First Business News Portal in English from Nepal
The government is planning to amend the Multi-year Contract Guidelines with an aim to make public expenditure more effective and the allocation process more reliable. The Ministry of Finance (MoF) has sent a draft of the amended guidelines to the Council of Ministers for final approval.
The MoF has proposed to keep minimum budget threshold while issuing the multi-year contract order for development projects. The minimum threshold for government buildings has been set at Rs 200 million. Similarly, the minimum threshold for other infrastructure schemes like roads, bridges and hydropower projects, among others has been set at Rs 500 million.
However, this threshold will not be applied to National Pride Projects and game-changer projects selected by the National Planning Commission.
Earlier, contractors and ministries used to lobby for multi-year contract orders for even small infrastructure projects so that they could extend the deadline that had been set to complete the projects.
“Ministries tried to award multi-year contracts even for small projects that could be completed within a year because with multi-year contracts they had the benefit of varying the orders and increasing the cost of the projects,” revealed a high-level official at the MoF.
With this amendment ministries will now be compelled to complete the infrastructure projects that have a threshold of one year within the stipulated deadline from the date the projects commence construction activities. Likewise, contractors will also be obliged to complete the projects within the given deadline.
“We are hopeful that infrastructure projects will be completed within the designated time once the amendments are endorsed by the Council of Ministers,” said Finance Secretary Sishir Kumar Dhungana.
The Finance Ministry has also proposed to amend the minimum requirement of budget allocation for multi-year contracts. As per the current provision, the government must allocate one-third of the total cost of the multi-year contracted projects in the first fiscal year.
A proposal has also been forwarded to amend this provision whereby the budget initially allocated will be reduced to 15 per cent for those projects which take more than five years to complete. Likewise, other provisions in the draft include allocating 20 per cent of the total budget in the first year for those projects that will be completed in four years and 25 per cent of the total budget for projects that will be completed in three years.
“This provision will help to make the budget allocation process more realistic,” said Finance Secretary Dhungana. Earlier, the government had amended the guidelines last year.
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