Nepali Contractors Lack Expertise and Experience to Bag Contracts Under MCC

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Nepali Contractors Lack Expertise and Experience to Bag Contracts Under MCC

With large investment projects operating in Nepal, it is even more difficult for a Nepali construction company to win a contract.

--BY NEWBIZ TEAM

Although Prime Minister Sher Bahadur Deuba called upon the Nepali construction companies to take maximum benefit from the Millennium Challenge Corporation (MCC) ratified by the parliament, it is highly unlikely that they will be able to apply for the contract.

The technology, qualifications and experience required for the construction of the transmission line, substation and road under the MCC project are highly advanced, unlike those used  by Nepali construction companies.

Inaugurating the 23rd Annual General Assembly and 12th Convention of the Federation of Contractors' Associations of Nepal (FCAN) in Kathmandu on March 11, PM Deuba said that Nepali companies should be successful in getting MCC contracts. “As per the provisions of MCC, international bids are invited for the contract,” he said, adding, “China and India are the likely contenders for the bids. But, Nepali construction companies should also be able to come and take benefit.” The US government will be spending around USD 500 million (around Rs 55 billion) and the Government of Nepal will contribute USD 130 million (around Rs 15 billion) under this project.

With large investment projects operating in Nepal, it is even more difficult for a Nepali construction company to win a contract. Khadga Bahadur Bista, Executive Director of Millennium Challenge Account Nepal (MCA) Nepal, informed that the Nepali companies face an uphill battle to participate in road construction under this project.

Stating that international tender bids will be called within the next six months for the construction of substation, transmission line and road, Bista said that Nepali companies will be able to participate in this tender. “However, the Nepali company must be able to meet the criteria for the contract (package),” said Bista, adding, “Besides, due to lack of experience in technology and technical expertise in the construction of roads, transmission lines and substations under the MCC project, the chances of Nepali construction entrepreneurs getting a contract is quite slim.”

Bista added that it is even more difficult for Nepali construction companies to get involved in road construction but said that the construction of transmission lines and substations can be done through joint venture (JV) companies and subcontractors. Although many are not in favour of splitting the package for the construction of the project, Bista said that discussions are underway to make several packages for the transmission line. He argued that discussions are being held to make some packages for the transmission lines as there could be problems if only one company is selected for the construction of the 315 km transmission line. Separate contracts will be called for substation and transmission line, said Bista.

Similarly, for the first time in Nepal, new technology is being used in the construction of a 77-km road in the East-West Highway with this grant. Due to this reason, it is expected that it will be more difficult for Nepali construction companies to build the road. An infrastructure expert said, “Even with the limited financial capacity, technology and experience of the domestic construction companies, it is almost impossible for them to participate in the MCC project on their own, although they can participate through JV.”

New technologies such as 'Full Depth Reclamation' and 'Superior Performing Asphalt Pavement (SuperPave)' will be used in the road to be constructed under this project. ‘Full depth reclamation’ is the removal of sand and ballast from the road to be constructed. The old material is reused by adding new cement to it. Similarly, in ‘Superior Performing Asphalt Pavement (SuperPave)’, the road surface is leveled. As this technology is new in Nepal, it seems that the qualification and experience of the domestic construction companies is not enough.

Chairman of Sharma & Company Ramesh Sharma, on the other hand, said that the size of the contract will depend on the size of the package after the detailed project report (DPR) is prepared. He says that Nepali construction companies can participate in contracts worth up to Rs 8 billion alone. “If a contract worth Rs 3/4 billion is proposed, it is possible for a Nepali company to get a contract from MCC,” said Sharma.

Construction companies of Nepal are now eligible to bid for contracts up to Rs 3 billion after the government increased the capacity through amendment to the procurement regulations. This has also boosted the morale of the domestic companies.

As there is a provision that Nepali companies can bag contracts up to Rs 10 billion through JV, Nepali companies will be able to land the contract of MCC even through JV. Chairman of Independent Power Producers Association of Nepal (IPPAN) Krishna Prasad Acharya emphasised on the need to give opportunity to Nepali construction companies. Arguing that Nepali companies are financially capable and the consultants are also groomed in Nepal, he said that the opportunity should be given to the domestic companies as well.

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