The Public Procurement (Second Amendment) Act, 2083 has introduced several significant changes to Nepal's public procurement framework. The amendment aims to make public procurement more efficient, competitive, transparent, accountable, and responsive to the practical challenges faced during the implementation of public projects.
The changes cover a wide range of areas, including pre-procurement preparation, procurement methods, bidding timelines, bid evaluation, average bid selection, performance security, professional liability insurance, domestic goods, social security, variation orders, blacklisting, force account works, land acquisition, special goods procurement, and the responsibilities of government agencies and contractors.
This article presents a comprehensive comparison between the Public Procurement Act, 2063 (2007) and the Public Procurement (Second Amendment) Act, 2083 (2026), highlighting the major legal and procedural changes introduced by the amendment.
Expanded Definitions and Scope
Under the Public Procurement Act, 2063, "Goods" were generally defined to include movable or immovable items. The amended law expands the concept to include both tangible and intangible goods.
This broader definition reflects the changing nature of modern procurement, where government entities increasingly procure not only physical products but also digital and intangible assets.
The definition of "Other Services" has also been expanded.
Previously, it primarily covered services such as:
- Vehicle rental
- Equipment rental
- Transportation
- Repair and maintenance
The amended framework explicitly includes additional non-consulting services such as:
- Advertising
- Security services
- Cleaning and sanitation
- Air ticketing
- Infrastructure management
This clarification is expected to reduce ambiguity regarding the procurement procedures applicable to various non-consulting services.
The amendment introduces a clearer definition of domestic goods. Goods must contain at least 30% value addition to qualify as domestic goods.
This provision is intended to promote domestic production and encourage the use of locally produced goods in public procurement.
Mandatory Pre-Procurement Preparation
A new provision relating to pre-procurement preparation has been introduced.
Before inviting bids, the procuring entity must ensure that essential prerequisites are in place, including:
- Availability and confirmation of budget;
- Availability and clearance of the construction site;
- Necessary arrangements for removal of trees and vegetation;
- Availability of budget for compensation;
- Approval of required environmental study reports.
This provision seeks to prevent situations where procurement is initiated before the necessary legal, financial, environmental, and physical conditions are ready.
In practical terms, it promotes the principle of "readiness before procurement."
Negotiation with Bidders
The amended provision relating to negotiations with bidders introduces an important mechanism.
If the bid prices submitted by all bidders exceed the approved cost estimate, the public entity may negotiate with the bidders to bring the price within the approved cost estimate.
The negotiation may involve agreement on a lump-sum discount percentage.
However, the quality requirements and technical specifications cannot be compromised during such negotiations.
Therefore, the amendment attempts to balance cost efficiency with quality assurance.
Selection Through Lottery in Case of Equal Scores
The amendment introduces a lottery mechanism in specific circumstances.
Where the Average Bid Method is used:
- If two or more bidders obtain exactly the same score; or
- If two bidders are equally distant from the average bid—one above and one below the average,
the successful bidder may be selected through a lottery.
However, where two bidders are equally distant from the average and one has quoted a lower price than the average, the lower bid may receive priority as prescribed by the amended law.
This provision is intended to provide a transparent mechanism for resolving otherwise indistinguishable results.
Professional Liability Insurance for Consultants
One of the important new provisions concerns Professional Liability Insurance for consultants.
A consultant entering into a procurement contract must submit a professional liability insurance policy within 30 days of entering into the contract.
The insurance must cover the total contract amount and provide unconditional payment in accordance with the prescribed requirements.
This provision strengthens professional accountability and provides additional financial protection to public entities against professional negligence or failures associated with consultancy services.
Special Provision for Land Purchase
A new provision has been introduced concerning the purchase of land.
Where a public entity needs to purchase land for commercial or business purposes, it may directly purchase the land by following the prescribed procedure.
However, where land is required for public purposes, land acquisition will continue to be governed by the applicable Land Acquisition Act and related laws.
This distinction is important because it separates commercial or business-oriented land purchases from compulsory land acquisition for public purposes.
Expanded Role of Consumer Committees
The amendment expands the scope of works that may be carried out through Consumer Committees.
Such arrangements may now include the establishment and operation of:
- Training centers; and
- Micro-enterprises,
where these activities contribute to employment generation.
This provision potentially strengthens the local economic and employment dimensions of community-based development activities.
Government's Facilitation Responsibilities
A new provision clearly defines the government's responsibility to facilitate project implementation.
The concerned level of government—federal, provincial, or local—may be responsible for ensuring:
- Availability of project sites;
- Removal of trees where necessary;
- Payment of compensation;
- Relocation of electricity infrastructure;
- Relocation of water supply infrastructure;
- Relocation of sewerage and other utilities.
A key principle introduced is that public projects should not be unnecessarily delayed because of administrative obstacles.
This provision seeks to address one of the long-standing challenges in infrastructure development: projects being delayed not because of contractors, but because the required site, compensation, or utility relocation arrangements are incomplete.
Criminal Action for Fraud and Forgery
The amendment introduces stricter consequences for fraudulent conduct.
Where a contractor or businessperson:
- Misuses an advance payment with dishonest intent;
- Submits false information;
- Abandons the work midway; or
- Causes financial loss to the State through fraudulent conduct,
criminal proceedings may be initiated under prevailing criminal laws, including laws relating to fraud and forgery.
This provision significantly strengthens accountability in public procurement and signals that serious procurement-related misconduct may have consequences beyond contractual penalties.
Incentives for Employees and Contractors
The amendment introduces a positive incentive mechanism for timely and quality project completion.
If a National Pride Project or major project is completed:
- Before the scheduled deadline; and
- In accordance with required quality standards,
the employees involved may receive bonuses or incentives, while contractors may receive:
- Awards;
- Certificates of appreciation; or
- Bonuses.
This is a notable shift from a procurement framework focused primarily on penalties toward a more balanced system that also recognizes good performance and timely delivery.
Special Procurement of Essential Goods
A new provision allows the Council of Ministers to approve and implement special procurement procedures for certain essential or special goods.
These may include:
- Fertilizers;
- Medicines; and
- Other goods considered essential for the country.
This provision is intended to enable the government to respond more flexibly to urgent national needs where conventional procurement procedures may cause unnecessary delays.
Certification of Procurement Experts
The Public Procurement Monitoring Office (PPMO) is given an expanded role in the certification of:
- Procurement experts; and
- Individuals or institutions providing procurement-related training.
This provision is expected to contribute to the professionalization and standardization of public procurement practices in Nepal.
Cost Estimates and Norms
The amended framework provides greater clarity regarding the preparation of cost estimates.
For construction works, the cost estimate must follow the norms approved by the Government of Nepal.
For consultancy and other services, the applicable norms must be approved by the concerned ministry or the relevant highest executive authority.
The objective is to ensure consistency, realism, and standardization in the preparation of cost estimates.
New Procurement Method: Reverse Auction
The amendment introduces Reverse Auction as a new procurement method.
Under this method, bidders compete electronically by progressively reducing their quoted prices within a specified time period.
The introduction of reverse auction is expected to:
- Increase price competition;
- Improve transparency;
- Promote electronic procurement;
- Potentially reduce procurement costs.
Prohibition of Artificial Fragmentation and Anti-Competitive Packaging
The amended law strictly prohibits:
- Creating large procurement packages in a manner that restricts competition; or
- Splitting procurement into smaller packages merely to change or avoid the applicable procurement method.
This provision aims to prevent procurement fragmentation and ensure fair competition.
Bidder Qualification and Bid Capacity
The amended framework introduces a clearer requirement to consider the technical and financial capacity of bidders, including their bid capacity.
This is particularly relevant for major construction contracts, where a contractor's existing workload and financial and technical resources can affect its ability to successfully complete an additional project.
The objective is to ensure that contracts are awarded to bidders with sufficient capacity to perform the work.
One-Envelope and Two-Envelope Systems
The amendment clarifies the use of envelope systems.
The one-envelope system applies to:
- Procurement where no separate qualification requirement is prescribed; or
- Works below the prescribed threshold.
The two-envelope system is applicable where:
- Qualification requirements are necessary; or
- Large construction works are involved.
Under this system:
- The technical proposal is evaluated first.
- Only technically successful bidders proceed to financial evaluation.
This separation strengthens the integrity of technical and financial evaluation.
Reduced Bidding Time
One of the most significant procedural changes is the reduction in bidding timelines.
| S.N. | Procurement Activity | Previous Provision | Amended Provision |
|---|---|---|---|
| 1 | First invitation for national-level bidding or prequalification | At least 30 days | At least 21 days |
| 2 | First invitation for international-level bidding or prequalification | At least 45 days | At least 30 days |
| 3 | Re-invitation for national-level bidding | At least 15 days | At least 7 days |
| 4 | Re-invitation for international-level bidding | At least 21 days | At least 15 days |
| 5 | Third invitation or selection of another procurement method—national level | At least 7 days | At least 3 days |
The reduction in timelines is intended to accelerate procurement processes and reduce delays.
Greater Use of Electronic Government Procurement (e-GP)
The amended law provides additional facilitation for procurement conducted through the Electronic Government Procurement (e-GP) system.
Where a bid or prequalification notice is published through e-GP:
- It does not necessarily need to be separately published in newspapers or other media.
- Where electronic publication is not used, the notice must be made available through the PPMO and concerned entity's website or notice board.
- Bidders may also receive relief from paying bid document fees where bids are invited electronically, subject to the prescribed provisions.
These changes promote digital procurement and reduce the administrative and financial burden associated with traditional procurement notices.
Mandatory Preference for Domestic Goods
The amendment introduces a mandatory requirement for public entities to give preference to domestic goods during procurement.
The applicable preference must be clearly stated in the bidding documents.
This provision is expected to support:
- Domestic industries;
- Local production;
- Employment generation; and
- National economic development.
The Major Shift: From Lowest Bid to Average Bid Method
Perhaps the most significant change introduced by the Public Procurement (Second Amendment) Act, 2083, is the change in the basis for selecting successful bidders.
Under the traditional system, the Lowest Evaluated Substantially Responsive Bid was generally selected.
The amended framework introduces the Average Bid Method in applicable procurement processes.
Under this method:
- Eligible and responsive bids are identified.
- The average of the quoted bid amounts is calculated.
- The bid closest to the average is selected for approval.
The objective is to discourage unrealistically low bidding and promote more realistic and commercially viable bids.
The 30% Threshold for Abnormally Low Bids
The amendment introduces a significant safeguard against excessively low bids.
A bidder quoting a price more than 30% below the approved cost estimate is excluded from the evaluation process, as provided by the amended law.
The apparent policy rationale is to discourage:
- Unhealthy price competition;
- Unrealistically low bidding;
- Underpricing that may make project completion difficult;
- Subsequent quality compromises;
- Contractual disputes and project delays.
This is a major departure from the traditional emphasis on selecting the lowest price.
How the Average Bid Method Works
The bids of qualified bidders are considered, and the average bid amount is calculated.
The bid amount closest to the calculated average is selected.
Only bidders who successfully pass the technical evaluation proceed to financial evaluation.
The average of their financial bids is calculated, and the bid closest to the average is identified for selection.
Where two bids are equally distant from the average:
- If one bid is above the average and another is below the average, the lower bid may be given priority as prescribed.
- If two or more bids are exactly equal in the relevant scoring circumstances, selection may be made through lottery.
Weighted Evaluation of Technical and Financial Proposals
The amended law also introduces a specific framework for cases where technical and financial proposals are evaluated using different weightings.
Where technical and financial proposals are assigned separate weights:
- The proposals must be evaluated according to the prescribed methodology.
- The bidder receiving the highest overall score may be selected.
- The quoted amount must not be substantially higher than the approved cost estimate.
This approach is particularly relevant to quality-based procurement methods, including systems similar to Quality and Cost-Based Selection (QCBS).
The provision attempts to ensure that the procurement decision considers both quality and cost, rather than focusing solely on price.
Detailed Evaluation Report
The evaluation committee must prepare a clear evaluation report explaining:
- The basis of evaluation;
- The evaluation methodology;
- The results;
- The reasons for selection.
The report must be submitted to the concerned public entity.
This provision strengthens transparency and accountability in procurement decision-making.
Alternative Selection Instead of Cancellation
The amendment also introduces flexibility in cases where the highest-ranked proposal exceeds the available budget.
If the proposal receiving the highest score exceeds:
- The approved cost estimate; and
- The available budget,
the entire procurement process does not necessarily have to be cancelled.
If the next-ranked eligible bidder has quoted an amount within the approved cost estimate and available budget, the public entity may proceed with that bidder, subject to the applicable legal requirements.
This change can help avoid:
- Repeated procurement processes;
- Unnecessary delays;
- Additional administrative costs;
- Loss of project implementation time.
Performance Security for Consultancy Services
The amended provisions clarify the performance security requirements for consultancy contracts.
The selected consultant must be notified to submit the required Performance Security within the prescribed period, generally within 15 days for entering into the contract.
For consultancy services, the performance security is linked to 5% of the total amount quoted in the financial proposal, as provided by the amended provisions.
If the selected consultant fails to submit the performance security and enter into the contract within the prescribed period:
- The bid security may be forfeited; and
- The public entity may proceed to negotiate with the next-ranked consultant in accordance with the law.
Professional Liability Insurance
The amended consultancy contract provisions introduce a new and important requirement.
A consultant entering into a contract must submit a Professional Liability Insurance Policy within 30 days of contract signing.
The insurance must:
- Cover the total contract amount;
- Provide unconditional payment as required; and
- Comply with the prescribed conditions.
This provision is intended to strengthen professional responsibility and protect public entities against financial losses resulting from professional negligence or failure.
Social Security and Bank-Based Payment of Wages
The amendment introduces a social protection requirement for workers engaged by contractors and suppliers.
Construction contractors and suppliers must:
- Enroll their workers in the Social Security Fund, as required; and
- Pay workers' remuneration through banking channels.
This provision promotes:
- Workers' social protection;
- Financial transparency;
- Formal employment practices; and
- Accountability in public contracts.
Variation Orders
The amended framework provides greater flexibility regarding variation orders.
Under the previous arrangement, variations exceeding certain thresholds could require approval at higher administrative levels, including the Secretary or Council of Ministers.
The amended provision allows greater authority to be delegated to the Head of Department for decisions relating to variations exceeding 15%, subject to the applicable legal framework.
This may help reduce administrative delays in project implementation.
Expanded Grounds for Blacklisting
The amendment adds new grounds for blacklisting bidders.
These may include situations where a bidder:
- Requests withdrawal of its bid; or
- Fails to provide information requested during the evaluation process.
The expanded grounds are intended to strengthen bidder accountability and discourage strategic or non-cooperative conduct during procurement.
Force Account Works
The amended law provides greater clarity on when works may be carried out through Force Account rather than through conventional procurement.
Force Account may be appropriate in circumstances such as:
- Routine maintenance or cleaning works where preparing a detailed cost estimate is difficult;
- Works that must be performed by persons familiar with existing service operations without disrupting those services;
- Works requiring immediate action due to special circumstances;
- High-risk or security-sensitive works.
The clarification is intended to ensure that Force Account is used only in appropriate circumstances.
Expanded Exemptions from the Public Procurement Act
Certain special situations have been added or clarified where procurement may receive exemptions or special treatment.
These include:
- Procurement of goods and advertising services required for fairs, festivals, or exhibitions held abroad;
- Procurement of construction materials or rental of machinery and equipment required for construction works assigned to infrastructure companies.
Such exemptions are intended to address specialized procurement needs while allowing greater operational flexibility.
Powers of Provincial and Local Governments
The amendment strengthens the procurement authority of Provincial and Local Governments in line with Nepal's federal structure.
Where the Act assigns certain decisions to officers or authorities of the Government of Nepal or ministries, the corresponding provincial or local government may designate the appropriate officer or authority to exercise such powers within its jurisdiction.
This provision is expected to promote greater procurement autonomy and administrative decentralization.
Public Construction Works Should Not Be Unnecessarily Obstructed
A new provision seeks to prevent unnecessary interruption of public construction works.
Construction projects should not be unnecessarily obstructed because of:
- Inter-agency disputes;
- Delays in infrastructure relocation;
- Administrative complications; or
- Similar procedural issues.
Even where a court or competent authority is required to issue an order, the broader public interest and continuity of the project should be considered, subject to the applicable law.
This provision reflects the need to balance legal remedies with the public interest in timely infrastructure delivery.
Clear Allocation of Responsibilities
The amendment clarifies the primary responsibilities of key parties involved in public procurement.
The primary responsibility for completing works according to the prescribed:
- Quality;
- Quantity; and
- Time schedule
rests with the contractor, supplier, or consultant, as applicable.
Consultants have a primary responsibility to ensure that:
- Designs are practical;
- Cost estimates are realistic; and
- Proposed solutions are economical and cost-effective.
This clarification strengthens accountability across the procurement lifecycle.
Overall Impact of the Second Amendment
The Public Procurement (Second Amendment) Act, 2083, represents a significant effort to reform Nepal's public procurement system.
The major policy direction of the amendment can be summarized as follows:
| Area | Key Direction of Reform |
|---|---|
| Procurement Preparation | Greater readiness before bidding |
| Procurement Methods | Introduction of Reverse Auction |
| Bid Evaluation | Greater use of Average Bid Method |
| Low Bidding | 30% threshold against excessively low bids |
| Competition | Restrictions on artificial packaging and fragmentation |
| Domestic Industry | Mandatory preference for domestic goods |
| Digital Procurement | Greater reliance on e-GP |
| Procurement Timeline | Shorter bidding periods |
| Consultants | Professional Liability Insurance |
| Workers | Social Security Fund enrollment and bank payments |
| Contractors | Greater accountability for performance |
| Government | Clearer facilitation responsibilities |
| Project Completion | Incentives for early and quality completion |
| Misconduct | Stronger criminal and contractual consequences |
| Federalism | Greater provincial and local procurement autonomy |
| Transparency | Clearer evaluation and reporting requirements |
Conclusion
The Public Procurement (Second Amendment) Act, 2083 marks a substantial shift in Nepal's public procurement framework. The amendment does not merely make technical changes to procurement procedures; it seeks to address several persistent challenges affecting public project implementation, including unrealistically low bidding, lengthy procurement procedures, administrative delays, weak contractor accountability, inadequate project readiness, and insufficient professional responsibility.
One of the most notable reforms is the move away from an exclusive focus on the lowest evaluated bid toward an Average Bid Method in applicable cases. The introduction of a 30% threshold for excessively low bids, together with the possibility of selecting a bid closest to the average, reflects an attempt to promote more realistic and sustainable pricing.
Similarly, the introduction of Reverse Auction, expanded e-GP provisions, shorter bidding timelines, preference for domestic goods, professional liability insurance, social security requirements, procurement expert certification, and incentives for timely project completion indicates a broader effort to modernize Nepal's public procurement system.
At the same time, the amendment places greater responsibility on both the government and private sector. Government agencies are expected to ensure project readiness, site availability, compensation, and infrastructure relocation, while contractors, suppliers, and consultants are expected to deliver projects with the required quality, quantity, and timeliness.
For federal, provincial, and local governments, the changes are particularly significant. The enhanced role of provincial and local authorities, clearer allocation of responsibilities, and greater digitalization of procurement may contribute to more efficient public service delivery if implemented effectively.
Ultimately, the success of the amended law will depend not only on the legal provisions themselves but also on their consistent implementation, institutional capacity, professional competence, transparency, accountability, and effective monitoring.
Read the full text of the Public Procurement (Second Amendment) Act, 2083 here.
