construction entrepreneurs in nepal

1

STATUS OF CLASS A CONSTRUCTION ENTREPRENEURS IN NEPAL

SURESH ADHIKARI

Pokhara Engineering College

Pokhara, Nepal

A Thesis submitted towards partial fulfilment of the requirements of M.Sc. Degree in Construction Management awarded by Pokhara University.

2014

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EXECUTIVE SUMMARY

It is realized that Nepalese construction had undertaken a high rise in its image

internationally and nationally and has been participating in various organization as an

active member. Besides these, there are many rumours and conflicts about the

capability of Nepalese contractors about their technical and financial ability for not

completing the projects undertaken by them within the given timeframe and of

standard quality. Although construction entrepreneur of Class A in Nepal, have the

opportunities to withstand in construction industry (as country is still in construction

phase of infrastructure development) with full enthusiasm and effort, they seems to

be demoralized by the policies, rules, guidance and support from the government and

procedure of procurement of donor agencies during bidding in Mega Projects.

The study has covered construction firms registered as class A construction

entrepreneur. The numbers of construction firms studied were fifty one (51). Random

sampling method was performed to select the respondents. A questionnaire was

developed to collect the datas for the study. The close ended question, open ended

question, and ranking method of prioritization was adopted to obtain the necessary

datas from the respondents.

The purpose of the study was to compare the existing equipment capabilities of Class

A construction entrepreneurs with the prescribed requirement as per CBA 2055 &

CBR 2056 and also to determine the current capacity of the class A construction

entrepreneurs in terms of technical and financial capabilities. The study also has

covered the exploration of common problems and difficulties felt in criteria of

achieving qualification documents during bidding procedure , receiving payment

during payment schedule, , taxation part, hiring qualified human resource in different

construction sector and insecure felt during stages of tender purchase, tender drop and

construction site execution works by class A construction entrepreneurs.

Percentage, frequency and charts were used to analyze the data. The result has

showed that, in owning equipments most of the companies have failed to meet the

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prescribed standard as per CBA 2055 & CBR 2056. Only few numbers of contractors

are extremely satisfied with their business. There are various factors like annual

turnover & similar experience part in qualification procedure, escalated amount &

running bill payment in payment procedure, insecurity due to hooliganism in

construction business during site execution and tender drop, taxation system during

refunding of the tax deducted at source amount. The research has also shown the

unavailability of human resources in tunnel sector, hydropower sector and bridge

sector in construction sector in present context.

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CERTIFICATE

This is to certify that the thesis entitled “ Status of Class A Construction Entrepreneurs in Nepal” by Mr. Suresh Adhikari presented towards the requirement of the M.Sc. Degree in Construction Management has been completed under my supervision. I recommend the same for acceptance by the University.

......................................... ......................................................

Date Assoc. Prof. Er. Ramesh Banstola

Supervisor

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Certificate

This thesis entitled Status of Class A Construction Entrepreneurs in Nepal by Suresh Adhikari has been examined by us and is accepted for the award of M.Sc. Degree in Construction Management of the Pokhara University.

1. External Examiner .......................

2. Thesis Supervisor .......................

3. Representative of Research Committee .......................

Date: ..........................................

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ACKNOWLEDGEMENT

I wish to express my gratitude to my advisor, Assoc. Prof. Er. Ramesh Banstola,

Coordinator of M.Sc. Program in PEC, who guided and helped me greatly to

complete my thesis.

I am also deeply indebted to Dr. Prof. Rajendra Prasad Adhikari, whose guidance from initial phase upon this completion had broaden mine vision more in setting up my objective more clearly on my research.

My heartful thanks goes to my father Mr. Mohan Prasad Adhikari, proprietor of Mangsuwa Nirman Sewa, for supporting me morally from my initial phase of this research till to the final publication.

I would also like to thank Mr.Keshab Prasad Gautam, vice-president of FCAN who helped me in providing his valuable suggestion and in arranging meetings with contractors for my necessary data collection. Also, I would like to thank all the official staff member of FCAN, who has provided me the necessary information that I have asked at any time.

I would also thank to my brother, Mr. Hem Kumar Adhikari, for his support in using SPSS.16 software during data analysis. I shall not forget my friends Er.Ujjwal Dahal, Er. Sandeep Gyawali and Mr. Jyoti Khatri for their help in distribution and collection of questionnaire. I am also highly debted to my friend Er. Sunder Adhikari for his help in everyway by providing me environment during preparation of final report.

To my wife Jyoti Shiwakoti for her spiritual support through prayers and encouragement, I thank you for providing me environment of study.

Lastly my sincere thanks goes to all who, in various ways have helped to make my

research work complete especially contractors who were respondents to my

questionnaire.

16 March, 2014

Suresh Adhikari

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TABLE OF CONTENT

EXECUTIVE SUMMARY……………………………………………………………i

ACKNOWLEDGEMENT…………………………………………………………….v

TABLE OF CONTENT………………………………………………………………vi

LIST OF TABLES …………………………………………………………………...x

LIST OF FIGURES ……………………………………………………………….…xii

LIST OF ABBREVIATIONS ………………………………………………………xiii

CHAPTER-1 INTROCUCTION ............................................................................ 1-4

1.1 Background of the Construction Industry .................................................... 15

1. 2 Statement of the Problem .............................................................................. 16

1. 3 Objective of the Study ................................................................................... 17

1.5 Limitation of the Study ................................................................................. 17

CHAPTER-2 LITERATURE REVIEW............................................................ 19-26

2.1 Conceptual Framework ....................................................................................... 5

2.1.1 Acts & Regulation on Infrastructure Development in Nepal .................... 19

2.1.2 Government Institutions for Infrastructure Development ......................... 20

2.1.2.1 Ministry of Physical Infrastructure and Transport ..................................... 20

2.1.2.2 Public Procurement Monitoring Office (PPMO) ...................................... 21

2.1.3 Public Entity ............................................................................................... 21

2.1.4 Foreign Aid in Nepal for Infrastructure Development .............................. 22

2.1.5 Requirements of Class A Construction Firms for Registration ................. 24

2.1.6 Qualification Procedure for Contractors .................................................... 27

2.1.6.1 Major Qualification Documents for Contractors ..................................... 28

2.1.6.1.1 Particular Construction Experience .......................................................... 28

2.1.6.1.2 Turnover .................................................................................................... 29

2.1.6.1.3 Financial Capabilities Requirement for Contractors ................................. 30

2.1.6.1.4 Personnel Capabilities ............................................................................... 31

2.1.6.1.5 Equipment Capabilities ............................................................................. 32

2.1.7 Payment Schedule for Contractors ............................................................ 33

8

2.1.7.1 Advance Payment ....................................................................................... 33

2.1.7.2 Payment of Bill or Invoice or Running Bill ............................................... 33

2.1.7.3 Final Bill Payment ...................................................................................... 34

2.1.7.4 Security Money .......................................................................................... 34

2.1.7.5 Price Escalated Amount ............................................................................. 34

2.1.8 Public Private Partnership in Infrastructure Development ....................... 34

2.1.9 Federation of Contractor Association of Nepal (FCAN) ........................... 35

2.1.10 Related Studies .......................................................................................... 37

2.1.12 Contractors Perceptions towards Construction Industries ......................... 38

2.2 Research Review ........................................................................................ 39

CHAPTER-3 RESEARCH METHODOLOGY ............................................... 41-31

3.1 Research Design ................................................................................................ 41

3.2 Data Collection .............................................................................................. 41

3.3 Population of the Study ................................................................................. 43

3.4 Sample of the Study ...................................................................................... 43

3.5 Research Instrument ...................................................................................... 43

3.6 Data Collection Procedure ............................................................................ 44

3.7 Data Analysis & Interpretation Procedure ................................................... 44

CHAPTER-4 PRESENTATION AND ANALYSIS OF DATA ...................... 46-50

4.1 General Information .................................................................................. 46

4.1.1 Types of Partners in Class A Firms .......................................................... 46

4.1.2 Active Partners in Class ‘A’ Firms in Terms of Registration................... 47

4.1.3 Experience on Specialized Construction of Work by Class A Construction Entrepreneurs ........................................................................................................... 48

4.1.4 Work Experience Sector of Class A Construction Entrepreneurs ............. 49

4.2 Comparison of the Existing Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056 .................................................................................... 52

4. 2.1 Machine and Equipment ............................................................................ 52

4.2.2 Human Resources Available with Class A Construction Entrepreneurs 52

4. 3 Financial Capabilities of Class “A” Construction Entrepreneurs ............ 54

4.3.1 Annual Turnover of Class A Construction Entrepreneurs......................... 54

4.3.2 Credit Limit of Class A Construction Entrepreneurs ............................... 55

9

4.3.3 Bank Overdraft of Class A Construction Entrepreneurs ........................... 56

4.4 Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business ...................................................................................... 57

4. 4.1 Common Problem and Difficulties of Class A Construction Entrepreneurs 58

4.4.1.1 Difficulties Felt in Criteria of Achieving Qualification Documents During Bidding Procedure by Class A Construction Entrepreneurs .................................... 58

4. 4.1.2 Difficulties felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs .................................................................................. 59

4.4.1.3 Difficulties Felt in Revenue & Taxation Part by Class A Construction Entrepreneurs ........................................................................................................... 60

4.4.1.4 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs .................................. 61

4.4.1.5.1 Tender Purchasing ..................................................................................... 62

4.4.1.5.2 Tender Drop .............................................................................................. 62

4.4.1.5.3 Site Execution ........................................................................................... 63

CHAPTER-5 FINDING OF THE STUDY ........................................................ 50-52

5.1 General Information ...................................................................................... 64

5.2 Comparison of the Existing Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056 .................................................................................... 64

5.2.2 Human Resources Available with Class A Construction Entrepreneurs ... 64

5.3 Financial Capabilities of Class “A” Construction Entrepreneurs ................. 65

5.4 Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business .............................................................................................. 65

5.4.1 Common Problem and Difficulties of Class A Construction Entrepreneurs .. 65

5.4.1.1 Difficulties Felt in Criteria of Achieving Qualification Documents during Bidding Procedure by Class A Construction Entrepreneurs .................................... 65

5.4.1.2 Difficulties felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs ...................................................................................... 65

5.4.1.3 Difficulties felt in Revenue & Taxation Part by Class A Construction Entrepreneurs ........................................................................................................... 66

5.4.1.4 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs .................................. 66

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5.4.1.5 Insecure Felt Due to Hooliganism During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs ........................................................................................................... 66

CHAPTER-CONCLUSION AND RECOMMENDATION ............................ 53-58

6.2 Recommendation ........................................................................................... 69

6.2.1 General Information ...................................................................................... 69

6.2.2 Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056...............................................................................................................55

6.2.3 Common Problem and Difficulties of Class A Construction Entrepreneurs..56

6.3 Recommendation for Future Research .......................................................... 71

References :........................................................................................................ 58-59

Bibliography: .............................................................................................................. 59

APPENDICES :...........................................................................................................60 Annex A : Figure of Special Purpose of Company..........................................61

Annex B :Requirement of Machine & Equipment as per CBR 2056...............62

Annex C : List of Class A Contractors........................................................63-68

Annex D :Overall Standard Meeting of Equipment as per CBA 2055 & CBR 2056 by Class A Firms ...................................................................69-70

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LIST OF TABLES

Table No. Title of the Table Page

2.1 Classification of Construction Firms in 1974 & 1999 as per Bidding Limit (In Million’s) 11

2.2 Nos. of Registered Firms of Class A, B, C& D in Various Years 11

4.1 Types of Partners Registered During Firm’s Registration as Class ‘A’ 32

4.2 Active Partners in Class ‘A’ Firm’s in Terms of Registration 33

4.3 Experience on Specialized Construction of Work by Class A Construction Entrepreneurs 34

4.4 Work Experience Sector of Class A Construction Entrepreneurs 35

4.5 Budget for Fiscal Year 2013/014 in Major Infrastructure Projects 36

4.6 Status of Machine & Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056 38

4.7 Human Resources Available with Class A Construction Entrepreneurs 39

4.8 Range of Human Resource in Class A Firms 39

4.9 Annual Turnover of Class A Construction Entrepreneurs for F.Y 069/070 , F.Y 068/069 & 067/068 40

4.10 Credit Limit of Class A Construction Entrepreneurs 41

4.11 Bank Overdraft of Class A Construction Entrepreneurs 42

4. 12 Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business 43

4.13 Difficulties Felt in Criteria of Achieving Qualification Documents During Bidding Procedure by Class A Construction Entrepreneurs 44

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4.14 Difficulties Felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs 45

4.15 Difficulties Felt in Revenue & Taxation Part by Class A Construction Entrepreneurs 46

4.16 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs 47

4.17 Insecure Felt During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs 49

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LIST OF FIGURES

Figure No. Title of the Figure Page

2.1 Distribution of Foreign Aid Disbursement per Policy Cluster of the Three Year Plan 9

3.1 Flow Chart of Research Design for Adopted Methodology 28

4.1 Types of Partners Registered During Firm Registration as Class ‘A’ 33

4.2 Active Partners in Class A Firms in Terms of Registration 34

4.3 Experience on Specialized Construction of Work by Class A Construction Entrepreneurs 35

4.4 Work Experience Sector of Class A Construction Entrepreneurs 36

4.5 Budget for Fiscal Year 2013/014 in Major Infrastructure Projects 37

4.6 Annual Turnover of Class A Construction Entrepreneurs for F.Y 069/070 , F.Y 068/069 & 067/068 40

4.7 Credit Limit of Class A Construction Entrepreneurs 41

4.8 Bank Overdraft of Class A Construction Entrepreneurs 42

4.9 Satisfaction of Class Construction Entrepreneurs in Current Situation with Business 43

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LIST OF ABBREVIATIONS

Abbreviation Explanation

ASSOSAI Asian Organisation of Supreme Audit Institution

CAN Contractor Association of Nepal

CBA 2055 Construction Business Act, 2055

CBPS Construction Business Promotion Section

CBR 2056 Construction Business Rule, 2056

DCR Development Corporation Report

DUDBC Department of Urban Development and Building

Construction

FCAD Foreign Aid Coordination Division

FCAN Federation of Contractor Association of Nepal

GDP Gross Domestic Product

PPA 2063 Public Procurement Act, 2063

PPMO Public Procurement Monitoring Office

PPP Public Private Partnership

PPR 2064 Public Procurement Rule, 2064

PITA Particular Instructions to Applicants

SPD 2009 (2066 B.S) Standard Pre-Qualification Document, 2009(2066 B.S)

SPSS.16 Statistical Package for Social Science, 16

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CHAPTER-1

INTRODUCTION

1.1 Background of the Construction Industry

Construction industry is regarded as the backbone of nation building as more than that

of 70% of the gross capital formation is contributed by this sector. In Nepal, this

industry contributes over 8% of GDP and has the growth rate of more than that of the

national average (Pandey, 2069).

This industry is one of the major contributors to the process of the development of the

country. The wide range of output provides the basis for social and economic

development of many sectors. In addition, it also stimulates significant economic

development through its backward and forward linkages like manufacturing,

transportation and other sectors of the economy. Contractors are one of the most

significant enteritis within the industry. They are the ones who actually convert the

designed facility into a tangible output. Much of the resources are spent through them

and success of the project is heavily dependent on the firm’s competence (Pandey,

2069).

Nepalese construction industry has taken a leap since 1990s with significant growth in

the number of construction and consulting firms. However, we need to actively wok

on the capacity building of all the stakeholders in the industry especially at the dawn

of the nation building efforts that could evolve the end of current political transition

period (Pandey, 2069).

The licensing and classification of contractors came into practise after implementation

of the construction classification Regulation in 1975 as Class A, B, C & D

respectively depending upon their physical facilities, resources and experience which

again was amendment in 1994 and 1999.

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1. 2 Statement of the Problem

Construction Industry is considered as one of the pioneering industry in Nepal. It is

consider as a building block for the development of infrastructure of the nation.

Among all the construction organization and contractors of Nepal, Class ”A” of

construction organization and contractors are considered as the major party who are

engaged in investing high budget projects, well equipped equipments with sufficient

human resource, financial strength and experience as per CBA 2055 & CBR 2056.

Although construction industry of the country is considered as pioneer sector in the

development of the nation, it has to face lots of problems with numerous weakness

and threats as follows:

i) The major challenges for the contractor is to complete project within the given

timeframe with quality, which is seen difficult in most of the cases and may be due to

the unavailability of owned full time technical personal, equipments or financial

resources by the concerned firms.

ii) Most of the reputed and well established contractors are being harrased by the

different political parties and holligans for large sum of money, which inturn has

created insecurity among these contractors. Also, inconsistent and ineffective price

escalation techniques used by the governments and unfavourable contract documents

to contractors and high unhealthy competition during tendering due to current

policies, rules and guidance had lead the contractor to get demoralized towards the

profession. As a result, many of the firms registered as Class A who are responsible to

undertake high active role and participation towards building the nation seems not

being as active as they owned to be.

iii) Construction industry being root for the development of infrastructure of the

nation and Class A contractor being the major party to perform such role for

development activities, no thorough study about the current status of Class A

contractor has been done so far.

iv) Also, current data about the Class A contractor in terms of their technical and

financial capacity strength is unknown in order to perform or execution of

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construction projects. Thus, these are the main problem to be identified during the

research study.

1. 3 Objective of the Study

The main objective of this study was:

i) To compare the existing equipment capacity of class “A” construction

entrepreneurs with the prescribed requirements as per CBA 2055 & CBR 2056

ii) To find out the financial capabilities of class “A” construction entrepreneurs.

iii) To explore the common problems and difficulties felt in criteria of achieving

qualification documents during bidding procedure, receiving payment during payment

schedule, taxation part, hiring qualified human resource in different construction

sector and insecure felt due to hooliganisms during stages of tender purchase, tender

drop and construction site execution works by Class A construction entrepreneurs.

1.4 Significance of the Study The study on the status of Class ‘A’ construction entrepreneurs of Nepal will be

important to all the contractors of Nepal as well as to new entrepreneurs who wants to

enter in construction industry as construction entrepreneurs. The information will also

be beneficial to other sectors like cement industry, iron industry, brick industry, sand

industry and other related industry which has day to day relation with the construction

industry. This research is more significant to the Government of Nepal as the research

has provided information’s about the capability and strength of Nepalese contractor’s

in terms of technical and financial capacity to accelerate and perform construction

projects.

1.5 Limitation of the Study

The following are the limitation of the study

i) The respondents of the study are presumed to provide all the relevant and valuable

information during the research and unbiased.

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ii) This study has excluded the status of lab equipment as mentioned in machine and

equipment defined by schedule-10 in CBA 2055 & CBR 2056.

iii) This study has not cover bank statement in order to find out the financial

capabilities of the Class A registered firms.

iv) This study has only considered civil engineer, junior engineer, accountant and

supervisor in determining the human resources available with Class A construction

entrepreneurs.

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CHAPTER-2

LITERATURE REVIEW

2.1 Conceptual Framework

The conceptual framework of this study clarifies about all the variables acts, policies

& regulation, government organization and stakeholders about the construction

industries in Nepal. The flow chart of special purpose company for infrastructure

development has been attached in appendices (Annex- A). The different variable to be

considered for relevant to this study has been as discussed herewith.

2.1.1 Acts & Regulation on Infrastructure Development in Nepal

According to the report of www.scaefe.com an official website of ‘Society Of

Consulting Architectural and Engineering Firms’ Nepal, Er. Tulsi Prasad Sitaula,

Infrastructure development has remained a priority of the government right from the

beginning of first five year plan (1956-61) A.D. With a view to facilitate and to create

enabling environment many legislations have been enacted since then rules,

regulations and guidelines have been developed and put to use. Policy documents

have been passed and practised so as to streamline the direction of the development.

In this connections the following acts, regulations, policy frameworks etc. have been

brought in place which are as:

Public Roads Act, 2031 , Local Self Governance Act 2054 and Regulations 2055

,Public Procurement Acts 2063 and Regulations 2064 , Contract Act, 2023 and 2058 ,

Construction Industry Acts 2055 , Private Investment in infrastructure, Build and

Operate Ordinance 2060 , BOOT Acts 2063 and Regulations 2064 ,Roads Board Act

2059 , Engineering Council Acts 2055 and Regulations 2057 , Road Sector Policy

1999 , Public Infrastructure Build, Operate and Transfer Policy 2057 ,Priority

Investment Plan 1997- 2007, Priority Investment Plan 2007 – 2017, The Department

of Roads Strategy 1995, Road Maintenance Training Policy 2001, Human Resource

20

Development Policies and Strategy 2002 ,Bridge maintenance Policy, 2004 ,

Consulting Industry Acts (Development phase) (www.scaef.org.np).

2.1.2 Government Institutions for Infrastructure Development

2.1.2.1 Ministry of Physical Infrastructure and Transport

Ministry of Physical Infrastructure and Transport established in 2000 A.D during the

course of the reorganization Government of Nepal. The main aim of reorganization

was to bring important infrastructural development under the umbrella of a single

ministry and to harmonize the policies and bring efficiencies and effectiveness in the

provision of infrastructural services (www.moppw.gov.np). For contractor issuing of

licensing and renewal had the department of Ministry of Physical Planning Works and

Transport Management where again had a separate section known as Construction

Business Promotion Section (CBPS).

The objective of Construction Business Promotion Section (CBPS)

i) To grant construction business license.

ii) To renew the license granted, maintain inventory of the revenue from renewal,

prepare financial statements and have revenue earnings audited.

iii) To maintain updated records and data of the firms, companies or corporate bodies

carrying on construction business.

iv) To give necessary direction and carry out monitoring in order to maintain quality

standards of public construction works and enhance and upgrade capabilities of

construction entrepreneurs.

v) To act as member secretary of the implementation committee in respect of

promotion and management of construction business.

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vi) To monitor implementation of the prevailing Acts and Regulations for the

promotion of construction business, and take necessary action to make it further

effective (www.cbps.gov.np).

2.1.2.2 Public Procurement Monitoring Office (PPMO)

PPMO was established as per the provision made in the new Public Procurement law

of Nepal. The Public Procurement Act, 2063 (B.S.) and Public Procurement

Regulation, 2064 (B.S.) have been enforced on 2063/09/30 (B.S.) and 2064/5/03

(B.S.) respectively. PPMO was established as the government agency on 2064/5/3

(B.S.) and is placed directly under the prime minister. It is the organization which has

responsibility to act as guiding body for procurement policy formation,

implementation and monitoring of effective public procurement system by

maintaining transparency, accountability, effectiveness, efficiency and economy

along-with non-discrimination and equality in public procurement proceedings of

Nepal ( www.ppmo.gov.np).

2.1.3 Public Entity

“Public Entity” means the following entity:

i) Constitutional organ or body, Court, Ministry, Secretariat, Commission,

Department of the Government of Nepal or any other Governmental Entity or Office

there under,

ii) Corporation, Company, Bank or Board owned or controlled fully or in majority by

the Government of Nepal or Commission, Institute, Authority, Corporation,

Academy, Board, Center, Council established at the public level or formed by the

Government of Nepal under the laws in force and other corporate body of a similar

nature

iii) University, College, Research Center, which is operated by the Government of

Nepal or receives grants fully or in majority from the Government of Nepal, and other

Academic or Educational Institution of a similar nature

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iv) Local body

v) Development Board formed under the Development Board Act, 1956

vi) Body operated with loan or grant of the Government of Nepal, and

vii)Other Bodies as specified by the Government of Nepal by publishing a notification

in the Nepal Gazette, as a Public Entity (PPA, 2063).

2.1.4 Foreign Aid in Nepal for Infrastructure Development

According to Development Corporation Report (DCR) F.Y 2010/011 foreign aid

plays an important role in Nepal’s socio-economic development, representing 26

percent of the national budget. In addition, significant aid flows are channelled

directly to beneficiaries outside the national budget. The main sectors receiving

external support are education, local development, health, roads followed by drinking

water, energy, agriculture, and peace and rehabilitation. Various economic and

financial reform programs also receive significant external support.

Also the DCR report has mentioned that Nepal receives official development

assistance from over 40 donors, including 35 resident agencies. About half of aid

resources use national systems such as the budget or procurement systems, and a

significant portion of aid is spent outside national systems. The Ministry of Finance is

mandated for the overall coordination of foreign aid in Nepal, including its allocation

in line with national priorities. The Foreign Aid Coordination Division (FACD) of the

Ministry of Finance is empowered, among others, to oversee the Government's

activities in the area of aid coordination, harmonization and alignment. The FACD of

the Ministry is the focal point for this purpose. The FACD has also been acting as the

secretariat to the high level committee on foreign aid coordination and mobilization

and provides technical input to the committee in the implementation of foreign aid

policy.

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Figure 2.1: Distribution of Foreign Aid Disbursements per Policy Cluster of the Three Year Plan (Source: www.mof.gov.np)

According to Asian Organisation of Supreme Audit Institutions (ASOSAI), published

on Sep 1995, for in the case of Nepal, foreign-aided projects mainly involved roads,

irrigation, electricity, drinking water and aviation. The donor countries and agencies

involve the World Bank, Asian Development Bank, Japan, China, USA, Finland,

U.K., India and France. These foreign-aided projects fall into two categories:

a) Turnkey projects

b) Loan projects

Turnkey projects are implemented by the donor countries or agencies themselves.

Such projects are formally handed over to the government on completion. The

government provides the land required for individual projects and makes available

other facilities such as customs and taxation concessions and import licences. With

such projects, the procurement of construction material, award of contracts and

execution of works are the responsibility of the respective donors. Projects being

implemented through loans are also financed jointly by the government and donor

agencies. The proportion of funds to be contributed from each of these sources is

determined when individual agreements are signed. Donor agencies provide most of

the finance for civil works, procurement of equipment and consulting services.

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Also the (ASOSAI) report mentioned that for large projects assisted by external

agencies, competitive bids are invited internationally for construction and the

procurement of machinery and consultancy services according to the official

guidelines of donor agencies. Bids received are evaluated by a technical committee of

the respective ministry and approved by the competent authority based on the

provisions of the government's Financial Administration Rules. However,

concurrence of the particular agency involved is also required for bid approvals.

Project identification, feasibility studies, investment criteria, budgeting, funding and

implementation procedures are common for all public works and projects. These

procedures are guided by the existing financial rules and regulations of the

government. Public works and projects carried out with external assistance are also

guided by the terms and conditions of the particular agreement signed between the

government and the donor agency (ASOSAI, Sep 1995) (www.asosai.org) .

2.1.5 Requirements of Class A Construction Firms for Registration

The first act which defined ‘Contractor’ was the Industrial Enterprises Act,

1974(A.D). It made provision for the classification and registration of contractor.

According to this act, all construction firms must register themselves with the

Ministry of Works and Transport in Class A, B, C or D contractors depending upon

the technical manpower, value and number of works done, machinery and liquid

assets available.

Industrial Enterprises Act 1974 provided for registration and classification of

contractors. Accordingly contractors were classified as Class A, B, C and D

depending upon their physical facilities, resources and experience.

The licensing and classification of the contractors came into practice after

implementation of the construction classification Regulation in 1975. There were

twice amendment of the regulation in 1994 and 1999.

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Table 2.1: Classification of Construction Firms in 1974 & 1999 as per Bidding

Limit (In Millions)

Classification Bid Limit In Millions

(1974)

Bid Limit In Millions

(1999)

Class A Above 10 Above 20

Class B Up to 10 Up to 20

Class C Up to 3 Up to 6

Class D Up to 1 Up to 3

Source: FCAN, 2069.

Table 2.2: Nos. of Registered Firms of Class A, B, C& D in Various Years

Year Class A Class B Class C Class D * Total

1977 4 14 29 47 94

1987 25 210 575 810 1620

1997 112 84 938 1124 2258

2006 143 130 1400 10000 11673

2012 194 322 1301 11000 12817

Source: FCAN, 2069. * Approximate in number

But, there is a debate regarding classification of contractors. The debating article is

10.3 of the act PPA 2063 & PPR 2064 which ignores the existing bidding limit of

contractors by classification for the qualification criteria. Despite of this debate still

the classification of contractor has been defined by CBA 2055 & CBR 2056 during

registration of firms.

Realizing the need for enhancement of the construction industry, Construction

Business Act CBA 2055 was promulgated and came into force from Baishak 1, 2056

(April 14, 1999). This is an effort made to institutionalize and systematize the

26

construction sector. The act had defined the procedures and requirement relating to

issues and renew of license and classification of obligation of construction

entrepreneurs (FCAN 2007, vol. 14.).

As mentioned by CBA, 2055(1999), “construction entrepreneur” means a firm or

company registered under the prevailing law with an object to carry out construction

business”. The classification of construction entrepreneur as per clause 10 sub-rule

(1), had classified the construction entrepreneur as Class A, Class B, Class C and

Class D according to in Construction Business Rule CBR, 2056(2000A.D) Schedule-

10, Schedule-11, Schedule-12 and Schedule-13 respectively.

To be Class A ‘A’ construction entrepreneur as defined by CBA (2055) & CBR

(2056) in Schedule-10, the following criteria must be meet by the registered firms:

Clause 10 sub-rule (1) Schedule -10

Financial Capacity: It has to be registered with the Department of Industries as a

private or public limited company or partnership firm with the running capital of a

minimum of ten millions rupees

Work Experience: It has to be satisfactorily completed four different public

construction works valued at a minimum of Ten million Five thousand rupees each or

various such works valued at a total of Sixty million rupees after having concluded an

agreement on its own.

Provided that, nothing in this clause shall be deemed to prevent the classifying of a

company having at least Two civil engineers with at least Twenty years of experience

in public construction works or of a company with an engineer or equivalent being its

shareholder or promoter, having experiences in construction works valued at Sixty

million rupees in last Ten years as the class “A” construction entrepreneur.

Description of Key Human Resources: There should be a provision to avail the

whole time service of two technicians having passed graduation level in civil

engineering and four technicians having passed certificate level in that subject, Two

27

persons having passed graduation level in any subject, three persons having passed

certificate level in any subject, one person having passed graduation level in

commerce and one person having passed certificate level in that subject.

Machine and Equipment: The checklist for machine and equipment as per CBA

2055 & CBR 2056 has been attached in Annex-B.

i) While submitting an inventory of equipment, ownership certificate of equipment as

well as insurance document thereof shall be submitted.

ii) It has to be certified by a mechanical engineer who has possessed educational

qualifications of at least graduation in mechanical engineer and obtained membership

of Nepal Engineers Association that the above-mentioned machines and equipment

are in proper condition.

iii) The above-mentioned machines and equipment shall not be sold and disposed of

until at least Two years from the date of their registration.

iv) Any machines and equipment which are more than Fifteen years old shall not be

recognized for purposes of enhancing the standard of, and new registration of, the

construction entrepreneur.

2.1.6 Qualification Procedure for Contractors

According to PPR 2064, “A public Entity may, in specifying the criteria for

qualification of a bidder or a pre-qualified proponent participating in procurement

proceeding of a construction work above six million, specify such criteria by taking

into account any one or all of the following matters according to necessity” ( PPR,

2064).

Namely two methods of qualification procedure are followed depending upon project

sensitivity. i) Post qualification ii) Prequalification

28

i) Postqalification

An assessment made by the employer after the evaluation of bids and immediately

prior to award of contract, to ensure that the lowest-evaluated, responsive eligible

bidder is qualified to perform the contract in accordance with previously specified

qualification requirements ( SPD, 2009).

ii) Prequalification

An assessment made by the Employer of the appropriate level of experience and

capacity of firms expressing interest in undertaking a particular contract, before

inviting them to bid (SPD, 2009).

2.1.6.1 Major Qualification Documents for Contractors

GoN's current policy on PQ is that all potential bidders that meet predefined minimum

requirements regarding: general construction experience; particular or specialized

experience; financial capabilities; personnel capabilities, and equipment availability

should be invited to bid. The procedure requires the implementing agency

(Employer) to set pass/fail criteria which, if all are not met substantially by the

Applicants, would cause them to be disqualified ( SPD, 2009).

2.1.6.1.1 Particular Construction Experience

General experience of having carried out works solely as a prime contractor or under

management contract or partner in a joint venture or sub-contractor. General

experience consists of similar nature of works (PPR, 2064).

Applicants should demonstrate that they have successfully carried out work,

substantially of a nature, size, value, and complexity similar to that of the contract in

question. There are two principal criteria for prequalification.

(a) The Applicant should have carried out similar work of a magnitude

approximating that of the package of Work for which prequalification is sought.

Depending on the nature of the works to be bid, the criterion should be related to the

29

Applicant having completed or substantially completed one or more contracts each of

a value (not less than about 80 percent) of that of the proposed contract over the last

five to ten years.

(b) The Applicant should have performed operations of a volume, quality, and

rate of execution similar to those required for the timely completion of the subject

contract. For example, where large-volume earthmoving, tunnelling, or concrete

placing is involved, the applicant should demonstrate experience in those operations,

having performed them at the rates necessary to meet a percentage (e.g., 80 percent)

of the estimated peak monthly and/or annual rates required for the subject contract.

The range should be one to three (and is normally two), depending on the size and

complexity of the subject contract. For example, for small- to medium-sized contracts

in a country with newly privatized, but competitive construction firms (which have

had some experience as parastatals), an employer may be prepared to risk an award to

an applicant with only one previous similar contract completed. For contracts in a

developed environment with a high potential supply of construction services, three

similar contracts may not limit applications, but would reduce the risk of contractor

default. The range is normally five to ten years, and should be related to the number

of similar contracts stated above and to the duration of the subject contract, e.g., ten

years for two contracts of about five years’ duration, or six years for two contracts of

about three years’ duration (SPD, 2009).

2.1.6.1.2 Turnover

Turnover for construction works of or above the threshold as referred to in the bidding

documents. Generally, turnover represents the total revenue received by the company.

ie., Sale of goods, Service Revenues (depending upon the nature of the business) and

here mainly concerned with supplies and construction works of public entities (PPR,

2064).

The Applicant’s general capabilities in managing construction contracts should be

related to its record of recent experience and to the value of work undertaken.

30

Experience requirements should be stipulated as a minimum annual value of general

construction work carried out over a stated period, normally five years, calculated by

applying an appropriate multiplier to the projected annual construction rate on the

subject contract. The recommended multiplier is normally 1.5 to 2.0.

Time Period in the Construction Business

The time period is normally five years or more, but may be reduced to not less than

three years (in agreement with the Financing Agency) under special circumstances,

such as to provide opportunities for new coming construction entrepreneurs for more

competition, etc.

Required Average Annual Turnover

The amount stated should normally not be less than 1.5 to 2 times the estimated

annual turnover or cash flow in the proposed works contract (based on a straight-line

projection of the employer's estimated cost over the contract duration). The multiplier

of 2 may be reduced to 1.5 times but should not be less than 1.5.The number of years

is normally ten years but not less than three years (in agreement with the Financing

Agency). Also clarify whether the annual turnover amount of past years are evaluated

in the current year with inflation/ price index. Clarification on whether the average

annual turnover for ten years is considered or average of best three years annual

turnover is considered in the evaluation (SPD, 2009).

2.1.6.1.3 Financial Capabilities Requirement for Contractors

Economic and financial capacity of having or access to liquid assets, loan facilities

and other financial (excluding advance payment under any procurement contract)

sufficient to meet the cash flow requirement to complete the proposed construction

work and construction work being carried out or committed to be carried out by the

concerned bidder, in the event of stoppage or delays in payment of money required to

start up construction work under a procurement contract.

31

• Minimum Required Cash Flow Amount

Calculate the construction cash flow requirement for a number of months (to the

nearest half-month), determined as the total time needed by the employer to pay a

contractor’s invoice, allowing for (a) the time of construction, from the beginning of

the month invoiced, (b) the time needed by the engineer to issue the monthly payment

certificate, (c) the time needed by the employer to pay the amount certified, and (d) a

contingency period of one month to allow for unforeseen delays. The total period

should not exceed six months. The assessment of the monthly amount should be

based on a straight-line projection of the estimated cash flow requirement over the

particular contract period, neglecting the effect of any advance payment and retention

monies (SPD, 2009).

• Adequate Source of Finance

Minimum Bid Capacity (BC) to meet cash flow requirement for this and other

contract commitment through the leveraged value of the applicant’s available

resources: [ enter amount equal to the value of the work]

Where,

Bid Capacity (BC) = 5× total financial resources - 40% of total contract value of

current commitments

• Applicant’s Financial Position

The Applicant’s Net Worth calculated, as the difference between Total Assets and

Total Liabilities, from the audited balance sheets of the last [ insert No. of years]

should be positive (SPD, 2009).

2.1.6.1.4 Personnel Capabilities

The managerial and technical competence of a contractor is largely related to the key

personnel on site. The extent to which the Applicant should demonstrate having staff

32

with extensive experience should be limited to those requiring critical operational or

technical skills. The prequalification criteria should therefore refer to a limited

number of such key personnel, for instance, the project or contract manager and those

superintendents working under the project manager who will be responsible for major

components (e.g., superintendents specialized in dredging, piling, tunnelling, or

earthworks, as required for each particular project). Applicants should normally be

required to name a principal candidate and an alternate for each key position. Criteria

of acceptability should be based on: a minimum number of years of experience in a

similar position and a minimum number of years of experience and/or number of

comparable projects carried out in a specified number of preceding years.

The requirement of specified education and academic qualifications is normally

unnecessary for such positions, as contractors often employ competent staffs who

have learned their profession “on the job” rather than through academic training. It is

appropriate to specify that certain positions are filled by individuals who have held

posts of comparable authority for, say, three years with the applicant, so that key staff

in executive site positions have sufficient knowledge of the applicant's management,

policy, procedures, and practices to act with confidence and authority within that

framework ( SPD,2009).

2.1.6.1.5 Equipment Capabilities

Equipment as set out in the bidding documents or prequalification documents in full

working order of the ownership of the bidder or proponent of pre-qualification

himself/herself or to be so available through rent, lease ,contract or other commercial

means as can be used freely during the procurement contract period and depends upon

the nature of works (PPR,2064). A complete inventory of construction equipment

represents a high capital cost overhead to a contractor. Consequently, not all

competent potential bidders will maintain an inventory of high-value items that are in

suitable condition for major contracts. In most cases applicants can readily purchase,

lease, or hire equipment for a particular contract; thus, it is usually unnecessary for

prequalification to depend on the contractor’s owning readily –fail criteria adopted

should therefore be limited only to those bulky or specialized items that are critical for

33

the type of project to be implemented, and that may be difficult for the contractor to

obtain quickly. Examples may include items such as heavy lift cranes and piling

barges, dredgers, tunnel boring machines, asphalt mixing plants, etc. Even in such

cases, Applicants may not own the specialized items of equipment, and may rely on

specialist subcontractors or equipment–hire firms. The availability of such

subcontractors and of the specified equipment should be subject to verification prior

to bid invitation, and confirmed at bid submission and prior to contract award. The

terms of any lease or hire agreement for equipment should preferably include a

provision that the equipment will remain on the site (or be vested in the Employer) in

the event of default of the contractor, thereby ensuring more timely continuity of work

by a replacement contractor. (SPD, 2009).

2.1.7 Payment Schedule for Contractors

Payment procedure to the construction entrepreneurs is in the form of advance

payment, running bills payment, final bills payment, escalated amount, bonus amount

and refunding security amount by public entities.

2.1.7.1 Advance Payment

Advance payment is the initial payment provided by public entities when entering into

contract agreement to construction entrepreneurs for initial mobilization of the

services as advance after submission of performance bond guarantee (SPD, 2009).

2.1.7.2 Payment of Bill or Invoice or Running Bill

Payment of bill or invoice or running bill is the payment made by public entities as

per the condition of contract and make payment to the construction entrepreneurs for

further site mobilization (SPD, 2009).

34

2.1.7.3 Final Bill Payment

Final bill payment is the final payment made by public entities to the supplier,

construction entrepreneurs, service provider or consultant, as the case may be, shall be

made as per the condition of contract (SPD, 2009).

2.1.7.4 Security Money

Security Money refers to the performance security amount and fifty percent amount

retention money deducted that is five percent of the running bills specified which

shall be returned back after expiry of the defects liability period. The remaining fifty

percent amount of the retention money shall be paid after the concerned supplier,

construction entrepreneurs or service provider, as the case may be, submits evidential

documents of having submitted income return issued from the concerned Inland

Revenue Office. Provided that if the concerned construction entrepreneur does not

correct the defects liability period, the public entity may correct the defects by using

the retention money or the amount for security (SPD, 2009).

2.1.7.5 Price Escalated Amount

Price Escalated Amount, a public entity shall, in the procurement contract have to

provide that price adjustment may be made. The maximum amount of price

adjustment to be made pursuant to this Rule shall not, generally are more than twenty

five percent of the initial contract prices (SPD, 2009).

2.1.8 Public Private Partnership in Infrastructure Development

As per website of FCAN, the government of Nepal has liberalizes its policies after

1980's and has released the act related to Build, Operate, Own and Transfer BOOT

Act (PPP) – 2063, Road Sector Policy 1999, BOOT Regulation (PPP) – 2064,

Hydropower Act – 1992, Public Infrastructure Build Operate and Transfer Policy –

2057, Private Investment in Infrastructure Build and Operate Ordinance – 2060. There

is still some opportunity for the contractors through Contractual PPP’s as:

35

Build and Transfer (BT)

Build, Operate and Transfer (BOT)

Build, Operate, Own and Transfer (BOOT)

Build Transfer and Operate (BTO)

Lease, Operate and Transfer (LOT)

Develop, Operate and Transfer (DOT)

Also it has mentioned that PPP is regarded as the revolutionary approach towards

infrastructure development which pulling in resources, pulling in expertise,

maximizing service delivery, magnifying scope opportunities and creates the

employment opportunities for the contractors also. The following are regarded as the

prospective PPP projects now in Nepal.

- Kathmandu - Terai Fast Track, East-West Railway, Kathmandu-Terai Railway,

KantiRajpat, Birgunj-Jitpur Roadway, Kathmandu Outer Ring Road, Janakpur-

Jayanagar Railway, Janakpur-Jayanagar Railway, Sitapaila-Dharke Roadway,

Airports (Nijgadh,Pokhara, Bhairahawa) , Cargo Complex at TIA, Cable Car and

Ropeway, Road and Infrastructure Maintenance, Sky Bridge, Sub Way, Flyovers and

Interconnections, City Parkings etc. (www.fcan.org.np).

2.1.9 Federation of Contractor Association of Nepal (FCAN)

As per journal published by FCAN (2007), Contractors of Nepal who are relatively

established today are said to be started their profession with their own effort without

any help, guidance or training during (1960-1990) A.D. After the restoration of

multiparty democratic political system in 1990 A.D for their enlistment and

developing further professional skills and built institution among the members,

Contractor Association of Nepal (CAN) was born. Later in 1997 A.D, with the great

enthusiasm of all the Contractors Association of Nepal to be under a single forum,

name and structure of this association has been changed as Federation of Contractor’s

Associations of Nepal (FCAN).

The FCAN Membership, at present, is comprised of three types:

i) Ordinary Member

36

ii) Associate Member

iii) Honorary Member

i) All the registered Regional and District Level Contractors’ Associations are capable

to get the Ordinary Membership of FCAN. Till this date all 5 Regional Contractors'

Associations and 75 District Contractors' Associations are associated with FCAN.

ii) Associated Members are those construction firms/companies, which have taken

direct membership from FCAN. Currently more than 275 firms and companies are

registered under this category.

iii) The Executive Board of FCAN may grant the Honorary Membership to those

person, firm, company, institution or any international organization who has done

specific contribution towards the field of construction business, science, technical

know how or national development.( www.fcan.org.np)

Also, after establishment as an umbrella organization CAN (1990) and later as

FCAN(1997), Nepalese contractor made participation and recognization of them with

various international organization like International Federation of Asian and Western

Pacific Contractors' Associations IFAWPCA (October 19, 1993), SAARC Chamber

of Commerce and Industry - Construction Industry Council SAARC CCI- CIC

(March 16, 1998) and International Chambers of Commerce ICC, China International

Contractors’ Association CHINCA (6th June, 2000) mainly and nationally as in

National Development Council (NDC), Construction Business Development Council

(CBDC), Construction Business Development Implementation Committee (CBDIC) ,

Market Monitoring Board, District Administrative Office (DAO), Nepal Council of

Arbitration (NEPCA), Federation of Nepalese Chambers of Commerce and Industry

(FNCCI) , Construction Industry Training Centre (CITC) etc. and in many more

organization (FCAN, 2007).

37

2.1.10 Related Studies

The relevant literatures that were selected finding importance to this research after

studying and its finding are discussed in this chapter. The first part of this chapter

deals with the issues and negative cases going around discussion about the technical

and financial ability & management owned capacity of such Class A firms. The

second part of this chapter deals with opportunity for qualified Class A contractor for

construction as participating in Public Private Partnership model (PPP model) in

developing infrastructure. The third part of this chapter deals with suggestion given

by various contractors about the policy that they felt made by government towards

construction industry. The last part of this chapter deals with finding out by previous

researcher on same topic.

2.1.11 Issues of Construction Entrepreneurs in Newspaper

According to article ‘Project Incomplete as Contractor Flee’ by Mr. Rudra Khadka,

Nepalgaunj published on Republica dated November 27, 2012, contract for

constructing a building of BheriZonal Hospital was awarded to a joint venture of four

contractors four years ago. However, even two years after the contractor’s term

expired, the building meant for running the emergency ward at the zonal hospital

remains incomplete. The Mid-Western regional office of the Department of Urban

Development and Building Construction (DUDBC) had awarded the Rs. 40.56

million-contract to the joint venture of Nepal Pragati, Pradip, DC and Suppliers,

Galva J/V contractor on July 13, 2008. As per their agreement with the DUDBC, the

contractors should have completed the building construction by end of June 2010

(www.myrepublica.com).

According to article ‘Contractors warned for work delay’ published on Himalayan

times daily newspaper dated Nov 15, 2011, the Ministry of Physical Planning and

Works has issued a warning to 151 contractors and seven consultants for delaying

various projects, including bridge and road construction. “The ministry has published

the names of contractors and consultants who have not made expected progress in

projects that have already been launched,” said Suman Sharma, spokesperson for the

38

ministry. “If they do not complete the projects on time, we will take legal action

against them,” he added (www.thehimalayantimes.com).

According to article ‘Development projects run late due to slow govermrnt,

contractors’ published on ekantipur.com dated April 16, 2013, the 50th annual report

from Office of the Auditor General (OAG), Out of the 1,748 contracts of type big and

small awarded under 10 government agencies, the deadlines for 1,518 projects were

extended in the last fiscal year. The time extensions ranged from 50 percent of the

original period for 572 projects to 50-100 percent for 581 projects. The time limit was

doubled for 365 projects. “This show a weakness in contract management and

upgrading managerial capacity is essential,” the report states (www.ekantipur.com).

2.1.12 Contractors Perceptions towards Construction Industries

According to an article ‘Kalika Construction bags FCAN's Class 'A' Gold Award’

published in online magazine ‘Housing Nepal’ dated on Dec 9,2012, Bishnu Bhai

Shrestha, vice president of FCAN, said emphasizing on the government´s role to

make contractors are more efficient, contractors said that there were many

opportunities within and outside the country. "We just need a supportive bureaucracy

and policies to work constantly". Also in same heading, Bikram Pandey, chairman of

Kalika Construction said the government was not supportive to uplift the quality of

the contractors within the country. The government imposes unnecessary criteria in

the bidding process to avoid participation of domestic contractors.

(www.housingnepal.com).

As per an article ‘Government Sits on Contractors Payment’ published on “Arthik

Abhiyan Daily” newspaper dated on Feb10, 2013, the lack of clarity in government’s

action plan, delay in approval of development projects, and low capital expenditure,

which remained a lowly 15 percent of an already low budget under the capital

expenditure, are taking a serious toll on the contractors engaged in government

projects. They claimed that they were not paid since Kartik for the work already

completed and this is straining their resources. The dues stand at staggering Rs 10

billion. According to President of Federation of Contractors’ Association of Nepal

39

(FCAN) Jay Ram Lamichhane, non-payment for the work done can hamper the

ongoing projects where work has to be stopped for want of money. Since Kartik,

payment has not been made for works already completed in over 200 projects. This is

causing massive losses for the contractors. Despite taking up the issue with Finance

Ministry, Financial Comptroller General Office (FCGO) and related ministries,

payments are still stuck with the government, he claimed (www.abhiyan.com.np).

2.2 Research Review

As per the thesis written by Ang Dorji Lama on the topic “ Present status of Class A

Contractors in Nepal and qualification criteria for them” dated on January, 2002.,

limited numbers of contractors were only able to get the contract from the bidding

which may leads to the monopoly of ‘A’ class contractors in construction industry.

The objective of research was to analyse the present status of the ‘A’ class

construction companies in Nepal in terms of experience, technical and financial

capability, nature of upcoming development work. The researcher adopted descriptive

and analytical research design and data were collected via different sources like

questionnaire survey, direct interview and through the study of profile of the

construction companies under the study. Moreover, the collected data were analysed

and presented by using tools like tables and figure. According to this report although

there are various criteria to analyse and evaluate the quality and qualification of

construction companies and contractors, there are no proper mechanism, tools and

techniques to monitor, check and control it. Henceforth, the researcher has

recommended taking active role in formulating policies, rules, guidelines for the

betterment of contractor’s capability building to the Construction Enterprise

Development Board and Committee in order to control and monitor all the

construction companies of Nepal.

Deepak Bhattarai argues that specializing in one area is more important than

classification of contractor from D to A. For example in macro level there is a need of

Building Contractor, Road Contractor, Pavement Contractor, Bridge Contractor,

Tunnel Contractor, Hydropower Contractor or similar specialist contractor then in

such case quality would enhance at competitive cost also. Therefore he have thought

40

about Super Speciality Contractors which would lead a construction industry to a new

height (FCAN Journal, 2012).

41

CHAPTER-3

RESEARCH METHODOLOGY

3.1 Research Design

This study was carried out on the basis of primary data and secondary data.

Descriptive research design were taken into consideration to describe all the

information collected through primary sources and exploratory research design were

taken into consideration to explore present status of contractor through secondary

sources and literature reviews . The research methodology chart is shown in Fig. 3.1.

3.2 Data Collection: All the information were collected by using various

sources like primary and secondary sources.

• Primary Sources: Primary sources of the study had included the sources like

questionnaires survey via direct interview and online interview with the

respondents selecting 30 % randomly from the list of class “A” contractors

provided by the FCAN i.e. 30 % of total 194 of population is 59 number of

Class A contractor which was taken as respondents sample for questionnaire

survey.

• Secondary Sources: Additional information are collected through secondary

sources such as : related websites, a journal of Federation of Contractor’s

Associations of Nepal which is from Nepalese Construction Souvenir

(Volume-1 to Volume 18) ,Construction News from Tri-annually Published

Magazine from FCAN , daily national newspapers and others related

published or unpublished materials such as thesis & reports.

42

Primary Source

Research Design

• Selection of Topic • Problem Identification • Setting Objectives

• Literature Review • Discussion with contractors,supervisors • Preparation of questionaires and

• Questionaire Survey • Data Collection

Secondary Source

Review of LiteratureQuestionaire Survey

• FCAN Journals • Websites • Library section • Reports

Verify with standardization

• Selection of Respondents from contractor (30% of total population)

• Informal discussion with company staff

• Data Analysis with SPSS • Qualitative (Descriptive) • Quantitative (Percentage and

Tabulation)

Findings of Study

Comments from Supervisors and Research Committee

Setting out Conclusion and Recommendation

Draft Report Writing

Collection of Comments

Finalization of Report

Figure 3.1: Flow Chart of Research Design for Adopted Methodology

43

3.3 Population of the Study: The population of the study includes all the

Class A contractors of Nepal i.e 194 Class A contractors/construction company of

Nepal as being listed in FCAN journal, Vol. 18, 2012 .(Annex C)

3.4 Sample of the Study: For the sample size, 30 % of total population i.e. 59

numbers of registered Class A contractor had been chosen by random sampling

method, from the list of total population 194 as listed in FCAN Journal, Vol. 18,

2012.

3.5 Research Instrument: The instrument used in collecting data was

through prepared questionnaire which was prepared after thorough study of literature

review so that the defined objective of this purpose of research is fulfilled. The

method followed during distribution of questionnaire was in the following ways:

• Explaining to respondents that the information they have provided shall be

kept very confidential and shall be used for the research purpose only where

overall data shall only be presented in research report rather then single firm’s

information.

• Also, questionnaires were made to fill up by the concerned office

representative personal (Engineers and Accountants) after permission from the

managing directors and directors of the firms in the cases where the concerned

respondents were unavailable to fill up by themselves.

The questionnaire contains four major section which includes general information of

firms, technical information, financial information & problems, difficulties and

satisfaction under which sub-section information are provided for respondents to fill

up to obtain the objectives of the research. The first part, general information

includes about the partners status and specialization of the firms in construction

sector. The second part, technical information includes equipments hold by the firm as

reference with the prescribed requirement defined by CBA 2055 & CBR 2056. In this

part, the firm answered only the quantity of equipments they owns in whatever

condition they acquired. The human resources available in the firm include only the

44

numbers of engineers, junior engineer, supervisors, accountant and general labor. The

third part financial capability includes the turnover of the firm of the three fiscal years

2069/70, 2068/069, 2068/067 B.S. , credit limit and permanent overdraft of the firm.

The fourth part common problem and difficulties includes the questionnaire regarding

satisfaction and common problems and that Class A construction entrepreneur are

being mostly tackled with. Also, for satisfaction question respondents were asked to

indicate with 5-point Likert-type rating scale: 1=Not at all satisfied, 2=Slightly

satisfied, 3=Somewhat satisfied, 4=Very satisfied, 5=Extremely satisfied. Also for

other ranking question respondents were asked to rank by their priority that they have

felt during their business.

3.6 Data Collection Procedure

The researcher collected list of Class A contractor with their name, contact address

and telephone number from FCAN, Kathmandu, office. Then, the list of 59

respondents(30 % of population) were selected by random sampling method. The

respondents were then at first contact in telephone providing information about the

research criteria and hence distributed questionnaire by personal meeting. The

questionnaire was then distributed hardcopy to 52 respondents and by email (7

respondents). Out of 59 respondents only 51 respondents returned the questionnaire

during 4 months of time, in which out of 52 respondents 44 respondents returned

hardcopy and all of the 7 respondents who were mailed returned in email. The

research has covered study of 29% of the respondents as sample from the list of 194

that is 51 respondents of total population as per total numbers provided by FCAN

Journal, Vol. 18, 2012.

3.7 Data Analysis & Interpretation Procedure

The returned fill up questionnaires were collected, coded and made data entry in

computer. The information obtained from questionnaires survey as raw data were

analyzed using SPSS & MS Excel programmer and were converted into information.

The information were presented by using the tools such as average, mean, weighted

average mean, percentage and minimum/maximum ranges. To understand easily,

45

some of the table & figures are presented in the form of horizontal, vertical bar chart

& pie chart also.

46

CHAPTER-4

PRESENTATION AND ANALYSIS OF DATA

This section of the research fully depends upon the research design and methods to be

undertaken while collecting the information. Henceforth, an analytical study was

conducted to analyze the collected data. Then, the collected data was coded, edited

and arranged in the systematic way. After that, this information were presented in the

form of table and diagram ( bar chart and pie chart ) through which, readers of the

report can easily understand the meaning of the findings of the research at a glance.

4.1 General Information

4.1.1 Types of Partners in Class A Firms

During registration of construction entrepreneurs, one may register at Ministry of

Small Cottage & Industry and Company Registrar Office at any of the form like

public limited company or private limited company or sole trader or partnership after

meeting the prescribed criteria of CBA 2055 & CBR 2056. Similarly, the choice of

persons in the company may be owned family members or groups of interested

professional.

Table 4.1: Types of Partners Registered During Firm’s Registration as Class A

S.N. Types of Partners Response Yes %

1 Family members 19 37.3

2 Other, than family members 19 37.3 3 Both family members & other 10 19.6

4 No partners/ owned by single investor 3 5.8 Total 51 100

Source: Field Survey, 2013.

47

Fig. 4.1: Types of Partners Registered During Firm Registration as Class A Source: Field Survey, 2013.

As shown in figure 4.1, 37.3 % of the firms of Class A construction companies

includes family member as partners in the firm where as again 37.3 % includes

partners as other than family. Similarily, percentage of firms that has both family

member and professional members as partners is 19.6 % and 5.8% of the construction

companies is either owned by single investor respectively.

4.1.2 Active Partners in Class A Firms in Terms of Registration

It is not always necessary that all partners listed during firm’s registration gets active

throughout the year. There can be various reasons through which the relationship

between and within partners can be strengthen and weakened. Some partners may get

much more active and some may not get active during firm’s operation.

Table 4.2 : Active Partners in Class ‘A’ Firm’s in Terms of Registration

S.N. Active Partners in Class ‘A’ Firm’s in Terms of Registration Response No. %

1 Yes 25 49%

2 No 26 51%

Total 51 100 Source: Field Survey, 2013.

37.3% 37.3%

19.6%

5.8%

0

5

10

15

20

Num

ber o

f firm

s

Nature of Partners

Types of Partners Registered During Firm Registration as Class A

Family members

Other, than family members

Both family members & other

No partners/ owned by single investor

48

Figure 4.2: Active Partners in Class Firms in Terms of Registration Source: Field Survey, 2013. The figure 4.2 depicts that out of the total respondents, 49% consists of active partners

and the remaining 51 % of companies are operated by single entreprenuers.

4.1.3 Experience on Specialized Construction of Work by Class A Construction Entrepreneurs

Generally, there are many sectors in which any firm can take part in construction

work of interested area after meeting specific criteria of qualification. But there has

also been argue that there is a need of Building Contractor, Road Contractor,

Pavement Contractor, Bridge Contractor, Tunnel Contractor, Hydropower Contractor

or similar specialist contractor so as to enhance at competitive cost also.

Table 4.3: Experience on Specialized Construction of Work by Class A Construction Entrepreneurs

S.N. Experience on Specialized Construction of Work by Class A

Construction Entrepreneurs Response No. %

1 Yes 4 7.8

2 No 47 92.2 Total 51 100


49%51%

Active Partners in Class A Firms in Terms of Registration

yes

no

49

Figure 4.3: Experience on Specialized Construction of Work by Class A

Construction Entrepreneurs Source: Field Survey, 2013.

As shown in figure. 4.3, 7.8 % of the firm are specialized in particular construction

works where as, remaining 92.2 % of the firm are engaged in two or more than two

areas of construction work.

4.1.4 Work Experience Sector of Class A Construction Entrepreneurs

Table 4.4 : Work Experience Sector of Class A Construction Entrepreneurs

S.No. Description about Work Experience Sector Response

Yes % 1 Construction and maintenance of building 50 98% 2 Road Construction and Maintenance 49 96.10% 3 Airport Building and Maintenance 24 47.10%

4 Barrage, Canal, Reservoir, Water Tank and Sewerage 29 56.90%

5 Tunnel and subway construction 7 13.70% 6 Electricity line, Power station 10 19.60% 7 Hydraulics Structure 13 25.50% 8 Reconstruction and Maintenance 24 47.10%


7.8%

92.2

Experience on Specialized Construction of Work by Class A Construction Entrepreneurs

Yes

No

50

Figure 4.4: Work Experience Sector of Class A Construction Entrepreneurs Source: Field Survey, 2013.

Table 4.5: Budget for Fiscal Year 2013/014 in Major Infrastructure Projects

S.No. Name of Projects Budget for Fiscal Year 2013/014 (In Billion Nrs')

1 Mid Hill Highway 1.9 2 East-West Railway 1.4 3 Melamchi 5.4 4 Sikta Irrigation 1.24 5 Babai Irrigation 0.45 6 KTM road expansion 1.81 7 Rural Drinking Water 3.99 8 Energy Sector 30 9 Transmission lines 13 10 Renewable energy 1.11

Source: http://www.nepalenergyforum.com/

98% 96.10%

47.10%56.90%

13.70% 19.60% 25.50%

47.10%

0102030405060

Cumulative nu

mbe

r of respo

nden

ts

Various Construction works

51

Figure 4.5: Budget for Fiscal Year 2013/014 in Major Infrastructure Projects Source: http://www.nepalenergyforum.com/

As shown in figure.4.4, most of the respondent are involved in construction and

maintenance of building (98 % respondents) and road construction and maintenance

works (96.1 % respondents) whereas, only 13.7 % of the respondent are only involved

in tunnel and subway construction. Similarily, 47.1 % of the respondent are involved

in airport building and maintenance and 56.9 % of respondents are involved in

barrage, canal, reservoir, water structures. Moreover, 25.5 % of respondent are

involved in hydraulic structure construction and 47.1 % of respondent are involve in

reconstruction and maintenance. It was also found that 19.6 % of respondent are

enagaged in construction of electricity transmission line and power station. Also it can

be seen from figure 4.5 that the highest amount of budget is for the energy sector

among other infrastructure development and the participant of contractors are very

few in number as compare to other infrastructures.

0

5

10

15

20

25

30

35N

rs in

bill

ion

Major Infrastructure

Budget for Fiscal Year 2013/014 in Major Infrastructure Projects In Billion Nrs'

52

4.2 Comparison of the Existing Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056

4. 2.1 Machine and Equipment

A machine is a tool that consists of one or more parts, and uses energy to meet a

particular goal. Machines are usually powered by mechanical, chemical, thermal, or

electrical means, and are often motorized. Construction equipment refers to heavy-

duty vehicles, specially designed for executing construction tasks, most frequently

ones involving earthwork operations. They are also known as, heavy machines, heavy

trucks, construction equipment, engineering equipment, heavy vehicles, or heavy

hydraulics.

Table 4.6: Status of Machine & Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056

S.N. Standard Meeting as per CBA 2055 & CBR 2056 by Class A

Construction Entrepreneurs Response No. %

1 Yes 17 33.3

2 No 34 66.7 Total 51 51


Table 4.6 shows that only 33.3 % of the respondents out of 51 respondents seem to

meet the standard as prescribed by CBA 2055 & CBR 2056. (Annex-D)

4.2.2 Human Resources Available with Class A Construction Entrepreneurs

Human resources are the set of individuals who make up the workforce of an

organization, business sector, or economy. Human resources in construction sector

generally refers to the various personal like civil engineers, overseers, supervisors,

accountant, general labour, various equipment operators etc.

53

Table 4.7 : Human Resources Available with Class A Construction Entrepreneurs

No. of personal

Types of Human Resource Owned by Class A Firms Civil Engineer Junior Engineer Accountant Supervisor Nos. of Firms Nos. of Firms Nos. of Firms Nos. of Firms

0 0 1 4 0 1 18 15 24 4 2 15 14 12 12 3 5 4 4 7 4 5 5 4 11 5 1 2 0 1 6 6 4 0 5 7 0 1 2 0 8 0 2 0 3 9 0 1 0 0 10 0 1 0 5 12 0 0 0 1 15 0 1 1 1 25 1 0 0 0 30 0 0 0 1

Total 51 51 51 51


Table 4.8: Range of Human Resources in Class A Firms

S.N. Type of Manpower Range of Human Resources in Class A Firms

Minimum Maximum Mean

1 Civil Engineers 1 25 2.92 2 Junior Engineer 0 15 3.25 3 Accountant 0 15 2.06 4 Supervisors 1 30 5.08


Table 4. 8 shows that overall average numbers of civil engineer held by Class A firm

is 2.92, junior engineer 3.25, accountant 2.06 and supervisor is 5.08.

54

4. 3 Financial Capabilities of Class “A” Construction Entrepreneurs

Financial Capabilities of firms can be defined in terms of their annual turnover

achieved, credit limit owned by the firm and bank overdraft facilities available with

the firm.

4.3.1 Annual Turnover of Class A Construction Entrepreneurs

Turnover represents the total Revenue received by the company. ie., Sale of goods,

Service Revenues (depending upon the nature of the business) and here mainly

concerned with supplies and construction works of public entities. (PPR, 2064).

Table 4.9 : Annual Turnover of Class A Construction Entrepreneurs for F.Y 069/070 , F.Y 068/069 & 067/068

S.N. Turnover Limit

Annual Turnover of Class A Firms in F.Y 069/070 , F.Y 068/069 & 067/068

Fiscal Year 069/70 068/069 067/068

No. % No. % No. % 1 Below 10 Crore 19 61.29 16 51.61 20 64.52 2 10-20 Crore 4 12.9 6 19.35 5 16.13 3 20-30 Crore 3 9.68 4 12.9 3 9.68 4 Above 30 Crore 5 16.13 5 16.13 3 9.68 Total 31 100% 31 100% 31 100%


Figure 4.6: Annual Turnover of Class A Construction Entrepreneurs for F.Y

069/070 , F.Y 068/069 & 067/068 Source: Field Survey, 2013.

0

10

20

30

40

Below 10 crore

10‐20 crore 20‐30 crore Above 30 crore

Total Nos. of Response

Num

ber o

f Firm

s

Turnover in Nrs

Annual Turnover of Class A Construction Entrepreneurs for F.Y 069/070, F.Y 068/069 & 067/068

F/Y 69/70 Nos. of Firms



55

Figure 4.6 shows that the majority of number of Class A firm’s annual turnover is

below 10 crore and is by 64.52 % of firms in F/Y 067/068, 51.61 % in F/Y 068/069

and 61.29 % in F/Y 069/070. From table 4.9 it is also seen that numbers of firms

having annual turnover in the recent three fiscal years above 20 crore is very less in

number.

4.3.2 Credit Limit of Class A Construction Entrepreneurs

A credit limit is the maximum amount of credit that a financial institution or other

lender will extend to a debtor for a particular line of credit by mortgaging the

properties. It is also known as credit line, line of credit, or a trade line.

Table 4.10 : Credit Limit of Class A Construction Entrepreneurs

S.N. Credit Limit Credit Limit of Class A Construction

Entrepreneurs No. %

1 Below 1 Crore 0 0% 2 1 - 5 Crore 19 37.30% 3 5 -10 Crore 26 50.90%

4 More than 10 Crore 6 11.80%

Total 51 100%


Figure 4.7: Credit Limit of Class A Construction Entrepreneurs Source: Field Survey, 2013.

0

5

10

15

20

25

30

below 1 crore 1 ‐ 5 crore 5 ‐10 crore more than 10 crore

Num

ber o

f respo

nden

ts

Credit Limit

Credit Limit of Class A Construction Entrepreneurs

56

As shown in figure 4.7, most of the firms have the credit limit between 5 to 10 crore

(50.9 % respondents) where as, only 11.8 % of the firms have credit limit above 10

crore.

4.3.3 Bank Overdraft of Class A Construction Entrepreneurs

A bank overdraft is a credit agreement made with a financial institution that permits

an account holder to use or withdraw more than they have in their account, without

exceeding a specified maximum negative balance, by mortgaging their properties.

Establishing an overdraft facility with a bank can help an individual or small business

with short term cash flow problems.

Table 4.11 : Bank Overdraft of Class A Construction Entrepreneurs

S.N. Bank Overdraft Limit Bank Overdraft of Class A Firms No. %

1 Below 1 crore 32 62.74% 2 1 - 5 crore 15 29.41% 3 5 -10 crore 3 5.88% 4 More than 10 crore 1 1.97% Total 51 100%


Figure 4.8 Bank Overdraft of Class A Construction Entrepreneurs Source: Field Survey, 2013.

62.74%

29.41%

5.88% 1.97%

Bank Overdraft of Class A Construction Entrepreneurs

Below 1 crore

1 ‐ 5 crore

5 ‐10 crore

Above 10 crore

57

As shown in figure 4.8, most of the firms have overdraft below 1 crores (62.74 %

respondents) whereas, only 1.97 % of the firms have overdraft above 10 crore.

29.41 % of the respondents has overdraft between 1 to 5crore. Also from fig.4.8 it is

seen that 5.88 % of the respondents has overdraft of 5 to 10 crore .

4.4 Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business

Table 4.12 : Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business

S.N Level of Satisfaction

Response about Satisfaction with Construction Business by Class A

Firms Nos. of Firms %

1 Not all satisfied 9 17.6 2 Slightly satisfied 17 33.3 3 Somewhat satisfied 17 33.3 4 Very satisfied 6 11.8 5 Extremely satisfied 2 3.9

Total 51 100% Source: Field Survey, 2013.

Figure 4.9: Satisfaction of Class A Construction Entrepreneurs in Current

Situation with Business Source: Field Survey, 2013.

17.6%

33.3% 33.3%

11.8%

3.9%

02468

1012141618

Not all satisfied Slightly satisfied Somewhat satisfied

Very satisfied Extremely satisfied

Num

ber o

f respo

nden

ts

Level of Satisfaction

Satisfaction of Class A Construction Entrepreneurs in Current Situation with Business

58

Fig.4.9 shows that construction entrepreneurs who are slightly satisfied and somewhat

satisfied with their business is 33.33 % out of 51 respondents while those who are

very satisfied is 11.8 %. From figure 4.9 it is seen that construction entrepreneurs

who are not at all satisfied is 17.6 % and extremely satisfied is only 3.9 % out of 51

respondents.

4. 4.1 Common Problem and Difficulties of Class A Construction Entrepreneurs

4.4.1.1 Difficulties Felt in Criteria of Achieving Qualification Documents During Bidding Procedure by Class A Construction Entrepreneurs

GoN's current policy on PQ is that all potential bidders that meet predefined minimum

requirements regarding general construction experience, particular or specialized

experience, financial capabilities including annual turnover and credit line

information, personnel capabilities, and equipment availability should be invited to

bid. Also bid security is an essential part of qualification document. The procedure

requires the implementing agency (Employer) to set pass/fail criteria which, if all are

not met substantially by the applicants, would cause them to be disqualified by public

entity.

Table 4.13 : Difficulties Felt in Criteria of Achieving Qualification Documents During Bidding Procedure by Class A Construction Entrepreneurs

Priority Weightage Criteria on Qualification Procedure S.E A.T C.L.I H.R E.R B.S

w f f f f f f First 6 23 18 1 5 3 1 Second 5 16 24 1 1 8 1 Third 4 1 4 16 3 22 5 Fourth 3 2 4 8 20 11 6 Fifth 2 2 0 19 19 7 4 Sixth 1 7 1 6 3 0 34 Ʃfw 239.0 257.00 143.00 148.00 193.00 91.00 Ʃw 21 - - - - - - Ʃfw/Ʃw - 11.38 12.24 6.81 7.05 9.19 4.33 Rank - 2 1 5 4 3 6 Source: Field Survey, 2013. * f= Nos. of Firms

Note: S.E=Similar Experience, A.T=Annual Turnover, C.L.I=Credit Line Information

H.R=Human Resource, E.R=Equipment Required, B.S=Bid Security

59

From Table 4.13, it is seen that the weighted average mean of 12.24 is highest for the

annual turnover and second highest 11.38 for similar nature of work experience in

prequalification part of bidding documents by the respondents.

Similarly from Table 4.13, it is seen that the weighted average mean for equipment

required is 9.19, manpower engaged is 7.05, credit line information is 6.81 and bid

security is 4.33 giving the third, fourth, fifth and sixth priority finding difficulties in

prequalification part of bidding documents by the respondents.

4. 4.1.2 Difficulties felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs

Payment procedure to the construction entrepreneurs is in the form of advance

payment, running bills payment, final bills payment, escalated amount, bonus amount

and refunding security amount by public entities.

4.14 : Difficulties Felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs

Priority

Weightage Criteria on Payment Procedure

A.P R.B.P F.B.P R.S.A E.A B.A w f f f f f f

First 6 1 14 9 3 18 6 Second 5 5 9 7 5 8 18 Third 4 4 7 9 17 8 6 Fourth 3 5 9 13 12 9 3 Fifth 2 6 11 10 10 5 8 Sixth 1 30 1 3 4 3 10 Ʃfw - 104.00 207.00 187.00 171.00 220.00 185.00 Ʃw 21 - - - - - - Ʃfw/Ʃw - 4.95 9.86 8.90 8.14 10.48 8.81 Rank - 6 2 3 5 1 4

Source: Field Survey, 2013. * f= Nos. of Firms Note: A.P=Advance Payment, R.B.P=Running Bill Payment, F.B.P=Final Bill

Payment, R.S.A=Refund of Security Amount, E.A=Escalation Amount,

B.A=Bonus Amount

60


escalation amount and second highest 9.86 for running bill payments in the process of

payment procedure made by public entities.

Similarly from Table 4.14, it is seen that the weighted average mean for final bill

payment is 8.90, bonus amount is 8.81, refunding of the security amount is 8.14 and

advance payment is 4.95 giving the third, fourth, fifth and sixth priority finding

difficulties in the process of payment procedure made by public entities.

4.4.1.3 Difficulties Felt in Revenue & Taxation Part by Class A Construction Entrepreneurs

There are various parts of taxation system that the construction entrepreneurs needs to

deals with during their business. Mainly difficulties are felt during the issuing of

license, yearly renewal, registration at Inland Revenue office, monthly tax

submission, tax clearance and refunding of the security amount (TDS i.e Tax Deduct

at Source) .

Table 4.15: Difficulties Felt in Revenue & Taxation Part by Class A Construction Entrepreneurs

Priority

Weightage

Criteria on Revenue & Taxation

I.L Y.R.F R.V.O M.T.S T.C R.T.D.S

w f f f f f f First 6 5 5 1 2 9 30 Second 5 10 5 5 1 23 12 Third 4 20 10 8 6 9 2 Fourth 3 7 15 26 18 2 1 Fifth 2 4 6 11 10 3 2 Sixth 1 5 10 1 14 5 4 Ʃfw - 194.00 162.00 164.00 129.00 222.00 259.00 Ʃw 21 - - - - - - Ʃfw/Ʃw - 9.24 7.71 7.81 6.14 10.57 12.33 Rank 3 5 4 6 2 1 Source: Field Survey, 2013. * f= Nos. of Firms

Note: I.L=Issue of License, Y.R.F=Yearly Renewal of Firm, R.V.O=Registration at

Vat Office, M.T.S=Monthly Tax Submission, T.C=Tax Clearance, R.T.D.S=Refund

of Tax Deducted at Source

61


refund of the tax deducted at source amount and second highest 10.57 for obtaining

tax clearance certificate in the part of taxation process.

Similarly from Table 4.15, it is seen that the weighted average mean for issuance of

license is 9.24, registration at vat office is 7.81, yearly renewal of firm is 7.71 and

monthly tax submission at revenue office is 6.14 giving the third, fourth, fifth and

sixth priority finding difficulties in the listed taxation parts.

4.4.1.4 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs

Brain drain (or human capital flight), is the large-scale emigration of a large group of

individuals with technical skills or knowledge. The reasons usually include two

aspects which respectively come from countries and individuals. In terms of

countries, the reasons may be social environment (in source countries: lack of

opportunities, political instability or oppression, economic depression, health risks,

etc). (www.en.wikipedia.org).

Table 4.16 : Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs

Priority

Weightage

Sectors on Human Resources

Road Sector

Bridge Sector

Irrigation Sector

Building Sector

Water Supply Sector

Hydropower Sector

Tunnel Sector

w f f f f f f f First 7 2 0 1 0 0 11 37 Second 6 0 6 0 1 3 31 10 Third 5 10 25 2 0 9 5 0 Fourth 4 17 12 10 5 4 1 2 Fifth 3 3 5 20 18 5 0 0 Sixth 2 9 3 14 18 5 1 1 Seventh 1 10 0 4 9 25 2 1 Ʃfx - 169.00 230.00 149.00 125.00 129.00 296.00 330.00 Ʃw 28.00 - - - - - - - Ʃfx/Ʃw - 6.04 8.21 5.32 4.46 4.61 10.57 11.79 Rank - 4 3 5 7 6 2 1

Source: Field Survey, 2013. * f= Nos. of Firms

62


tunnel sector and second highest 10.57 for hydropower sector in the part of manpower

unavailability as felt by Class A contractors.

Similarly from Table 4.16, it is seen that the weighted average mean for bridge sector

is 8.21, road sector is 6.04, irrigation sector is 5.32, water supply sector is 4.61 and

building sector is 4.46 giving the third, fourth, fifth , sixth and seventh priority in the

part of manpower unavailability as felt by Class A contractors.

4.4.1.5 Insecure Felt due to Hooliganism During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs

4.4.1.5.1 Tender Purchasing

A notice for invitation to bids or prequalification proposals shall have to be

published in a daily newspaper of national circulation and, in the case of an

international bid, it may also be published in any international communication

media. Then, interested firms shall purchase the tender document from concerned

offices upon submission of specified amount providing along with the necessary

documents like registration certificate of a firm, organization or company, value

added Tax registration certificate and permanent account number (PAN) registration

certificate, tax clearance certificate and a written declaration made by bidder with a

statement that he/she is eligible to participate in the procurement proceeding. Due to

the hooliganism that had entered into the tendering process in contractor profession, it

has become very difficult for most of the interested contractor for even to purchase

tender document from concerned authority.

4.4.1.5.2 Tender Drop

In publishing a notice under, for invitation of national level bidding or

prequalification proposals, a period of at least thirty days shall be given and at least

forty five days shall be given in the case of a notice on invitation that of

international level bidding or prequalification proposals. The place, manner, the

deadline for the submission or forwarding of the bidding documents or

prequalification documents and the place, date and time for the opening of bids,

63

and matter that the bidders or their authorized agents shall be invited to attend

the opening of bid must be mentioned during tender notice by public entities. Due to

the hooliganism that had entered into contractor profession, it has become very

difficult for most of the interested contractor for to drop their tender document to

concerned authority.

4.4.1.5.3 Site Execution

Site execution has always become very difficult for most of the contractors from the

initial establishment of site for work and ends till up to the completion of the project.

Table 4.17 : Insecure Felt due to Hooliganism During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs

Priority Weightage

Area of Business Sector for Contractors Tender

Document Purchase

Tender Document

Drop

Construction Sites Execution

w f f f

First 3 3 20 28

Second 2 4 28 19

Third 1 44 3 4 Ʃfw - 61.00 119.00 126.00 Ʃw 6 - - - Ʃfw/Ʃw - 10.17 19.83 21.00 Rank - 3 2 1

Source: Field Survey, 2013. * f= Nos. of Firms

From Table 4.17, it is seen that the weighted average mean of 21 is highest for the

construction site execution, second highest 19.83 for tender document drop and third

highest 10.17 for tender document purchase.

64

CHAPTER-5

FINDING OF THE STUDY

5.1 General Information

• The research has revealed that most of the partners in the firms include family

member as partners (37.3 %), Other, than family member (37.3 %) both family

member and other (19.6%) and no partners (5.9 %).

• 51 % of the partners those who were member of the organization during the

registration phase have discontinued as an active member in the same

company and profession.

• Few contractor ,(only 7.8 % ) are specialized in particular area of construction

work. Most of the contractor are engaged specially in two areas of

construction, viz. Construction and maintenance of building (98 %) and in

road construction and maintenance (96.10 %). The study also shows that the

contractor in the sector of tunnel and subway (only 13.70 %), electric line

and power station constructions (19.6 %) are very few in numbers.

5.2 Comparison of the Existing Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056

• Most of the companies, 66.7 % of the companies have failed to meet the exact

prescribed standard in overall consumption of the equipment as prescribed by

CBA 2055 & CBR 2056.

5.2.2 Human Resources Available with Class A Construction Entrepreneurs

• The overall average number of civil engineers hold by Class A firm is 3,

junior engineer 3, accountant 2 and supervisor is 5.

65

5.3 Financial Capabilities of Class A Construction Entrepreneurs

• Most of the firm(51 % to 64 %) has the annual turnover below ten crore on

viewing the recent three fiscal years F.Y 069/070, 068/069 & 067/068

• The credit limit for most of the firm (50.9 %) , ranges between five to ten

crore.

• Most of the firm (62.74 %) , has the overdraft facility below one crore.

5.4 Satisfaction of Class A Construction Entrepreneurs in Current Situation with Construction Business

• Few construction entrepreneurs (only 3.9 %) ,are extremely satisfied with the

profession.

5.4.1 Common Problem and Difficulties of Class A Construction Entrepreneurs

5.4.1.1 Difficulties Felt in Criteria of Achieving Qualification Documents during Bidding Procedure by Class A Construction Entrepreneurs

• It is seen that the weighted average mean of 12.24 is highest for the annual

turnover, second highest 11.38 for similar nature of work experience and third

9.19 for equipment required which have been felt the most difficult by

contractors in prequalification part of bidding documents made by public

entities.

5.4.1.2 Difficulties felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs

• It is seen that the weighted average mean of 10.48 is highest for the escalation

amount, second highest 9.86 for running bill payments and third 8.90 for

final bill payment which have been felt most difficult by contractors in the

process of payment procedure made by public entities.

66

5.4.1.3 Difficulties felt in Revenue & Taxation Part by Class A Construction Entrepreneurs

• It is seen that the weighted average mean of 12.23 is highest for the refund of

the amount of tax deduct at source, second highest 10.57 for obtaining tax

clearance certificate and third 9.24 for issuance of license in the part of

taxation process.

5.4.1.4 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs

• It is seen that the weighted average mean of 11.79 is highest for the tunnel

sector, second highest 10.57 for hydropower sector and third 8.21 for bridge

sector which has been felt insufficient in the part of manpower availability.

5.4.1.5 Insecure Felt Due to Hooliganism During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs

• It is seen that the weighted average mean of 21 is highest for the construction

site execution and second highest 19.83 for tender document drop during

which contractors feels unsecure in their business.

67

CHAPTER-6

CONCLUSION AND RECOMMENDATION

Based on the observations and findings of the study, the following conclusion and

recommendation are made:

6.1 Conclusion

6.1.1 General Information

• Specialization in construction by contractors seems not to be adopted as most

of the contractor seems to work in various field of construction.

• Most of the budgets in this fiscal year 2013/014 has been allocated in energy

sector (73.15 %) but the participation of contractors in building infrastructure

regarding electric line and power station (19.6 %) are very few in number.

6.1.2 Existing Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056

• Most of the construction entrepreneurs of Class A firm (66.7 %) in Nepal does

not meet the standards of equipment as prescribed by CBA 2055 & CBR 2056.

6.1.3 Financial Capabilities of Class “A” Construction Entrepreneurs

• Most of the firm(51 % to 64 %) has the annual turnover below ten crore on

viewing the recent three fiscal years F.Y 069/070, 068/069 & 067/068

• The credit limit for most of the firm (50.9 %) ranges between five to ten crore.

• Most of the firm(62.74 %) has the overdraft facility below one crore.

68

6.1.4 Satisfaction of Class A Construction Entrepreneurs

• Most of the construction entrepreneur (96.1 %) is not extremely satisfied with

the current situation ongoing in their business.

6.1.4.1 Common Problem and Difficulties of Class A Construction Entrepreneurs

6.1.4.1.1 Difficulties Felt in Criteria of Achieving Qualification Documents during Bidding Procedure by Class A Construction Entrepreneurs

• Most of the contractor are finding difficulties in meeting criteria for turnover

part and similar nature of work experience of qualification documents asked

during the bidding procedure by public entity.

6.1.4.1.2 Difficulties felt in Receiving Payment During Payment Schedule by Class A Construction Entrepreneurs

• Most of the contractors are not satisfied with the process in getting escalated

amount, running bill payment and final bill payment from public entity during

making payment.

6.1.4.1.3 Difficulties felt in Revenue & Taxation Part by Class A Construction Entrepreneurs

• Most of the contractors are not satisfied with the process in refunding of the

amount of tax deduct at source and obtaining tax clearance certificate at the

end of fiscal year.

6.1.4.1.5 Difficulties Felt in Hiring Qualified Human Resource in Different Construction Sector by Class A Construction Entrepreneurs

• Currently, there is a lack of skilled manpower in tunnel sector, hydropower

sector and in bridge sector most in Nepal by respectively as felt by Class A

contractors.

69

6.1.4.1.6 Insecure Felt Due to Hooliganism During Stages of Tender Purchase, Tender Drop and Construction Site Execution Works by Class A Construction Entrepreneurs

• Most of the contractors feels insecure during site execution and during tender

document drop.

6.2 Recommendation

6.2.1 General Information

• Contractors need to focus in some particular area or sector of construction

work instead of targeting almost all the sectors inorder to expertise in a

particular sector to enhance the quality and sepcialization of work.

• It is clear from the study that there is more opportunity in construction if the

contractors manage to enter in the construction of energy sector.

6.2.2 Equipment Capacity of Class A Entrepreneurs as per CBA 2055 & CBR 2056

• It was clear from the study that most of the firm were not following the

standards to own heavy equipments, which means they are using these heavy

equipments on rent or outsourcing from other. This means that these firm are

still not following the standards on the ownsership of equipments as

prescribed by CBA 2055 and CBR 2056. Hence these companies need to

consider in purchse and ownership of heavy equipment as per the prescribed

standards of CBA 2055 & CBR 2056. There should be a systematic

monitoring system for to maintain the standard of equipment of class A

contractors after the issuance of license as class A .

70

6.2.3 Common Problem and Difficulties of Class A Construction Entrepreneurs

6.2.3.1 Criteria on Qualification Documents

• Public entity must be more flexible in terms of present policy while preparing

similar nature of work experience and annual turnover part during preparation

of qualification procedure for procurement aiming more participation of

contractor during bidding procedure.

6.2.3.2 Payment During Payment Schedule

• Public entity must create suitable environment for payment procedure in

escalated amount, running bill and final bill payment.

6.2.3.3 Revenue & Taxation Part

• Simple procedure should be formulated for refunding of the tax deduct at

source amount and tax clearance at the end of fiscal year for construction

entrepreneurs by Inland Revenue Office.

6.2.4.4 Qualified Human Resource in Different Construction Sector

• Special training for labours should be provided to produce the skilled

manpower in tunnel sector, hydropower sector and bridge sector.

6.2.4.5 Tender Purchase, Tender Drop and Construction Site Execution

• Special separate laws and policies regarding security should be formulated for

contractor business during bidding procedure and for the execution of work at

site .

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6.3 Recommendation for Future Research

The aim of the study was to identify and compare the current status of Class A

construction entrepreneurs in terms of equipment capability as prescribed by CBA

2055 and CBR 2056. Furthermore, this research also studies about the financial

capabilities of firms in terms of credit limit and overdraft facilities and also explore

the common problem in criteria of qualification, payment procedure, security matter,

taxation and unavailability experienced by manpower by Class A contractor.

Furthermore, this study enclose particular scope. There can be requisite for a further

research into other areas in the construction entrepreneur’s status. The following

recommendations are suggested for future research on:

i) To study on status of construction companies of registered class B, C or D

construction entrepreneur.

ii) To study on opportunity and challenges on specialization on nature of works to

Nepalese contractor.

iii) To study on laws and policies regarding security for healthy construction

environment of bidding procedure and working environment in Nepalese construction

projects.

72

References:

Bhattarai, Deepak, (2069, Mangsir), The Neplease Construction Industry is at Risk, Nepalese Construction Souvernir , Vol: 18, No.21, Federation of Contractors’ Associations of Nepal (FCAN), Kathmandu

Deoja, B.B, Adhikari R.P, and B.R Pandey, Prospects and Approaches to Public Private Partnership in Transport Infrastructure(August 2009), Economic Policy Network

Government of Nepal, Standard Prequalification Document (2009), Public Procurement Monitoring Office, Tahachal, Kathmandu

Lama, Ang Dorje, 2002. “Present Status of ‘A’ Class Contractors in Nepal and Qualification Criteria for them” Centre for Post Graduate Studies, Nepal Engineering College

Pandey, Birendra Raj ( 2069, Mangsir,), Capacity Building of Construction Industry- Project Level, Nepalese Construction Souvernir , Vol: 18, No.21, Federation of Contractors’ Associations of Nepal (FCAN), Kathmandu

Pandey, Birendra Raj ( 2057, Mangsir,), Nepalese Contractors: A discussion, Nepalese Construction Souvernir , Vol: 10, No.13, Federation of Contractors’ Associations of Nepal (FCAN), Kathmandu

http://www.ppmo.gov.np/about_us.php?menu_id=1 cited on 2013-05-28

http://www.moppw.gov.np/ cited at 2013-05-28

http://www.cbps.gov.np/ cited at 2013-05-28

http://www.fcan.org.np/pages.php?pid=86 cited at 2013-05-29

http://scaef.org.np/conference/conference/pdf/Session-3/2.%20Tulasi%20Sitaula%20-%20Theme.pdf cited on 2013-05-28

73

http://www.mof.gov.np/files/DCR.pdf cited at 2013-05-28

http://www.asosai.org/R_P_auditpublicworks_projects/chapter_15_nepal.htm cited on 2013-15-18

http://www.fcan.org.np/pages.php?pid=83 cited at 2013-05-29

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=45497 cited at 2013-05-20

http://www.thehimalayantimes.com/fullNews.php?headline=Contractors+warned+for+work+delay++&NewsID=309390 cited at 2013-05-22

http://www.ekantipur.com/2013/04/16/development/development-projects-run-late-due-to-slow-govt-contractors/370063.html cited at 2013-05-24

http://stats.kkk.com.np/2013/04/08/business/two-more-infra-projects-under-ppp-model/369671.html cited at 2013-05-24

http://www.housingnepal.com/news/national/kalika-construction-bags-fcans-class-a-gold-award cited at 2013-05-28

http://www.abhiyan.com.np/article-thecorporate_vol2_Issue51_mainnews1#.UZ8l_XWNFzU cited at 2013-05-24

http://en.wikipedia.org/wiki/Brain_drain cited at 2013-09-20

http://www.nepalenergyforum.com/govt-emphasizes-hydropower-infrastructure-development/cited at 2014-01-09

Bibliography:

Journal of Federation of Contractor Associations of Nepal (FCAN), “Volume; 9, no.12,Feburary 2000” ; “Volume 17,no.20, September 2011”; “Volume 18 , no.21, November 2012”

www.fcan.org.np cited at 2013, March 18

74

Appendices

75

Annex-A

(Figure of Special Purpose of Company)

Source: Prospects and Approaches to Public Private Partnership in Transport Infrastructure, August 2005.

Toll Collection

Operations and Maintainence

Operations and Maintainence CompanyConstruction Company

Contractors

Suppliers

Project Management Group (PMG)

Project Company(PC) Design

Investors

PromotersIndependent

Promoter/Sponser

Government Department

Technical, Financial and Legal Advisors

Government Ministry

Telecom & Electrical System

Quality Assurance & Control

Detailed Design & Engineering

Wayside Amenities

Slope Stabilizations

Construction of bridge/tunnels

Construction of roads

76

Annex-B

(Requirements of Machine & Equipments as per CBA 2055 & CBR 2056 for Class A Construction Entrepreneurs)

S.No Name of Equipment Quantity in Nos.

1 Thodolite 2

2 Level 4

3 Dump truck or truck 2

4 Water pump 3

5 Concrete mixture 3

6 Vibrator 5

7 Lab Equipment 1 set

8 Any one set of Excavator, bull dozer, backshoe

9 At least four items out of following:

9.1 Loader

9.2 Bitumen distributor/sprayer

9.3 Water tanker/sprayer

9.4 Motor grader

9.5 Three wheeler roller

9.6 One ton roller

9.7 Pneumatic roller

9.8 Bitumen paver

9.9 Asphalt mix plant

9.10 Crane

9.11 Fork Lift

9.12 Crusher

9.13 Compactor

9.14 Vibrating roller

9.15 Hydraulic auger

9.16 Benz

9.17 Building host

Source: CBA, 2055. & CBR, 2056.

77

Annex-C (List of Class A Contractors affliated with District Association)

S/No. Name of Contractors District Address 1 BKOI Builders Pvt. Ltd. Taplejung 2 H.M Construction Pvt. Ltd. Sunsari 3 Network Builders & Construction Pvt. Ltd. Sunsari 4 Surya & Sons Pvt. Ltd. Sunsari 5 Raman Construction Pvt. Ltd. Dhanusa 6 Pratistha Construction Co. Pvt. Ltd. Sarlahi 7 Jay Baba Construction Pvt. Ltd. Nuwakot 8 Karki Manakamana Nirman Sewa Nuwakot 9 Vishan Construction Dhading

10 Surya Chandra Construction Rasuwa 11 Friends Construction Pvt. Ltd. Kabhrepalanchok 12 Kuseshwor Nirman Sewa Pvt. Ltd. Kabhrepalanchok 13 Hira & Namita Construction Pvt. Ltd. Kathmandu 14 I.C.T.C Construction Kathmandu 15 Mahabu Construction Pvt. Ltd. Kathmandu 16 N.B Construction Kathmandu 17 Narayan Construction Kathmandu 18 Rasuwa & Company Pvt. Ltd. Kathmandu 19 Shivaco Construction Pvt. Ltd. Kathmandu 20 Awale Builders Pvt. Ltd. Lalitpur 21 Banglamukhi Construction Pvt. Ltd. Lalitpur 22 Diwa Nirman Sewa Pvt. Ltd. Lalitpur 23 Future Star Construction Pvt. Ltd. Lalitpur 24 Karyashila Construction Co. Pvt. Ltd. Lalitpur 25 Sailung Construction Co. Pvt. Ltd. Lalitpur 26 Singha & Brothers Construction Pvt. Ltd. Lalitpur 27 Lali Gurans Construction Bhaktapur 28 Sobarna Nirman Sewa Sindhupalchok 29 Sunaula Khimti Construction Pvt. Ltd. Sindhupalchok 30 Ashish Nirman Sewa Pvt. Ltd. Chitwan 31 Adventure Construction Co. Pvt. Ltd. Chitwan 32 B.P Construction Pvt. Ltd. Chitwan 33 Lohani & Brothers Pvt. Ltd. Chitwan 34 Luna Builders & Contractors Pvt. Ltd. Chitwan 35 Nepal Builders & Engineers Pvt. Ltd. Chitwan 36 Shanti Nirman Sewa Pvt. Ltd. Chitwan

78

37 D.S Construction Co. Pvt. Ltd. Makwanpur 38 Om Sai Construction Makwanpur 39 Road & Bridge Construction Pvt. Ltd. Makwanpur 40 Mrit Sanjivani Nirman Sewa Makwanpur 41 Sapana Nirman Sewa Pvt. Ltd. Makwanpur 42 Subedi Nirman Sewa Makwanpur 43 Chandra Nirman Sewa Kaski 44 Chapkota Nirman Sewa Pvt. Ltd. Kaski 45 Danfe Construction Co. Pvt. Ltd. Kaski 46 Indreni Nirman Sewa Pvt. Ltd. Kaski 47 K.C Construction Firm Kaski 48 M.K Construction Kaski 49 Muktinath Nirman Sewa Pvt. Ltd. Kaski 50 Pannachan Construction Pvt. Ltd. Kaski 51 United Builders & Engineers Pvt. Ltd. Kaski 52 Gajindra Nirman Sewa Pvt. Ltd. Syangja 53 Lumbini Builders Pvt. Ltd. Rupandehi 54 Siddhartha Darshan Builders Pvt. Ltd. Rupandehi 55 Surya Construction Firm Surkhet 56 Ashis Construction Kailali 57 K.S Construction Pvt. Ltd. Kailali 58 Jaya Durge Mahakali Nirman Sewa Pvt. Ltd. Kanchanpur 59 Netra Prakash Construction Kanchanpur 60 Chandra & Basanta Construction Pvt. Ltd. Baitadi 61 Rajendra Nirman Sewa Pvt. Ltd. Dadeldhura 62 P.S Construction Doti 63 Jagriti Nirman Sewa Bajhang

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(List of Class A Contractors affliated with Associates Member)

S/No. Name of Contractors District Address

1 A.M Construction Co. Pvt. Ltd. Lalitpur 2 A.K & Ganba Construction Pvt. Ltd. Kathmandu 3 Akela Construction Co. Pvt. Ltd. Kathmandu 4 Alija Construction Co. Pvt. Ltd. Lalitpur 5 Amar Construction Pvt. Ltd. Kathmandu 6 Amrit Nirman Sewa Pvt. Ltd. Sunsari 7 ANK Construction Co. Pvt. Ltd. Kathmandu 8 Apex Construction Co. Pvt. Ltd. Kathmandu 9 Araniko Nirman Company Pvt. Ltd. Kathmandu

10 Associated Builders & Contractors Pvt. Ltd. Narayanghat 11 Atlas Engineering & Construction Co. Pvt. Ltd. Kathmandu 12 B.K Shrestha & Builders Pvt. Ltd. Kathmandu 13 B.T Nirman Sewa Pvt. Ltd. Kathmandu 14 Bajra Guru Construction Co. Pvt. Ltd. Lalitpur 15 Bhairav Construction Co. Pvt. Ltd. Kathmandu 16 Bhandar Thotung Nirman Sewa Pvt. Ltd. Kathmandu 17 Bishnu Paduka Construction Co. Pvt. Ltd. Kathmandu 18 Bokhim & Son Construction Co. Pvt. Ltd. Kathmandu 19 C.E Construction Pvt. Ltd. Kathmandu 20 C.L.S Construction Pvt. Ltd. Kathmandu 21 Chakreswari Nirman Sewa Pvt. Ltd. Bhaktapur 22 Chitwan Co. E Nepal Pvt. Ltd. Kathmandu 23 Con-Tech Pvt. Ltd. Kathmandu 24 Dhukuchhu Construction Co. Pvt. Ltd. Kathmandu 25 Elite Construction Co. Pvt. Ltd. Kathmandu 26 Everest Nirman Co. Pvt. Ltd. Kathmandu 27 Fulijor Nirman Company Pvt. Ltd. Sarlahi 28 G.M Construction Pvt. Ltd. Kathmandu 29 G.R Construction Kathmandu 30 Gaura Construction Pvt. Ltd. Kathmandu 31 Gauri Parbati Nirman Sewa Pvt. Ltd. Kathmandu 32 Giri Bandhu Construction Jhapa 33 Global Construction Pvt. Ltd. Chitwan 34 Gokarna Nirman Sewa Pvt. Ltd. Kathmandu 35 Golden Good Sherpa Construction Pvt. Ltd. Kathmandu 36 Gorkha Builders Pvt. Ltd. Kathmandu

80

37 Gorkha Construction Co. Nepal Pvt. Ltd. Kathmandu 38 H.T.C Construction Pvt.Ltd. Kathmandu 39 Habitat Construction Engineers Pvt. Ltd. Kathmandu 40 Hanyang Construction Co. Nepal Pvt. Ltd. Kathmandu 41 Himal Hydro & General Construction Pvt. Ltd. Kathmandu 42 Himalayan Builders & Engineers Pvt. Ltd. Kathmandu 43 High Himalaya Hydro Construction Pvt. Ltd. Lalitpur 44 Hirachan Construction Company Pvt. Ltd. Bhairawa 45 Indreni Builders Pvt. Ltd. Lalitpur 46 Jade Construction Co. Pvt. Ltd. Kathmandu 47 Jagat Nirman Sewa Pvt. Ltd. Kathmandu 48 Janamukhi Construction Co. P. Ltd. Lalitpur 49 Jaya Buddha Nirman Sewa Pvt. Ltd. Kathmandu 50 Jay Om Nirman Sewa Pvt. Ltd. Kathmandu 51 Jayee Construction Pvt. Ltd. Kathmandu 52 Kailash & Company Pvt. Ltd. Kathmandu 53 Kalika Construction Pvt. Ltd. Chitwan 54 Kankai International Builders Pvt. Ltd. Jhapa 55 Khani Nirman Sewa P. Ltd. Kathmandu 56 Khom Construction & General Pvt. Ltd. Pokhara 57 KONECO Pvt. Ltd. Kathmandu 58 Koshi & Neupane Nirman Sewa Pvt. Ltd. Kathmandu 59 Krishna Construction & Engineers Pvt. Ltd. Pokhara 60 Kumar Shrestha Nirman Sewa Pvt. Ltd. Mahendranagar61 L.P & Lama Construction Pvt. Ltd. Kathmandu 62 Lama Builders Co. Pvt. Ltd. Kathmandu 63 Lama Construction Co. Pvt. Ltd. Kathmandu 64 Laxmi Saraswati Nirman Sewa Pvt. Ltd. Pokhara 65 Laxmi Shrestha & Co. Pvt. Ltd. Kathmandu 66 M.B Construction Company Pvt. Ltd. Lalitpur 67 M.K Nirman Sewa Pvt. Ltd. Kathmandu 68 Mahadev Khimti Nirman Sewa Pvt. Ltd. Kathmandu 69 Mahalaxmi Construction Concern Pvt. Ltd. Kathmandu 70 Mainachuli Nirman Sewa Pvt. Ltd. Jhapa 71 Manadhar Construction Kathmandu 72 Michico & Company Pvt. Ltd. Kathmandu 73 Millennium Builders Conssortium Pvt. Ltd. Kathmandu 74 Mudbhari & Joshi Construction Pvt. Ltd. Kathmandu 75 Munna & Acharya Construction Company Pvt. Kathmandu 76 Nagarjun Construction Co. Pvt. Ltd. Kathmandu

81

77 Narendra Nirman Sewa Pvt. Ltd. Pokhara 78 Neesa Nirman Sewa Pvt. Ltd. Kathmandu 79 Nepal Adarsha Nirman Company Pvt. Ltd. Kathmandu 80 Nepal Pari Nirman Company Pvt. Ltd. Kathmandu 81 Nepal Pragati Nirman Sewa Pvt. Ltd. Kathmandu 82 Nepal Singha Construction Pvt. Ltd. Kathmandu 83 New Everest Construction Pvt. Ltd. Kathmandu 84 Om Sai Ram Construction Pvt. Ltd. Lalitpur 85 P.S Construction Co. Pvt. Ltd. Kathmandu 86 Pappu Construction Birgunj 87 Pashupati Nirman Sewa Pvt. Ltd. Kathmandu 88 Prera Nirman Sewa Pvt. Ltd. Chitwan 89 Prithivi Nepal Construction Pvt. Ltd. Dhading 90 Prompt Construction Pvt. Ltd. Kathmandu 91 Puspanjali Builders Pvt. Ltd. Chitwan 92 Rabina Construction Pvt. Ltd. Chitwan 93 Rainbow Construction Pvt. Ltd. Kathmandu 94 Ramechaap Sherpa Construction Pvt. Ltd. Kathmandu 95 Ranipauwa & Kakani Nirman Sewa Pvt. Ltd. Kathmandu 96 Rayamajhi Construction Pvt. Ltd. Kathmandu 97 Rasuwa Construction Co. Pvt. Ltd. Kathmandu 98 R.J Construction Company Pvt. Ltd. Lalitpur 99 Road & Building Construction Pvt. Ltd. Kathmandu

100 S.B.A Nirman Sewa Pvt. Ltd. Kathmandu 101 Sagar Construction Co. Pvt. Ltd. Kathmandu 102 Samanantar Nirman Sewa Pvt. Ltd. Kathmandu 103 Santoshi Nirman Sewa Pvt. Ltd. Chitwan 104 Shankar Mali Nirman Sewa Pvt. Ltd. Kathmandu 105 Sharma & Company Pvt. Ltd. Kathmandu 106 Siddhi Sai Prakash Construction Pvt. Ltd. Kathmandu 107 Shrestha Construction Co.(Hetauda) Pvt. Ltd. Kathmandu 108 Shubha Construction Pvt. Ltd. Kathmandu 109 Shyam Sundar Nirman Sewa Pvt. Ltd. Kathmandu 110 Siruwa Construction Pvt. Ltd. Kathmandu 111 Sky Builders Pvt. Ltd. Kathmandu 112 Super Sherpa Construction Co. Pvt. Ltd. Kathmandu 113 Super World Construction Co. Pvt. Ltd. Kathmandu 114 Swachchhanda Nirman Sewa Pvt. Ltd. Kathmandu 115 Taksar Nirman Sewa Pvt. Ltd. Kathmandu 116 Tamang Construction Pvt. Ltd. Kathmandu

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117 Tarun Nirman Sewa Pvt. Ltd. Kathmandu 118 Technican Nepal Pvt. Ltd. Lalitpur 119 Thakali Subba's Construction Co. Kathmandu 120 The Kanchanjanga Construction Co. Pvt. Ltd. Kathmandu 121 Thodung Construction Pvt. Ltd. Kathmandu 122 Trisuli Construction Co. Pvt. Ltd. Kathmandu 123 Tulsi Bhakta Construction Pvt. Ltd. Lalitpur 124 Tundi Construction Pvt. Ltd. Kathmandu 125 Waiba Construction Co. Pvt. Ltd. Kathmandu 126 Y.P Construction Pvt. Ltd. Palpa 127 Yakthumhang Nirman Sewa Pvt. Ltd. Panchthar 128 Yojana Construction Pvt. Ltd. Kathmandu 129 Young Sherpa Construction Pvt. Ltd. Kathmandu

Source: FCAN Journal, 2012

83

Annex-D

(Overall Standard meeting of equipments as per prescribed in CBA 2055 & CBA 2056 by Class A Firms)

84

Equipment Analysis

85

Annex-E

(Questionnaire for Contractors)

The research is being undertaken by Mr. Suresh Adhikari, a third semester student in MSc. Construction Management. This study is being undertaken to identify the “Status of Class A Construction Entrepreneurs in Nepal of Nepalese Construction Industry”. You are kindly requested to participate by completing the questionnaire. The information you provide will be used together with other information to come out with finding, suggestions and recommendations on finding Status of Class A Contractors.

It is hoped that you will complete the questionnaire as frankly and honestly as possible. Please be assured that your responses will be treated as confidential and used only for the purpose of this research study only.

Thank you.

Note: Please ( ) wherever is correct. For subjective question, please provide answer with specific response.

While ranking the answers please start from lower values of ranking number as quoted in each of the questions. Eg. 1,2,3,4,5,………. and so on. The lowest numerical means highest priority & highest numerical means lowest priority. For example numeric value 1 means the most priority you have given, 2 means less priority you have given, 3 means least priority you have given and so on.

Name of the company : ............................................................

Address: .........................................................................

Office phone no: ......................................................................

A. General Information

1. Please mention the type of partners involved in your Company.

a) Family Members b) Other then family, professional members c) Both d) No partners/owned by single investor

86

2. Are all partners listed in your company registration actively working in the firm?

a) Yes b) No

3. Has your firm only worked under a particular construction area (specialized) (eg. Building, Road, Bridge etc. Only one sector) construction, from the date of establishment of your firm?

a) Yes b) No

If yes, please mention in which sector? -------------------------------

4. Please provide the information about the nature of works that your firm had constructed from the date of establishment till present. Please mention

S.N. Nature of Work Rank 1. Construction and maintenance of

Building

2. Road Construction and Maintenance

3. Airport Building and Maintenance

4. Barrage, Canal, Reservoir, Water Tank and Sewerage, Pipe Laying and Maintenance

5. Tunnel, Sub-way

6. Electricity Line ,Power Station

7. Hydraulics Structure

8. Re-construction and Maintenance

9. If any please mention as 9.1 9.2 9.3

87

B. Technical Information 5 . Please provide the information about equipments and machineries your company has been holding till the date.

S. N. Name of Equipment Quantity1 Theodolite 2 Level Machine 3 Dump truck or truck 4 Water pump 5 Concrete mixture 6 Vibrator 8 Excavator 9 Bull dozer 9.1 Backshoe 9.2 If others please mention as 9.3 Loader 9.4 Bitumen Distributer/Sprayer 9.5 Water Tanker/ Sprayer 9.6 Motor Grader 9.7 Three Wheeler Roller 9.8 One ton roller 9.9 Pneumatic Roller 9.10 Bitumen Paver 9.11 Asphalt Mix Plant 9.12 Crane 9.13 Fork Lift 9.14 Crusher 9.15 Compactor 9.16 Vibrating Roller 9.17 Hydraulic Auger 9.18 Benz 9.19 Building Host 9.20 If any, please mention as 9.21 9.22 9.23 9.24 9.25 9.26

88

6. Please provide the permanent human resources in your organisation at recent employment. Please mention in detail as.

S.N. Position Quanitity Experience1 Civil Engineers 2 Junior Engineer 3 Supervisors 4 Accountant 5 General labour 6. If others ,please mention 7. 8. 9. 10. 11. 12. Others:

C. Financial Information

7. Please provide the annual turnover of your company as specified in table?

Fiscal Year (B.S)

Firm’s Owned Annual Turnover from J/V firms (1)

Firm Single Turnover (2)

Total Turnover (1+2)

2069/070 2068/069 2067/068

8. Please list out the present credit limit of yours firm in Nrs.. a) Below 1crore b) 1 - 5crore c) 5 - 10crore d) Above 10crore If above 10 crore, please specify in Nrs. .........................................

9. Please list out the Permanent Overdraft of yours firm in Nrs..

a) Below 1crore b) 1 - 5crore c) 5 -10crore d) Above 10crore

If above 10 crore, please specify in Nrs. .........................................

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D. Problems, Difficulties and Satisfaction

10. Are you satisfied with your profession as Class A construction entrepreneur. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

Rank

1. Not at all satisfied 2. Slightly satisfied 3. Somewhat satisfied 4. Very satisfied 5. Extremely satisfied

If not extremely satisfied, then

Please mention which of the following parameter has been hindering you for being not satisfied. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

Rank

1. Tough Pre-Qualification Procedure

2. Delay in Payment by Employers

3. Security Matter

4. Tough Taxation System

5. Brain Drain( Unavailability of Skilled Manpower) in construction sectors

6. If other please specify ………………………………

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11. Please mention which part of tender document you feel as tough pre-qualification procedure as per your experience. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority

S.N.

Description

Rank

1. Similar Nature of Work Experience

2. Average Annual Turnover

3. Credit Line Information

4. Manpower Engaged

5. Equipments Required

6. Bid-Security

7. If other please specify ………………………………

12. Please mention in which part of payment procedure you have been delayed during project run from employer as per your experience. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

Rank

1. Advance Payment

2. Running Bills Payment

3. Final Bills Payment

4. Refunding of Security Money

5. Claimed and Accepted to Pay Price Escalated Amount

6. Bonus Amount

7.

91

If other please specify ………………………………

13. Please mention where have you felt not insecure during your profession as per your experience. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

1. During Tender Document Purchasing

2. During Tender Document Drop

3. During Construction Execution at Sites

4. If other please specify..................................

14. Please rank the part of taxation system you have found has been tough in your profession as per your experience .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

1. During issuing of license as Class A

2. During Yearly Renewal of firm

3. During Registration of VAT at vat office

4. During Monthly Tax Submission

5. During Tax Clearance at the end of Fiscal Year

6. During Refunding of the Security Amount after handover of the project to concerned employer

7. If other please specify..................................

92

15. Please mention the sector where s you found deficit (unavailability) of skilled manpower during execution of project as per your experience. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

1. Road Sector Skilled Manpower 2. Bridge Sector Skilled Manpower 3. Irrigation Sector Skilled

Manpower

4. Building Sector Skilled Manpower 5. Water supply Sector Skilled

Manpower

6. Hydropower Sector Skilled Manpower

7. Tunnel Sector Skilled Manpower 8.

If other please specify..................................

16. Please suggest based on your experience in Construction Field, how can we uplift the profession of Class A contractor in future. Please rank .The lowest numerical means highest priority & highest numerical means lowest priority.

S.N.

Description

1. Timely update of Act and Rules 2. Stop Foreign Contractor

Intervention in mega projects

3. Fair and Healthy Competition among each other

4. More Development in contractor institution & Rights

5. Performance of own in Quality & Within time of undertaken project

6. Hooliganism in the construction industry must be made zero

7. Influence of political power in this sector must be made zero

8. Effective price escalation

93

technique must be maintained 9. Qualifying criteria technically &

financially must be simplified during participation by donor agencies

10. Local Contractors must be given priority and must be included in all Public Private Partnership (PPP) model projects

If other please specify ………………………………