Prevalence, Impacts and Mitigation
FEATURED PAPER
By Yamanta Raj Niroula and Santosh Nepal
Kathmandu, Nepal
Abstract
In the Nepalese construction industry, selecting contractors based solely on the lowest bid is a common practice. While low bids may initially appear cost-effective, they often lead to long-term consequences that can have a negative impact on the project quality, durability, and timely completion. This paper explores the problematic ramifications of low bids, exploring their impact on project outcomes, stakeholder satisfaction, and the overall sustainability.
This paper identifies the key factors that influence low bidding practices, dissects their long-term repercussions, and proposes potential mitigation strategies. By providing insights into the challenges posed by low bidding practices, this paper aims to contribute to informed decision-making and encourage a shift towards more balanced and sustainable construction practices in Nepal. Furthermore, this paper seeks to establish a solid foundation for a broader knowledge base, guiding future decisions and discourse towards the establishment of balanced and ethical bidding practices in the Nepalese construction industry.
This analysis calls for a collaborative effort from all stakeholders, including project owners, contractors, subcontractors, suppliers, and regulatory bodies. By working together, these entities can effectively mitigate the risks associated with low bids and pave the way for a more robust and prosperous construction industry in Nepal.
Keywords: low bids, hidden costs, construction industry, Nepal, project outcomes, stakeholders, mitigation strategies, bid evaluation, average bid method.
- Introduction
In the construction industry, a “low bid” refers to a bid quoting the lowest price, including chosen alternatives, and adhering to all bidding requirements (Harris, 2006). This concept extends to project proposals submitted by the contractors with significantly lower estimated costs compared to their competitors. The goal is to win the contracts by offering the most financially attractive bid price.
In Nepal’s construction market, the practice of contractors submitting low bids to win the contracts has become widespread. The allure of low bidding stems from the promise of direct cost savings for budget-limited clients and project owners.
The rationale behind selecting the lowest bid for award is to prioritize cost efficiency and ensure the least expensive option for completing a project. Project owners who opt for the lowest bid seek to minimize project expenses and achieve cost savings within their budgetary constraints. This strategy is often considered a way to promote fair competition and prevent favoritism or corrupt practices during the procurement process.
However, this strategy carries significant risks as the primary motivation of low bidders is just to win the contract, not delivering the best value. This can trigger a focus on immediate gains over long-term quality, with shortcuts leading to compromised materials, workmanship, and ultimately, project failures.
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How to cite this paper: Niroula, Y. R., and Nepal, S. (2024). Low Bidding in Nepal’s Construction Industry: Prevalence, Impacts and Mitigation; PM World Journal, Vol. XIII, Issue II, February. Available online at https://pmworldlibrary.net/wp-content/uploads/2024/02/pmwj138-Feb2024-Niroula-Nepal-Low-biddng-in-Nepals-construction-indstry.pdf
About the Authors
Yamanta Raj Niroula, PMP
Kathmandu, Nepal
Yamanta Raj Niroula is a seasoned engineering and project management professional with over 15 years of experience in overseeing all phases of engineering and infrastructure programs. His extensive portfolio includes managing engineering and infrastructure projects in nine countries, namely Nepal, Maldives, Singapore, Afghanistan, Philippines, Nigeria, Yemen, Sudan, and Ethiopia. He is highly skilled in project management, procurement, construction management, quality assurance/quality control, monitoring and evaluation, and close-out of construction projects. He holds a Master’s degree in Rural Development and Bachelor’s degree in Civil Engineering. He obtained his Project Management Professional (PMP) certification in January 2011. He can be reached at niroulayr@gmail.com.
Santosh Nepal
Kathmandu, Nepal
Santosh Nepal brings over 15 years of experience in the field of engineering and construction mainly around overseeing donor-funded projects, collaborating with governmental bodies, private sector and non-governmental organizations nationwide. Holding a Master’s degree in Interdisciplinary Water Resource Management and a Bachelor’s degree in Civil Engineering, he is well-versed in various facets of the engineering field. His skill set includes contract management, construction management, quality assurance/quality control, quantity surveying, and monitoring & evaluation. He can be contacted via email at santu.brbip@gmail.com.
