Who is Responsible for the Growing Number of Underperforming Projects?

Various government agencies have been issuing daily notices to terminate or cancel non-performing construction contracts since mid-September. The projects include those under the health sector, urban roads, irrigation, and even national priority roads and bridges.

Among them, the Department of Roads (DoR) has recorded the highest number of sick contracts. The department has sought clarifications from contractors involved in 229 projects, questioning why their contracts should not be terminated. According to the department, its subordinate offices — including project offices for national pride projects and 37 road division offices under the Federal Road Supervision and Monitoring Office — have issued notices seeking clarification between September 18 and November 3.

Government and Contractors Both at Fault

Data show that of the 229 sick projects, 70 became inactive due to government-related factors, while 159 turned non-performing due to the contractors’ shortcomings.

The department has categorized sick contracts into four types: those made sick by contractors, by government agencies, by both sides, and those affected by uncontrollable circumstances. The ongoing study focuses on projects that failed due to government and contractor-related causes, and a task force has been formed to analyze them.

While the government’s practice of seeking clarifications and blacklisting non-performing contractors is not new, the current administration has taken a more systematic approach to ending contracts that have remained inactive for years. Officials admit, however, that delays are not always the contractors’ fault — issues such as inadequate budget allocation, delayed payments, lack of site clearance, and land acquisition problems have also caused projects to stall.

Regulations Repeatedly Amended

The government has amended public procurement regulations several times to allow deadline extensions for incomplete projects. Despite these changes, many contracts have exceeded their original deadlines without completion. Offices under the Department of Roads, Department of Urban Development and Building Construction, and Department of Irrigation are currently issuing 15-day notices seeking clarification on why such contracts should not be terminated.

Projects Left Unfinished for Years

The Kanakai Bridge in Jhapa has remained incomplete for 14 years. Similarly, sections of major highways such as the Mid-Hill (Pushpalal), Madan Bhandari, and Postal highways are also classified as sick projects.

The Department of Urban Development’s Intensive Urban and Building Construction Project (Dhading) recently sought clarifications from nine contractors for failing to complete health post buildings, monasteries, and the integrated Rasuwagadhi Customs Office within the contract period.

Former government secretary Arjun Jung Thapa said the current process of contract termination is justified. “It’s positive to end contracts that have shown no progress for years,” he said. “During my tenure, over 966 road and bridge projects were sick. We resolved them differently — we terminated unworkable ones, extended deadlines for active ones, and provided budgets which lacked funding. That reduced the number of sick projects to around 200.”

He added that while contractors should be given extensions if they show progress, those failing to perform should face contract termination and blacklisting.

Thapa also acknowledged government shortcomings, such as delays in payments. “Last year’s payments for bridge construction have still not been cleared,” he said, adding that excessive pressure on contractors is also counterproductive. “But many contractors misuse the system — they bid jointly under weak companies, delegate the work, and remain inactive, making it unclear who is actually responsible for the project.”

Termination Not Always a Solution

Machakaji Maharjan, Director General of the Department of Urban Development and Building Construction, said clarification notices were issued to contractors who failed to work for extended periods. “If contractors fail to provide satisfactory explanations, we will proceed with action,” he said. “We are issuing repeated notices because we want progress. However, once a contract is terminated, managing the project becomes difficult.”

According to him, action will be initiated against contractors involved in 28 such projects, which range from Rs 40 million to Rs 500 million in value.

Officials said several projects became inactive due to government-related issues. For instance, in the Punyamata Corridor in Kavre — divided into three packages — work could not start because of unresolved land acquisition problem and court cases.

The project, contracted on July 31, 2020, was supposed to be completed within 18 to 24 months but remains at zero progress due to a pending Supreme Court verdict on land compensation.

Similarly, a project to build the Santhal settlement in Urlabari, Morang, has been halted since 2021 following a local land ownership dispute. The construction company has already returned its advance payment and requested contract termination.

Even projects that are 90 percent complete in urban road construction are facing possible termination.

Kanakai Bridge Still Unfinished After 14 Years

The Kanakai Bridge under the Postal Highway Project remains incomplete despite repeated efforts. Ravi Singh, Managing Director of Mahadev Khimti Construction and President of the Federation of Contractors’ Associations of Nepal (FCAN), said his company had taken responsibility for the bridge under a joint venture with Pappu Construction.

“After Pappu Construction failed to complete the work, I tried to move forward, but the National Vigilance Centre found technical faults during an audit in 2022 and stopped the project,” Singh said. “The office later directed us not to continue, though the Postal Highway Project again instructed us to resume work this year.”

Awaiting Final Decision

Shubharaj Neupane, Chief of the Federal Road Supervision and Monitoring Office, Kathmandu, said the office is currently reviewing explanations submitted by contractors in response to the 15-day notices. “If contractors provide satisfactory reasons, the contracts will not be terminated,” he said. “Otherwise, we will proceed with cancellation. A final decision will be made within this week.”