Nepal adopts average‑bid system in public procurement, ending lowest‑bid rule

On 16 July 2026 Nepal’s Public Procurement Monitoring Office confirmed that the Second Amendment to the Public Procurement Act took legal effect, replacing the long‑standing lowest‑evaluated‑responsive‑bidder rule with an average‑bid formula for public works contracts. Under the new system, bids more than 30 % below the engineer’s cost estimate are discarded, the remaining bids are averaged, and the contract is awarded to the bidder whose offer is numerically closest to that average, provided it does not exceed the official cost estimate.

The change, welcomed publicly by the Federation of Contractors' Associations of Nepal (FCAN) as a remedy for past quality shortcuts and stalled projects caused by reckless underbidding, has drawn criticism from analysts who argue it could undermine genuine competition, encourage collusion and turn public contracting into a lottery. Illustrative calculations show that a low‑cost, efficient bid could be bypassed in favor of higher offers that sit nearer the calculated average.