According to a recent ADB report, the smaller the size of the contract, the greater the problem of ghost contracting in Nepal. The situation in urban and water sectors in 2018 regarding ghost contracting was as follows:
- 100% in contracts worth less than $5 million
- 100% in contracts valued between $5 million and $10 million
- 70% in contracts valued between $10 million and $20 million
- 63% in contracts greater than $20 million
In transport sector, ghost contracting was 100% in contracts
valued between $10 million and $20 million in 2018. It was 33% in the case of
contracts valued above $20 million.
The situation improved a bit since 2018 in urban and
water sector. In 2021, it found ghost contracting in:
- 100% in contracts worth less than $5 million
- 67% in contracts valued between $5 million and $10 million
- 50% in contracts valued between $10 million and $20 million
- 50% in contracts greater than $20 million
In transport sector, since all contracts were given to foreign
companies only, there were no ghost contracting in 2021.
FYI, ghost contracting refers to non-execution of contract by a winning bidder, who allows a subcontractor to manage, administer and implement the contract. It is typical in cases where a foreign bidder forms a joint venture with local contractors. The foreign bidder, upon winning the bid and signing the contract, disappears from contract execution. No international expertise is used and sometimes it does not even provide cash flow support. It not only delays project execution but also affects quality and portfolio performance.
