Thukten Zangpo

With roughly 70 percent of contractors facing a work drought or difficult financial circumstances, a major overhaul of the Procurement Rules and Regulations (PRR) 2023 is expected to revitalise the sector.

The government is currently revising the PRR and the standard bidding document to address the industry’s challenges.

A consultation meeting scheduled for December 3 between the Department of Procurement and Properties and contractors is expected to allow industry leaders to voice concerns and propose changes as the government fine-tunes procurement processes.

These discussions are expected to focus on streamlining the rules and ensuring more equitable conditions for contractors across the country.

Contractors have raised several issues with the current procurement system, including direct contract awards, a lack of uniformity in the PRR, and the dominance of certain agencies over others, leaving contractors with few opportunities.

The president of Construction Association of Bhutan, Trashi Wangyal, said that many contractors are on the brink of financial collapse, with some receiving loan deferments until June next year while others struggle with non-performing loans.

The pandemic’s long-lasting impact on the construction industry has left many unable to access crucial funding, including working capital and bank guarantees, as they fall behind on payments.

Trashi Wangyal pointed out that the PRR varies widely between procurement agencies and dzongkhags, which leads to inconsistency and confusion for contractors.

Contractors have voiced concerns that special conditions in contracts are often created based on the resources available to specific contractors, potentially limiting fair competition. This also raises the issue of coalition between friendly contractors and the procurement agency.

Another major issue raised is the direct awarding of contracts, which bypasses the formal procurement process and undermines the PRR.

In particular, community contracts are frequently awarded to contractors who lack the necessary licenses, experience, or safety protocols.

Trashi Wangyal said that while contracts below Nu 1.5 million are eligible for direct award, this has led to the splitting of larger contracts into smaller amounts to circumvent the rules. “There are some cases where the contract work amounting to Nu 3 million is divided into Nu 1.5 million,” Trashi Wangyal said.

“PRR often favours the procuring agencies, leaving contractors to shoulder all the risks,” he said.

He said that all the risks are with the contractors that includes 10 percent performance bonds or bank guarantee and 10 percent retention money for work done. It is a guarantee that the contractor will execute the contract.

To address the issue of oversaturation in the market, Trashi Wangyal proposed that the government manage contractor numbers based on performance, ensuring that only qualified contractors are given work.

However, he emphasised that these contractors should be given opportunities to prove their capabilities through actual work assignments.

The contractors are also urging the government to initiate third-party quality monitoring of works to determine the capability of contractors.

The contractors have also called on the government to simplify procurement rules, especially in the aftermath of the pandemic.

There are 2,800 contractors in the country, of which 300 are large and medium contractors. More than 10,000 people are employed in the industry. 

“The government support to the private sector should be realistic and the outcome should be tangible to trickle down to the economy,” Trashi Wangyal said.

With a capital budget of more than Nu 200 billion in the 13th Plan, contractors are hopeful that the revised policies will provide a boost to the sector.