15 Annual General MeetingCONSTRUCTION ASSOCIATION OF BHUTAN | 9TH MAY 2016 | BCCI CONFERENCE HALL

Submission to Hon’ble Prime Minister

1. Scores for fresh engineers and VTI graduates in Evaluation Guidelines•In the current evaluation system, fresh engineers and VTI graduates do not fetch points•Only engineers with 3 years and above experience fetch points•Requested for a minimum of 5-10 points for fresh engineers and VTI graduates

2. Evaluation report to be made public•Contractors not happy with the evaluation report being not disclosed•Requested for exhaustive evaluation report•Report to be displayed in client’s notice board and website•Accords fairness and transparency

3. Late declaration of evaluation report•Some clients take very long to declare the evaluation result•Unlike large complex project, nothing to evaluate•EMD in the form of mortgage is tied up with client•Delay costing opportunity•Evaluation report to be declared as soon as possible

4. Evaluation Criteria•Financial aspect most important component of current evaluation system•Technical aspect is just a qualification criteria for next stage •To ensure quality, equal importance to be given to both the aspects•Proposed for 60 (financial) / 40 (technical) system

5. HR/ Equipments required as per the specification and nature of work•Some client agencies include non-required HR/Equipments•Such inclusions are tailored to suit some particular firms•Loophole for corruptive practices•Discourage such practices•Deployment of machineries throughout construction period needed amendment

6. Use of labors in different sites within one dzongkhag/labor has to exit and re-enter/labor entry from any point•Labor from one site cannot be transferred to another site within a dzongkhag•Labor has to exit and re-enter•Labors cannot enter from any point convenient•E.g Assam labors have to strictly enter via Gelephu •Huge expenditure for contractors/time constraint•Not conducive

7. Realistic Project Duration•Project durations driven by factors such as project deadline, fiscal year closing•Contractors land up paying huge liquidity damages •Technical approach needs to be adopted for estimation of project duration

8. Realistic Budget Estimate•Budget estimate based on BSR by clients•Bidders estimate based on actual market rates•Mismatch leads to rejection of genuine bids and often leads to re-tendering•Adoption of standard approach for budget estimate•10% provision in estimate for unforeseen contingencies

9. Detailed drawing & specification of Items for Small tender•Some client do not provide detailed drawings & specifications for Small tender•Such practices creates room for client to change the scope of work, site, items•Difficult for the contractor to execute the work•Payment problems due to deviations•Must provide all technical specifications & drawings

10. Revision in work ceiling for Small Class•Small Class allowed to execute 2 works within 4 million•But its not possible to get 2 works meeting the 4 million ceiling•Requested for 2 works with 4 million each

11. Deviation clause for Small Class•Absence of deviation clause for small class•Deviation occurs in small tenders also•Absence of deviation has invited many litigations•Deviation clause to be incorporated

12. Escalation clause for Small Class•Absence of escalation clause for small class•Deviation occurs in small tenders also•Absence of deviation has invited many litigations•Deviation clause to be incorporated

13. Differential Security•Low quoted and unbalanced bid requires differential security•Some agencies require differential security for bids just 5% while some require for 13%•Not uniform during implementation•Lower limit be defined beyond which differential security to be applied•-20% margin to be applied for differential security

14. Re-tender•Clients opt for re-tender if lowest bidder is disqualified or bid price is slightly higher than estimate•Clients can re-tender if bid price is abnormally high•If bid price within a tolerable range, re-tender should not be initiated•Upper limit to be defined beyond which re-tender can be initiated

15. Lottery system for awarding of Limited Tenders•Clients invite bids from only few known bidders•Those bidders are favoured•Award system not fair and transparent•Section 4.2.3.1 of PRR requires clients to invite for all contractors within that dzongkhag•Requested for strict compliance of the above clause and introduction of lottery system of award

16. CPI instead of WPI for Price Adjustment•SBD mandates WPI to be used for price adjustment•WPI is not applicable to Bhutan•WPI do not cover transportation, tax etc•CPI to be used for Bhutan•Few agencies are already using CPI•CPI not uniformly applied when only few agenices entertain it

17. Time extension for deviated works as per approved drawings•Deviated works require allotment of additional time•Early warning GCC 32.1 to 32.4 mandates contractor to notify to the Project Manager•If failed to notify within 30 days, the time extension is not entertained•The clause needs to amended

18. Bank Guarantee Charges•Bank guarantee needs to be renewed every year•Bank guarantee not as per the length of the project•Contractors pay a huge amount in the form of bank guarantee fees•Bank guarantee to be issued as per the length of the project•Fees for the guarantee to be reduced

19. Community Contract•Work ceiling for community contract is Nu. 1.5 Million•Most works fall within this ceiling•Large numbers of Small Contractors (3247)•Small Contractors are deprive of work opportunities•Ceiling needs to be brought down to 0.5 million

20. Conflict of information in bidding data sheet requirements and evaluation parameters•Requirements in bid data sheet appears to be with lock out specifications•Bids not meeting the requirements are treated not responsive•Direct abuse of evaluation parameters•Such requirements are tailored to suit certain bidders only

21. Department execution of works/labor contract/machineries hiring•Departmental execution permitted only if the work is specialized in nature•However, DoR execute works departmentally irrespective of work being specialized in nature•Government loose huge money because such works are neither time frame nor have budget ceiling

22. CDCL•Mandate of CDCL was to act as a lead agency •Undertake works beyond the capacity of local contractors•Currently CDCL involved in works that can be undertaken by local contractors•Direct award of contracts to CDCL by some agencies•Request for no direct award/have to go through competitive bidding process

23. Gov. training slots to be extended to private sectors•Construction industry blamed for lack of professionalism•Capacity development required•Any trainings related to construction sector be given to CAB directly

24. Construction Development Fund•SRL fund to be used as CDF•The purpose of the CDF is therefore:

1. To finance development and promotional programs of the Construction Industry

2. Facilitate those developmental activities that do not have budgetary support from government or donors.

3. Make it available to the government in need for the improvement of the construction based activities in the country.

•Requested Gov. for collection of 0.15% SRL with 2% TDS•Source deduction of SRL by procuring agencies from first running bill

25. Tender cost despite contractors bearing the tender cost•Tenders are available in most of client’s website•Contractors download and print the documents themselves•The cost is born by contractors•However, contractors still have to pay for the tender cost•Some clients ask for tender cost while some do not•Not consistent and uniform

26. Uniform application of PRR•Different agencies have their own way of interpreting the provisions of PRR•Rule accepted by one agency is not honored by other agencies•Confusion in the procurement system

27. Auditing•Pvt. Limited companies require hiring of CA from India for auditing•Causes inconvenience and incurs huge expenditure to contractors•Requested for making the requirement of CA from India be made optional•Allow local private accounting firms to carry out the auditing

28. Tax Assessment•Tax assessment is delayed•Often delayed for 1 to 2 years•Contractors pay 24% penalty per annum on taxable amount when the filing is wrong•Huge penalties incurred•Contractors can avoid penalties if the assessment is timely•Also requested for inclusion of liquidated penalties under expenditure

29. Establishment of Stone quarry and Stone aggregate crushing plant •All structures in Bumthang are to be build using local materials and maintain traditional architectural design•This requires constant and huge amount of stone and stone aggregates•No quarry and aggregate plants•Requesting government to setup such plants & quarry

30. CDB renewal fees•Substantial revision in CDB renewal fees was unexpected•Old fee was Nu. 400 for small class which was revised to Nu. 8500•Contractors request for revision•To be brought down to 50% of current fee

31. Up-gradation of CDB certificate with work in hand•Contractors wishing to upgrade to higher class requires to complete work in hand•Such rules are not favorable•A contractor with work in hand with project duration of 2 or 3 years have to wait till the project is complete•Requested for discontinuation of the notification from CDB

32. Locking of resources/Different set of HR & Equipment required for every tender •E-tool system requires contractors to commit new set of resources for every new bid•Any resources used for a bid is locked in the e-tool till the evaluation is complete•Large contractors can take up 5 projects at a time, so to maintain 5 sets of HR/Equipments is not in the capacity of any contractors•Opportunity cost and overhead cost for contractors•Request amendment

33. Strengthening of Construction Association of Bhutan (CAB) office•Members not happy with services of CAB•Following initiatives and improvements recommended

1. Establishment of Training Wing (Manpower pooling) 2. Establishment of Commercial Wing (Hiring/Spare Parts/Repair &

Maintenance) 3. Any other activities to generate income for CAB

34. Establishment of CAB Service Center (18 Dzongkhags)•Member requested for establisment of CAB Service Centers during the dzongkhag tour•Purpose was to reach out to every members in the far flung dzongkhags•And to support and provide services at dzonkhag level

35. Online Registration System by CDB•Launching of Online Registration system on 2nd day of Annual General Meeting•As a result following issues where important to be discussed with CDB during 3rd day of the meeting

1. Clearance from CAB during the renewal of CDB Certificate2. Contractors representatives in the CDB Board3. Submission of Tax Clearance & declaration of employee’s provident fund

Thank you!