteria in prequalification documents.
    2. Openly publishes a list of selected applicants and notifies all applicants.
  7. Information for Rejected Applicants:
    1. If an applicant’s prequalification proposal is rejected, they can request reasons within thirty days.
    2. The Public Entity must provide reasons for rejection upon request.

6. Criteria for Qualification of Public Procurement in Capacity and Specification

6.1. Criteria for qualification of bidder supplying goods

(a) Technical capacity,

(b) Expertise of technician for installation,

(c) Assurance of smooth functioning for a specific period,

(d) Provision of repair and maintenance,

(e) Availability of services and reserve spare parts,

(f) Skills, mastery, experience, and reliability of the supplier.

6.1.1. Documents

(a) Details of goods supplied in the last three years,

(b) Check on production capacities,

(c) Certificates from quality control institutes,

(d) Samples, supplementary descriptions, or photographs,

(e) Proportion of supply intended to be sub-contracted,

(f) Authorization from the manufacturer if not self-manufactured,

(g) Representation documents for bidders outside Nepal.

6.2. Criteria of qualification of construction entrepreneurs

(a) General experience as prime contractor or in various roles,

(b) Minimum average annual construction turnover,

(c) Specific experience in construction works,

(d) Economic and financial capabilities,

(e) Qualified human resources,

(f) Key items of equipment.

6.2.1. Documents

(a) List of construction works in the last ten years,

(b) Proportion of proposed works for subcontracting,

(c) Statement of technical equipment and plant.

6.3. Criteria of qualification of proponent of consultancy service

(a) Experience (individual or institutional),

(b) Educational qualification and experience of key staff,

(c) Mode of performance, responsiveness, technology transfer,

(d) Managerial and financial capacity,

(e) Participation of native human resources (for international proposals).

6.3.1. Documents

(a) Description of similar consultancy services in the past three years,

(b) Details of key staff,

(c) Description of managerial staff,

(d) Proportion of consultancy service for sub-contracting.

7. Procedure for Tenders in Nepal

7.1. Obtaining Procurement via Tender

In Nepal, public entities are required to use a tender process to procure products, services, or construction projects worth more than one million Rupees. Furthermore, in instances pertaining to international matters as defined in Section 15 of the Act, the acquisition of services, construction projects, or products must be conducted via invitation to international open bidding.

In addition to the principal terms and conditions of the procurement contract, pre-qualification documents that are prepared by a public entity must encompass a range of pertinent particulars. These may include the prerequisite qualifications for the proposed work, qualification criteria for each partner in joint ventures, submission instructions, evaluation procedures, and principal terms and conditions. Additionally, the Public Procurement Monitoring Office has the authority to stipulate what should be included in these documents.

A public entity is required to obtain approval from the department chief for the prequalification criteria established prior to soliciting prequalification proposals.

For the provision of prequalification documents, public entities are required to charge a fee that varies from One Thousand to Fifteen Thousand Rupees, depending on the expenses incurred. The signature and the office insignia of the chief executive officer or a duly authorised employee of the public entity are required on these documents. Various entities, including the public entity itself, have the ability to furnish these documents.

7.2. Methodology for the Preparation and Submission of Tenders in Nepal

1. Examine the Tender Specifications:

With meticulous attention to the instructions provided by the public entity, peruse the tender documents. It is important to take note of the prescribed language for the tender and the manner in which the price should be specified in accordance with international commercial terms (INCOTERMS).

2. Compile the necessary documentation:

It is imperative to verify that the tender encompasses all mandatory information, including particulars regarding any joint venture, the submission of requisite documents, and, if pertinent, samples of goods. Provide a table of manufacturer-recommended spare parts, including the manufacturer’s stock number and pertinent pricing information, for the purpose of procuring goods.

3. Incorporate Crucial Information:

In the tender, specify the country of origin, manufacturer’s name, model, brand, and catalogue number of the merchandise. Please furnish details regarding the employee who has been assigned by the public entity to respond to inquiries pertaining to the procurement proceedings.

4. Tender Document Submission:

Obtain the procurement documents bearing the signature of the designated employee or the chief of the relevant public entity. The necessary fees must be paid in accordance with the valuation of the construction project or work for which the bid is being submitted. Request the public entity, if necessary, to deliver the tender documents via courier or postal service, with the appropriate charges specified.

5. Adhere to Notice Requirements:

The notice of invitation to tender should include a cost estimate for construction projects with a maximum value of six million rupees. Notify all foreign missions based in Nepal of invitations to participate in international tenders or prequalification proposals issued by the public entity.

7.3. Fees for Tender Documents

Value of Tender

Fees (Rupees)

1,000,001 to 6,000,000

1,000

6,000,001 to 60,000,000

3,000

60,000,001 to 100,000,000

5,000

100,000,001 to 2,500,000,000

6,000

Above 2,500,000,000

10,000

7.4. Documents to be Included in Tender Documents

A Public Entity is required to include the Following Documents in the Tender Documents:

(a) Tender instructions and tender form,

(b) Format of bid bond,

(c) Format of performance guarantee,

(d) Format of advance payment guarantee,

(e) Terms and format of procurement contract,

(f) Specifications and design,

(g) Work schedule for the commencement and completion of work,

currency in which payment is made, source and location

wherefrom materials can be available, and

(h) Other necessary documents.

8. Documents Required for Bidding

(a) Nature of Procurement:

  • Detailed Description
  • Timeframe
  • Technical Specifications

(b) Qualification Criteria:

  • Criteria for Bidders
  • Section 10 Reference

(c) Site Visit Information:

  • Provision Details

(d) Bid Conference:

  • Pre-submission Conference
  • Relevant Information

(e) Bidding Instructions:

  • Submission Guidelines
  • Deadline and Location
  • Bid Opening Details

(f) Price Component:

  • Bid Price Breakdown
  • Currency and Exchange Rate

(g) Bid Evaluation Criteria:

  • Methodology
  • Bidder Selection Criteria

(h) Preferences:

  • Domestic Goods
  • Local Entrepreneurs

(i) Lot and Package Details:

  • Separate Procurement Lots
  • Evaluation Approach

(j) Alternative Specifications:

  • Evaluation Method

(k) Partial Bid Submission:

  • Description of Allowed Portions

(l) Bid Validity Period:

  • Specified Period

(m) Security Requirements:

  • Type, Amount, and Validity
  • Bid, Performance, etc.

(n) Bid Security Period:

  • Exceeds Bid Validity by 30 Days

(o) Procurement Contract Terms:

  • Section 52 Details
  • Contract Entry Modality

(p) Conflict of Interest:

  • Non-processing Conditions
  • Fraud or Corruption Legal Action

(q) Bid Review Provision:

  • Application for Review

(r) Submission Envelope:

  • Technical and Financial Documents

(s) Additional Matters:

  • Determined by Procurement Office

9. Conclusion

Public procurement in Nepal is governed by the Public Procurement Act, 2063 (2007) and the Public Procurement Rules, 2064 (2007). Procurement entities must adhere to a comprehensive plan, encompassing master and annual procurement plans. The procurement process involves preparation, including the development of procurement plans, cost estimates, and detailed descriptions of services, products, and operations. Public entities are required to include various documents in tender documents, covering instructions, bid forms, performance guarantees, and more. The fee structure for tender documents is categorized based on the value of the procurement.

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