Unable to pay contractors on time, Karnataka govt now ‘formalises’ delay

Bengaluru: By modifying a key clause in the standard tender documents, the Siddaramaiah administration has now officially given itself the option of delaying payments to contractors who carry out public works.

The formalisation of delayed payments is bad news for contractors, who are already fighting the government over pending bills worth Rs 32,000 crore and corruption.  According to the standard tender documents, in use since April 2007,  departments were required to pay contractors within 60 days of them submitting bills. 

“The employer (government department) shall pay the contractor within 60 days of the submission of bill,” was the clause. 

In a new order issued by the finance department, the clause has been changed to: “The employer shall, as far as possible, pay the contractor within 60 days of submission of bill”.

The modified clause will apply to contracts less than Rs 20 lakh, more than Rs 20 lakh but less than Rs 50 lakh, more than Rs 50 lakh but less than Rs 100 lakh (Rs 1 crore) and more than Rs 100 lakh, but less than Rs 10 crore.  

“This order will apply for invitation of tenders for procurement of construction works to be invited hereafter and shall not be applicable for tenders already invited,” the finance department said in its June 6 order. According to a senior official, the finance department has modified the clause to avoid litigation.

“The government is unable to make payments on time. The words ‘as far as possible’ means some delays in payment can be explained,” the official said. 

Karnataka State Contractors Association president R Manjunath sneered at the government’s decision.

“The government never followed the 60-day limit for payments,” he said. “In fact, we used to sue the government and seek interest on the arrears”.

For works valued above Rs 100 lakh, but below Rs 10 crore, the contractor is liable to pay “liquidated damages for shortfall in progress,” according to the standard tender documents. 

Manjunath explained that execution of projects inevitably gets delayed. “Sometimes, site conditions will be different. Also, elected representatives add to the delay by not conducting ground-breaking ceremonies on time,” he said.