TIL BDR GHALLEY Thimphu
A Special Audit by the Royal Audit Authority (RAA) has revealed significant procurement weaknesses, inadequate project planning, implementation failures and substantial financial losses in the Bhutan Integrated Taxation System (BITS 1.0), a flagship digital initiative originally intended to modernize Bhutan’s tax administration and support the implementation of the Goods and Services Tax (GST).
The audit report, released in March 2026 following a directive from parliament, examined the planning, procurement, implementation and eventual transition from BITS 1.0 to BITS 2.0 and the Bhutan Integrated Revenue Management System (BIRMS).
According to the audit, the Nu. 610.11 million contracts for BITS 1.0 was directly awarded to Druk Holding and Investments Limited (DHI) through its subsidiary, Thimphu TechPark Limited (TTPL), without an open competitive bidding process.
“The project contract valued at Nu. 610.11 million was directly awarded to DHI/TTPL without open competitive bidding. This approach reduced transparency and limited assurance that the Government obtained the best value for money,” the audit report stated.
The Ministry of Finance had initially planned to procure a Commercial Off-The-Shelf (COTS) taxation system through international competitive bidding to automate taxpayer registration, tax return processing, payment management and revenue reporting. However, the procurement strategy was later revised following a policy decision to promote domestic ICT capability development. As a result, the original tender process was cancelled and DHI, through TTPL, was engaged to develop a bespoke taxation system with support from international experts.
The RAA found significant weaknesses in procurement governance throughout the project. Among the concerns identified were revisions to evaluation criteria used to select the international implementation partner. Auditors observed that the evaluation framework was altered without adequate documentation or justification, weakening transparency and accountability in the procurement process.
The report also highlighted weak contractual safeguards and noted the release of advance payments beyond regulatory limits without adequate financial guarantees. According to the RAA, these weaknesses contributed to inefficient utilization of public resources and resulted in a direct financial loss estimated at Nu. 119.11 million.
The findings drew concerns from (MP) members of Parliament, who questioned both the procurement process and the project’s eventual outcome.
During the National Assembly session held on 16 June, MP from Bartsam-Shongphu, Rinchen Wangdi said the audit raised serious concerns regarding procurement procedures and the use of public resources.
“The procurement process and evaluation criteria were inadequate. BITS had a huge budget, and when a project receives such a large public investment, it should deliver quality results. If it fails to do so, serious questions must be asked about accountability and the use of public funds,” he said.
Beyond procurement concerns, the audit identified major shortcomings in project planning and implementation oversight. Auditors found that BITS 1.0 commenced without adequate validation of system requirements and lacked sufficient planning mechanisms from the outset. As implementation progressed, substantial changes to requirements resulted in repeated modifications, delays in testing and additional development work.
The report noted that inadequate definition of system requirements during the inception stage became one of the principal factors that undermined the project’s success.
The RAA also found weaknesses in monitoring and enforcing contractual obligations, particularly regarding the deployment of qualified international technical experts who were expected to support system development and facilitate knowledge transfer. According to the report, these deficiencies contributed to implementation delays, inefficiencies and the eventual termination of the contract in April 2022.
MP Rinchen Wangdi noted that substantial resources had been invested in supporting the project, including the establishment of a dedicated GST Project Office with office needs.
“During the 12th Five-Year Plan, we established the GST Office and put in place the necessary facilities and resources. However, today we do not see the quality results that were expected or hoped for,” he said.
The audit’s most significant findings relate to value for money and the sustainability of public investment.
According to the RAA, outputs developed under BITS 1.0 were largely not utilized in subsequent tax administration systems. Despite earlier assurances that system components could be reused, auditors found that most deliverables could not be incorporated into BITS 2.0 because the two systems were fundamentally different in design. BITS 1.0 was developed as a bespoke system, while BITS 2.0 adopted a Commercial Off-The-Shelf model.
As a result, the government incurred substantial additional costs associated with redevelopment and replacement of the system.
The audit identified four major categories of expenditure arising from the failed implementation. These include Nu. 119.11 million spent on BITS 1.0, Nu. 78.79 million invested in supporting infrastructure, and Nu. 60.12 million spent on the development of the Bhutan Integrated Revenue Management System (BIRMS). Auditors also identified an additional Nu. 329.52 million increase in project costs, representing the difference between the Nu. 939.63 million contract value of BITS 2.0 and the Nu. 610.11 million contracts awarded for BITS 1.0.
Together, these expenditures amount to Nu. 587.54 million associated with the failed project.
The RAA stated that these expenditures represented significant wasteful and avoidable costs and undermined the value for money expected from public procurement. The report further concluded that the government’s inability to salvage and reuse substantial portions of BITS 1.0 significantly reduced the return on public investment.
“The RAA concluded that BITS 1.0 failed to achieve its intended objectives primarily due to inadequate system requirement definition before the inception of the system development,” the report stated.
The audit findings also sparked debate about whether the project’s intended objective of supporting Bhutan’s ICT sector had been achieved.
National Council MP for Dagana, Birendra Chimoria said the original decision to engage TTPL through DHI had been driven partly by the objective of promoting domestic ICT capability and creating employment opportunities for young people.
“Developing the private sector and creating employment opportunities for youth are important responsibilities of any government. The project was awarded with the intention of supporting the ICT sector and creating opportunities for young people,” he said.
However, he questioned whether the benefits had been broadly shared across Bhutan’s ICT industry.
“Bhutan has around 50 ICT firms and hundreds of young people working in the sector. When I went through the audit report, it appeared that most of the opportunities were provided to TTPL alone. Equal opportunities were not available to other firms, which led to uneven employment opportunities,” he said.
He also highlighted concerns over the absence of open competition during the procurement process.
“The weakness was the lack of open competition in the bidding process. If major projects are awarded without competitive bidding, smaller ICT firms are deprived of opportunities to participate and grow,” he said.
NC Birendra Chimoria argued that concentration of government contracts among a limited number of companies could undermine the development of the wider ICT industry.
“If agencies continue to award most tenders to a single company, smaller ICT firms will struggle to secure work. Without opportunities, they cannot expand their businesses or create jobs for young people,” he said.
MP Rinchen Wangdi also stressed the importance of accountability and continuity in public projects, particularly when administrations change.
“We need a good system. When one government’s tenure ends, it is important to clearly account for the status of projects and responsibilities. If that is not done and projects simply continue without accountability, the public will gradually lose trust in the government,” he said.
He further called for stronger procurement legislation and questioned how losses associated with the failed project would be addressed.
MP from Thrimshing , Damchoe Tenzin said the findings had raised public concerns about whether individuals responsible for significant losses of public funds would face appropriate consequences.
He noted that ordinary citizens found guilty of misusing or embezzling public resources are often required to refund losses, face penalties or, in some cases, imprisonment. However, he questioned whether similar standards were consistently applied when cases involved individuals in positions of authority.
“People often ask whether there is truly rule of law in Bhutan. The law should apply equally to everyone, regardless of position, status or wealth,” he said.
MP Damchoe Tenzin also sought clarity on the accountability measures that would follow the audit findings, including issues relating to audit clearances, administrative action and possible sanctions.
“The report identifies serious concerns, but it remains unclear what specific actions will be taken against those responsible. There should be greater clarity on accountability and the consequences that will follow,” he said.
The audit was conducted following deliberations in the Third Session of the Fourth Parliament after concerns regarding the project were raised in the Annual Audit Report 2022–2023. The review covered the Department of Revenue and Customs, the Ministry of Finance, the GST Project Office and Thimphu TechPark Limited.
Given the strategic importance of BITS to Bhutan’s public financial management system and its intended role in supporting GST implementation, the findings are expected to attract significant attention from policymakers and oversight institutions.
The RAA has recommended corrective measures to strengthen procurement governance, project planning, contractual oversight and accountability mechanisms for future digital transformation initiatives. The report also calls for improved requirement validation, stronger project governance frameworks and enhanced safeguards to ensure future public technology investments deliver value for money while minimizing risks to public resources.
