This paper based on the experience of actual project execution in Nepal highlights some of the issues on contract administration in a politically unstable developing country, Nepal and intends to aware foreign contractors of the situation who are willing or planning to work in Nepal or other country similar to Nepal. Like in the construction industry of many other developing countries, contract administration is a very undeveloped area of project management in the Nepalese construction industry. The construction projects with domestic finances are using two-party (Owner-Contractor) system whereas three-party (Owner-Contractor-Engineer) system is used to execute the projects financed by international lenders. Unlike in the FIDIC contracts some provisions such as force majeure, suspension, time frame for engineer’s decision, etc. are not included in domestic contracts. In addition, some contracts require the contractor to follow international standard for material testing for which several local laboratories only can perform the tests. The contractor may suffer delays due to the long time required to get approval from the bureaucracy to import plant/equipment and materials such as explosive.
Moreover, it is very difficult to realize the presence of Government and rule of law in most of the project area. Goons and self-declared political followers often ask money from the contractors and force contractors directly or indirectly to fulfill their demands. Contractor may incur additional cost by such activities and the ruling culture of locals. Foreign contractors are required to prepare necessary strategy to manage such situation in a politically unstable country such as Nepal.