Has the Finance Ministry been overridden?

Some agencies have refused to implement a notification signed by the finance minister concerning time extension of projects

Contractors, who have been one of the most affected by the COVID 19 pandemic heaved a sigh of relief when the finance minister on June 21, 2022, issued a notification titled “rescheduling of the intended completion date for ongoing construction works between procuring agencies and contractors.”

One of the main contents was to review ongoing projects; determine if the existing duration is sufficient to complete the work and accordingly provide time extension.

However, with some districts and corporations refusing to abide by the notification, the case has taken a new turn with people saying that agencies are not even following directives signed by none other, but the Finance Minister himself, thus overriding the MoF.

According to the president of the Construction Association of Bhutan (CAB), Trashi Wangyel, “some agencies, like those under Druk Holding Investment (DHI) corporation have refused to grant the time extension and have even said that the notification from the Ministry of Finance (MoF) has not been sent to them specifically.

“The notification was for everyone and every agency. Should the Finance Minister issue a special and separate notification to companies under DHI,” he said, adding that all State-Owned Enterprises (SOE) are under the government and that they should abide by the notification.

A legal expert who did not want to be named said that legally, all agencies should abide by the notification unless there are exceptions. “It is signed by the Finance Minister, a member of the Lhengye Zhungtshog,” he said, also adding that the issue could be due to misunderstandings.

When asked what could be done, he said that if agencies are really not following the notification, the government, MoF, or other parties involved can write a formal letter to the office of the attorney general (OAG).

The Executive Director of CAB, Tshering Yonten, also said that a few districts including Paro, Tsirang, Wangduephodrang, and Samrup Jongkhar Thromde have also refused to grant the extension, claiming that it should be submitted and approved by the Dzongkhag Tender Committee (DTC). 

“Despite submission to the DTC, they have not granted approval,” he said.

Additionally, a Board Member of CAB and the owner of Neten construction said contractors are in a fix. “We are not able to decide if we should complete the project or just leave it incomplete as the costs of completing the project are less than paying penalties if the extension is not given,” he said.

As per procurement rule, contractors will be liable to pay 10% of the overall project as Liquidated Damage (LD) for late project completion. However, it was reduced to 5% during the lockdown.  And if the contractors leave the project incomplete, they have to pay 20% of the balance of work, but that 20% shouldn’t be 10% of the overall project.

Meanwhile, another large-scale contractor, who did not want to be named said the issue at hand isn’t really about making a profit but rather about minimizing the amount of loss we must endure.

He added that given the significant cost escalations, they already have to make the losses but if procuring agencies extend the deadline, they won’t be subjected to LD.

“But if we abandon the project halfway, our reputation will be tarnished and we will have problems in the future, too,” he said.

Business Bhutan learned that the CAB has given the names of the agencies who have refused to adhere to the MoF’s notification on time extension to the ministry. If things stand as it is they are going to appeal to the Prime Minister.

There are also those who say that extensions may not have been given based on the review. “Perhaps, agencies concerned found out that the contractors needed no time extension,” an engineer said.  

While few officials quoted the Dzongkhag Tender Committee (DTC) rules as the basis for not permitting extension, the DTC says that rules within it will not apply, “When, due to some special circumstances, the government grants exemption to the application of these rules for execution of a project funded by external assistance, and provides for adherence of some specific procurement procedure under the relevant financing agreement.”

Meanwhile, the paper could not contact the agencies involved. A Dzongdag that the paper spoke to asked the paper to contact the DTC, when the Dzongdag himself is Chairperson of the DTC.

Tshering Pelden from Thimphu