The Public Accounts Committee (PAC) of the Parliament raised serious concerns over financial losses, procurement irregularities and weak project management in one of Bhutan’s most ambitious digital transformation initiatives, revealing that expenditures amounting to approximately Nu 587.54 million may have delivered limited value to the government and taxpayers.
Presenting findings from the Special Audit Report on the Bhutan Integrated Taxation System (BITS) during a joint sitting of Parliament on June 12, the PAC highlighted significant shortcomings in the planning, procurement, implementation and eventual transition of BITS 1.0 to BITS 2.0 and the Bhutan Integrated Revenue Management System (BIRMS).
The Royal Audit Authority (RAA), said that it found weak procurement governance, inadequate project planning and ineffective implementation oversight, which contributed to a direct financial loss of Nu 119.11 million. It said broader expenditures associated with the project have raised major concerns regarding value for money and accountability in public spending.
One of the central findings of the audit relates to the manner in which the original BITS 1.0 contract, valued at Nu 610.11 million, was awarded.
According to the RAA, the contract was directly awarded to Druk Holding and Investments Limited (DHI) through Thimphu Tech Park Limited (TTPL) without undergoing open competitive bidding.
Auditors observed that bypassing a competitive procurement process reduced transparency and weakened assurances that the government secured the most cost-effective solution for taxpayers.
The audit further noted that evaluation criteria used for selecting the international implementation partner were subsequently revised without adequate documentation or justification, raising additional concerns over governance and decision-making during the procurement process.
The RAA also identified weaknesses in contractual safeguards. Advance payments exceeding prescribed regulatory limits were reportedly released without sufficient financial guarantees, exposing public resources to avoidable financial risks.
The audit found that BITS 1.0 was launched before system requirements had been comprehensively defined and validated.
As implementation progressed, repeated modifications to project requirements resulted in additional development work, delays in testing and prolonged implementation timelines.
Auditors concluded that project management mechanisms failed to effectively monitor contractual obligations, including requirements relating to the deployment of qualified international technical experts.
The report states that these weaknesses ultimately contributed to significant implementation challenges and the eventual termination of the contract in April 2022.
According to the RAA, the project failed to achieve its intended objectives largely because critical business requirements had not been adequately established before development commenced.
However, the most significant concern emerging from the audit is the question of whether public funds invested in the project generated commensurate value.
Although assurances had been provided that components developed under BITS 1.0 would be reusable in subsequent phases, the audit found that most of the system was incompatible with the architecture later adopted under BITS 2.0.
The transition from a bespoke software solution to a Commercial Off-The-Shelf (COTS) platform meant that substantial investments made during the first phase could not be effectively leveraged.
The audit highlighted several major expenditures associated with the project, which included Nu 119.11 million spent on BITS 1.0 that was deemed lost; Nu 78.79 million invested in infrastructure supporting BITS 1.0; Nu 60.12 million spent on developing the Bhutan Integrated Revenue Management System (BIRMS); and Nu 329.52 million in additional costs resulting from the higher contract value of BITS 2.0 compared with BITS 1.0.
Together, these expenditures amount to approximately Nu 587.54 million, prompting auditors to question whether the government received adequate returns on its investment.
The RAA noted that the expenditures reflected significant wasteful and avoidable costs arising from weaknesses in project design, procurement decisions and implementation management.
Additionally, BITS was conceived as a cornerstone of the government’s efforts to modernize tax administration and prepare for the implementation of the Goods and Services Tax (GST).
The system was expected to automate key functions including taxpayer registration, tax return filing, payment processing, compliance monitoring and revenue reporting.
Initially, the project had been planned as a COTS solution to be procured through international competitive bidding. However, a policy decision aimed at promoting domestic information and communications technology (ICT) capability development resulted in a shift in strategy.
The government subsequently awarded the project to DHI through TTPL for the development of a customized taxation platform, while engaging an international partner to provide technical expertise and facilitate knowledge transfer.
The audit suggests that this shift in approach introduced significant implementation challenges and contributed towards many of the issues identified during project execution.
The PAC informed the Joint Sitting that it had conducted numerous hearings with agencies involved in the project and had engaged extensively with the RAA and other stakeholders to review the findings.
According to the Committee, several issues were clarified and addressed through these consultations, while efforts continue to resolve outstanding matters.
The Committee stressed the importance of strengthening accountability, improving oversight mechanisms and ensuring that lessons learned from the BITS project inform future public investments.
Members emphasized that large-scale digital transformation initiatives involve substantial public resources and must be supported by rigorous planning, transparent procurement processes and effective implementation monitoring.
The PAC expressed hope that the findings would serve as an important lesson for government agencies undertaking major technology projects in the future.
With more than half a billion ngultrum now under scrutiny, the BITS case has emerged as one of the most significant public expenditure and accountability issues to come before Parliament in recent years.
Sangay Rabten, Thimphu
