Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: In a sweeping action targeting years of negligence and project delays, the government has terminated 25 long-pending road construction contracts, marking one of the most forceful crackdowns on non-performing contractors in recent years. The Road Division Office Kathmandu issued a public notice on Monday confirming that all 25 contracts—some dating back as far as FY 2067/68—have been formally scrapped.
These sick contracts had remained stagnant for years despite repeated deadline extensions, causing significant delays in road infrastructure development across the Kathmandu Valley. The terminated contracts span agreements signed between FY 2067/68 and 2079/80, many of which saw little to no progress.
Minister Ghising Orders Aggressive Action
The decision follows a directive from Minister for Energy, Water Resources and Irrigation, Physical Infrastructure and Transport, and Urban Development Kulman Ghising, who has vowed to end the persistent trend of contractors securing projects but abandoning work. Ghising had instructed all subordinate agencies to take immediate legal and administrative action against non-performing contractors.
In response, the Department of Roads and its subordinate offices initiated the legal process to evaluate and terminate stalled contracts.
Contractors Failed to Provide Satisfactory Explanation
On Kartik 11, the Road Division Office Kathmandu sought formal clarification from the 25 contracted construction firms, asking why their contracts should not be terminated. However, according to Office Chief Subodh Devkota, the explanations submitted were “not satisfactory,” prompting the office to invoke provisions under the Public Procurement Act to cancel the contracts.
“The clarifications were not convincing. Therefore, the contracts have been terminated as per the Public Procurement Law,” Devkota said.
Strict Penalties Imposed: Blacklisting, Guarantee Seizure
The Road Division Office will now begin enforcing a series of penalties as mandated by law. Measures include:
Blacklisting the contractors
Confiscation of performance guarantees, deposits, and advance payment guarantees
Recovery of 10% interest on advance payments
Recovery of remaining construction costs as government arrears
Contractors have been directed to appear at the office within 15 days to comply with the termination and penalty procedures.
Years of Delay, Zero Progress, Repeated Deadline Extensions
The official notice states that the contracts were nullified because the contractors repeatedly failed to show progress despite being granted multiple deadline extensions. Many contractors did not even maintain a physical presence at the construction sites for long periods.
According to the Road Division, the contractors:
Ignored repeated written and verbal requests to resume work
Demonstrated no intent to complete the projects
Violated contract conditions by being absent from the work site
Failed to renew, extend, or update contract timelines
Because of these violations, the division concluded that the contracts had reached a point of complete non-performance and were therefore terminated.
Government Moves Toward Zero Tolerance
The mass termination of 25 contracts signals the government’s toughened stance against stalled infrastructure projects—an issue that has long plagued Nepal’s public construction sector. With Minister Ghising’s clear directives and the Road Department’s decisive actions, officials believe this could mark the beginning of a new era of accountability in public contracting.
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