Kathmandu: Various government projects will no longer be allowed to hire domestic or foreign consultants through so-called “intellectual middlemen.”
A Cabinet meeting chaired by PM Sushila Karki decided that budget allocations should not be used to outsource work that can be completed by existing human resources.
The decision also prohibits taking consultancy services even for drafting bills, rules, regulations, guidelines, standards, and directives. Only in cases where the existing manpower cannot handle the work — certified by the accountable officer concerned — will spending on capital research and consultancy be permitted.
Media outlets, including Clickmandu.com, had been consistently reporting on rampant misuse of consultancy budgets.
In the name of consultancy, a small circle of “intellectual brokers” has been pocketing sums equivalent to the annual budget of a ministry.
Reports show that nearly 35 percent of funds in projects financed by foreign loans and grants were siphoned off by these intermediaries under various conditions. In some cases, over 45 percent of total project costs went into consultancy, enriching a limited few while depriving the intended beneficiaries.
Although the Public Procurement Act allows consultancy hiring only when work cannot be performed by in-house staff, the Office of the Auditor General (OAG) has repeatedly flagged misuse — where tasks easily manageable by regular staff were outsourced.
Auditor reports also reveal that foreign-funded projects spent excessively on consultancy and administration rather than target groups. Payments were often made in US dollars, euros, or yen instead of Nepalese rupees. Dozens of retired government officials were rehired as consultants in the very ministries they once served.
Despite the OAG raising these issues every year, such practices have only grown. Institutions like the World Bank, Asian Development Bank, and other donors were found to be reclaiming up to 45 percent of project budgets back into their own countries through consultancy contracts.
Legally, consultancy should only be awarded on a competitive basis when specialized expertise is unavailable locally. Yet, in FY 2023/24 alone, ten ministries spent over Rs 4.53 billion on consultancy for feasibility studies, designs, master plans, and construction supervision, according to the 62nd annual report of the Auditor General.
Local governments also followed the trend: 241 municipalities spent Rs 665.3 million on consultants in FY 2023/24. Over the last three years, municipalities spent nearly Rs 1.49 billion on feasibility studies, detailed project reports, and master plans. Alarmingly, records of many reports were not maintained, and 135 local governments failed to implement 448 consultancy reports worth Rs 323.2 million.
In the name of consultancy, a small circle of “intellectual brokers” has been pocketing sums equivalent to the annual budget of a ministry.
In FY 2022/23, eight ministries spent more than Rs 8.5 billion on “intellectual middlemen.” Examples include the Ministry of Labour, Employment, and Social Security, where consultants were hired to prepare simple reports, financial audits, procurement plans, and filing tasks — all of which regular staff could have handled. That year, the ministry alone spent Rs 10.5 million on seven such consultants.
Overall, eight ministries and their agencies in FY 2022/23 paid Rs 8.69 billion in salaries, allowances, and facilities to consultants. The malpractice extended even to inflated vehicle rental bills, with government staff colluding for commissions.
Economist Keshav Acharya warns that consultancy hiring has blocked the development of Nepal’s own skilled manpower.
“A powerful network ensures that local experts are sidelined, while foreign consultants are given preference under the guise of specialized knowledge,” he said. “Nepal already produces highly qualified experts, but their expertise is suppressed in favor of costly outsiders.”
According to him, a serious attempt was made during Prime Minister Manmohan Adhikari and Finance Minister Bharat Mohan Adhikari’s tenure (1994/95) to regulate consultancy spending. But foreign-funded projects and bureaucratic resistance derailed the effort.
In the last 11 fiscal years (2013/14–2023/24), federal development ministries spent a staggering Rs 67.34 billion on consultancy services. The biggest spenders included the Ministries of Physical Infrastructure and Transport; Urban Development; Energy, Water Resources and Irrigation; Water Supply; Forests and Environment; Education and Population; Agriculture and Livestock; Health and Population; Home Affairs; Industry, Commerce and Supplies; Federal Affairs and General Administration; Culture, Tourism and Civil Aviation; and Information and Communication.
Even the former Federal Affairs and Local Development Ministry and the erstwhile Irrigation Ministry were found to have poured large sums into consultancy. Among them, the agriculture, infrastructure, urban development, energy, and water ministries topped the list of excessive spending, often in violation of rules.
Comment Here