Construction Business Act, 2055 (1999)


Published: 1999

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Construction Business Act
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Construction Business Act, 2055 (1999)
Date of Authentication
2055.11.27(11 March 1999)
Act number 25 of the year 2055 (1999)
An Act made to manage and expand construction business
Preamble: Whereas, it is expedient to make necessary provisions on the operation of
construction business by promoting and developing construction entrepreneurs so as
to maintain required quality standards of public construction works;
Be it enacted by the Parliament in the twenty-seventh year of reign of His
Majesty King Birendra Bir Bikram Shah Dev.
Chapter-1
Preliminary
1. Short title and commencement: (1) This Act may be called as the
"Construction Business Act, 2055 (1999).
(2) It shall come into force on the 1st day of Baish kh 2056 (14 April
1999).
2. Definitions: Unless the subject or the context otherwise requires, n this Act:
(a) "public construction works" means any kinds of c nstruction related
works to be carried out by Government of Nepal and ybody corporate
fully owned by Government of Nepal, and this term also includes
reconstruction and maintenance works.
(b) "construction entrepreneur" means a firm or company registered under
the prevailing law with an object to carry out construction business.
(c) "foreign construction entrepreneur" means a firm or company which is
registered in a foreign country and carries out construction business
related works.
(d) "license" means a license to be issued pursuant to Section 4 to carry out
public construction works.
(e) "temporary license" means a license to be issued pursuant to Section 6
to a foreign construction entrepreneur to carry out p blic construction
works.

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(f) "body corporate" means a body corporate fully owned by Government
of Nepal.
(g) "technician" means a technical employee deputed by Government of
Nepal and the concerned body corporate to look after nd supervise the
public construction works.
(h) "quality standard" means the quality standard as mentioned in an
agreement concluded between the proponent and the acceptor as per a
proposal invited for the construction works or in ay documents,
drawings, designs and specifications forming an integral part of such
agreement.
(i) "council" means the Construction Business Development Council
formed pursuant to Section 13.
(j) "committee" means the execution committee formed pursuant to Section
15.
(k) "prescribed" or "as prescribed" means prescribed or as prescribed in the
Rules framed under this Act.
Chapter-2
Provisions relating to License
3. Prohibition on carrying out construction without license: No person shall
carry out or cause to be carried out public construction works without having
obtained the license pursuant to this Act.
Provided that, this Section shall not be deemed to prevent the carrying
out of public construction works to be carried out through a consumers'
committee or public participation pursuant to the prvailing law.
4. License: (1) A construction entrepreneur who intends to carry out public
construction works shall make an application, accompanied by such fees and in
such format as may be prescribed, to the committee for the license to carry out
public construction works.
(2) If an application is made pursuant to Sub-section (1), the committee
shall examine the application as prescribed and make recommendation to
Government of Nepal to issue the license of the class which appears to be

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appropriate, out of the classes of construction entrepreneurs classified pursuant
to Section 8.
(3) Government of Nepal shall issue the license in the format as
prescribed to the applicant recommended by the committee pursuant to Sub-
section (2).
(4) Notwithstanding anything contained in Sub-sections (2) and (3),
Government of Nepal may also issue the license of class "B", without
recommendation of the committee.
5. Validity period and renewal of license: (1) Except in cases of annulment
pursuant to Section 7, the license issued pursuant to Section 4 shall remain
valid for one fiscal year. The validity period of the license shall expire on the
last day of that fiscal year irrespective of the date of issue of such license.
(2) Each construction entrepreneur whose license ha expired pursuant
to Sub-section (1) shall get such license renewed, as prescribed, by the
prescribed authority by paying the prescribed fees no later than three months of
the date of expiration of such license.
(3) A construction entrepreneur who intends to get th license renewed
within six months of expiration of the time limit asreferred to in Sub-section
(2) may get the license renewed as prescribed by paying the prescribed fees.
6. Temporary license: (1) The temporary license to carry out public construction
works shall be issued to a foreign construction entrepreneur who is selected in
an international competitive bidding and who is involved in joint venture with a
native construction entrepreneur in a local competitiv bidding exceeding sixty
million rupees.
(2) The fees and format of the temporary license to be issued pursuant to
Sub-section (1) shall be as prescribed.
(3) No foreign construction entrepreneur having obtained the temporary
license pursuant to this Section shall carry out any public construction works
other than the works mentioned in such license.

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7. Annulment of license: (1) In the following circumstances, Government of
Nepal may, on recommendation of the committee, annul the construction
entrepreneur license:
(a) where the license is obtained on submission of false
statements,
(b) where false statements and related documents are
submitted to Government of Nepal and corporate body
with intent to carry out, or cause to be carried out, p blic
construction works,
(c) where the entrepreneur is held to have failed to carry out
works of standard quality.
(2) Prior to annulling the license pursuant to Sub-section (1), a
reasonable opportunity shall be given to the concerned construction
entrepreneur to furnish explanation.
(3) The license not renewed within the time limit a referred to in Section
5 shall ipso facto be annulled.
(4) Where the license is annulled pursuant to Sub-section (1) or (3),
information thereof shall be given to the office registering the firm or company
concerned.
Chapter-3
Classification and Obligation of Construction Entrepreneur
8. Classification of construction entrepreneur: The construction entrepreneurs
who carry out public construction works shall be classified as follows based on
the prescribed grounds:
(a) Construction entrepreneur of class "A";
(b) Construction entrepreneur of class "B";
(c) Construction entrepreneur of class "C";
(d) Construction entrepreneur of class "D".


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9. Obligation of construction entrepreneur: (1) It shall be the obligation of the
construction entrepreneur to carry out public construction works, subject to the
terms and conditions mentioned in the contract agreement.
(2) The construction entrepreneur shall submit statements of each
construction works completed by him to the committee as prescribed.
10. Grouping of construction entrepreneurs: Government of Nepal may, based
on the prescribed grounds and on recommendation of the council, group the
construction entrepreneurs classified pursuant to Section 8.
11. Public construction works capable of being procured from construction
entrepreneur: Any public construction works valued at the following amount
in maximum and in minimum may be procured from the following construction
entrepreneur:
(a) works valued at whatever amount exceeding twenty million
rupees, from the construction entrepreneur of class "A",
(b) works valued at an amount from six million rupees to thirty
million rupees, from the construction entrepreneur of class "B",
(c) works valued at an amount from two million rupees to ten
million rupees, from the construction entrepreneur of class "C",
(d) works valued at an amount not exceeding three million rupees,
from the construction entrepreneur of class "D".
Explanation: For purposes of this Section, "amount" means the estimate
figure.
12. Procurement of public construction works from native construction
entrepreneur and construction entrepreneur in joint venture: (1)
Notwithstanding anything contained in the prevailing law, any public
construction works mentioned in an international competitive bidding may be
procured from the following construction entrepreneur in the following
circumstances:
(a) despite that the total contract price quoted in the bidding
by a construction entrepreneur wholly owned by a
Nepalese citizen or by a construction entrepreneur licensed

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under joint venture with a foreign construction
entrepreneur with at least fifty percent of share owned by
the Nepalese citizen or by a construction entrepreneur
making a joint venture agreement with a foreign
construction entrepreneur with at least fifty percent of
share owned by the Nepalese citizen is higher by a
maximum of seven and half percent than the total contract
price quoted in the bidding by a foreign construction
entrepreneur, the entrepreneur making such bidding.
(b) despite that the total contract price quoted in the bidding
by a construction entrepreneur licensed under jointve ure
with a foreign construction entrepreneur with at least
twenty five percent of share owned by the Nepalese citizen
or by a construction entrepreneur making a joint venture
agreement with a foreign construction entrepreneur with at
least twenty five percent of share owned by the Nepalese
citizen is higher by a maximum of five percent than the
total contract price quoted in the bidding by a foreign
construction entrepreneur, the entrepreneur making such
bidding.
(2) Any public construction works valued at a maximu of sixty million
rupees shall be procured from a Nepalese construction entrepreneur.
Chapter-4
Construction Business Development Council and Execution Committee
13. Construction business development council: (1) The following Construction
Business Development Council shall be formed to prepar necessary policies
and give direction to the concerned bodies in order to carry out the construction
business in a consolidated and systematic manner:
(a) Minister for Works and Transport -Chairperson
(b) Member, National Planning Commission
(looking after works and transport sector)

-Member

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(c) Secretary, Ministry of Works and Transport - Member
(d) Secretary, Ministry of Water Resources -Member
(e) Secretary, Ministry of Housing and Physical
Planning

-Member
(f) Chairperson of Nepal Construction
Entrepreneurs' Federation or representative
designated by him/her


-Member
(g) Chairperson, Society of Consulting
Architectural and Engineering Firm
(SCAEF)


-Member
(h) Technical Joint Secretary designated by the
Ministry of Works and Transport

-Member Secretary
(2) In cases where only the Minister of State for Works and Transport is
appointed, the Minister of State shall be the chairperson of the council.
(3) The procedures relating to the meeting of the coun il shall be as
determined by the council itself.
14. Functions, duties and powers of council: The functions, duties and powers
of the council shall be as follows:
(a) To prepare norms required to maintain quality standards of public
construction works,
(b) To make and develop model drafts of agreement to be concluded
between the proponent and the acceptor on public construction works,
terms of contract and specifications,
(c) To make and develop necessary codes on other matters including the
environmental aspects related with public construction works,
(d) To operate trainings for the generation of human resources required to
carry on the construction business in a consolidated and efficient
manner,
(e) To do necessary research works and carry out development on matters
related with the construction business,

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(f) To carry out such other functions as are required to implement the
objectives of this Act.
15. Implementation committee: (1) An implementation committee, as follows,
shall be formed to render necessary assistance to Government of Nepal on the
promotion and management of the construction busines .
(a) Technical Joint Secretary designated by the
Ministry of Works and Transport

-Chairperson
(b) Technical representative, Ministry of Water
Resources -Member
(c) Technical representative, Ministry of Housing
and Physical Planning

-Member
(d) Technical representative, Department of
Roads

-Member
(e) Representative, Nepal Construction
Entrepreneurs' Federation

-Member
(f) Representative, Society of Consulting
Architectural and Engineering Firm (SCAEF)
-Member
(g) Officer designated by the Ministry of Works
and Transport

- Member secretary



(2) The procedures relating to the meeting of the committee shall be as
determined by the committee itself.
16. Functions, duties and powers of committee: The functions, duties and
powers of the committee shall be as follows:
(a) To make recommendation to Government of Nepal to issue license to
the construction entrepreneur.
(b) To do timely study and research works and colle t necessary
suggestions on the construction business and submit them to
Government of Nepal.
(c) In the event of any question as to the quality s andard of public
construction works, to hold, or cause to be held, necessary inquiry and

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examination into the verification and clearance made by the concerned
technician.
(d) In the event of revelation from the inquiry and examination held
pursuant to Clause (c) that the technician has verified and cleared
without maintaining the prescribed quality standard, to make
recommendation to the concerned body to recover the loss and damage
caused therefrom and take action against the person inv lved in that act,
in accordance with the prevailing law.
(e) To determine required policy matters on the submission of a tender by a
construction entrepreneur licensed under this Act for carrying out
construction related works in a foreign country, make a contract
agreement and issue a bid bond or performance bond in the currency of
the concerned country and recommend the same to Government of
Nepal.
(g) To perform such other functions as prescribed.
Chapter-5 Fund and Audit

17. Construction entrepreneur fund: (1) A construction entrepreneur fund is
hereby established to render necessary services and assistance to the
construction entrepreneurs in order to enhance the quality standard of public
construction works and the efficiency of construction entrepreneurs.
(2) The following amounts shall be credited to the fund as referred to in
Sub-section (1):
(a) Amounts obtained from Government of Nepal,
(b) Fees obtained from construction entrepreneurs,
(c) Amounts obtained from native or foreign organiz tions.
(3) Expenditures shall be made from the fund as per th decision of the
council.
(4) The fund as referred to in Sub-section (1) shall be operated and
audited as prescribed.


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Chapter-6 Miscellaneous
18. Contract documents to be forwarded: The contract accepting body shall
forward a copy of the agreement concluded on the carrying out of public
construction works in the Kingdom of Nepal and the documents related
therewith to the committee.
19. Details of goods imported under facility to be set out: A native or foreign
construction entrepreneur who has imported any motor vehicle, machinery,
tools and similar other machine and equipment into the Kingdom of Nepal
under the facility available pursuant to the prevailing law for the public
construction works to be carried out under a bilateral or multilateral agreement
shall submit to the committee the details thereof in the prescribed format.
20. Prohibition on use of machinery, tools etc. imported by foreign
construction entrepreneur under facility for another purpose: (1) A foreign
construction entrepreneur who imports any motor vehicl , machinery, tools and
similar other machine and equipment pursuant to Section 19 shall use them
only in the works for which they are imported. The entrepreneur shall not use
such motor vehicle, machinery, tools, machine and equipment for another work
without approval of Government of Nepal.
(2) If the foreign construction entrepreneur who has imported any motor
vehicle, machinery, tools and similar other machine a d equipment pursuant to
Section 19 does not take them back after the completion of public construction
works, such tax, fees or charges as may be levied on such motor vehicle,
machinery, tools, machine and equipment pursuant to the prevailing law shall
also be recovered.
21. Prevalence of agreement concluded with foreign government or
organization: Notwithstanding anything contained elsewhere in this Act, the
provisions of a grant or loan agreement concluded btween Government of
Nepal and a foreign government or organization owned by a foreign
government or an international organization shall be applicable to the public
construction works to be carried out under such agreement.

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22. Punishment: If any native or foreign construction entrepreneur misuses
facilities and concessions available pursuant to the prevailing law, Government
of Nepal may impose a fine in a sum not exceeding the double of the amount so
misused on such construction entrepreneur.
23. Powers to form sub-committee: (1) The council and the committee may, as
per necessity, form sub-committees for the operation of their functions.
(2) The functions, duties and powers of the sub-committees to be formed
pursuant to Sub-section (1) shall be as specified by the council and committee
on their own.
24. Issuance of duplicate copy of license: If any construction entrepreneur makes
an application for a duplicate copy of the license which is lost or destroyed, the
committee shall issue a duplicate copy of that license by collecting the fees as
prescribed.
25. Delegation of authority: Government of Nepal may delegate any of the
powers conferred to it pursuant to this Act to any prescribed official for a
certain specified period.
26. Application of prevailing law: The matters contained herein shall be governed
by this Act itself and the other matters by the prevailing law.
27. Powers to frame Rules: Government of Nepal may frame necessary Rules for
the accomplishment of the objectives of this Act.
28. Saving: The licenses issued to the contractor firms and companies registered
under the prevailing law prior to the commencement of this Act shall be
deemed to have been issued under this Act.