Challenges in Public Software Procurement in Nepal: Structural and Institutional Issues

Public procurement constitutes a major component of government expenditure in Nepal, accounting for a significant portion of national budget allocation. While the procurement framework—primarily governed by the Public Procurement Act 2063—was originally designed for infrastructure and physical goods, the rapid advancement of digital governance under the Digital Nepal Framework has significantly increased public investment in software systems and digital platforms. Despite this transformation, Nepal continues to rely on construction-centric procurement models for software acquisition. This structural misalignment has resulted in systemic inefficiencies, including project delays, cost overruns, vendor disputes, and high failure rates in ICT projects. Empirical findings indicate that projects with higher bid discounts exhibit significantly higher failure rates, confirming the risks associated with the Lowest Evaluated Bidder (L1) model.

This study investigates structural and institutional challenges affecting public software procurement in Nepal. The findings reveal that procurement challenges are primarily institutional rather than financial, driven by weak technical capacity, inadequate specification design, and vendor lock-in risks. The study concludes that adopting Quality and Cost-Based Selection (QCBS), strengthening institutional capacity, and introducing software-specific procurement guidelines are essential for improving digital project outcomes.