Nu. 587.54 Million Lost in Bhutan's BITS Digitalization Project
THIMPHU, Bhutan - A special audit has found that Bhutan lost Nu. 587.54 million through the failed Bhutan Integrated Taxation System 1.0 project, with the Royal Audit Authority identifying significant procurement failures, including the direct award of a Nu. 610.11 million contract without open competitive bidding.
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. The Royal Audit Authority found that the contract for BITS 1.0 - a flagship digital initiative intended to modernize Bhutan's tax administration and support implementation of the Goods and Services Tax - was awarded directly to Druk Holding and Investments Limited without a competitive tender process.
"The project contract valued at Nu. 610.11 million was directly awarded to DHI 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 contract was channelled through a DHI subsidiary rather than through international competitive bidding, as Bhutan's finance ministry had originally planned. The ministry had initially intended to procure a commercial off-the-shelf taxation system through an open international process to automate taxpayer registration, tax return processing, and payment collection. That plan was set aside in favour of a direct award.
The Royal Audit Authority's findings cover significant procurement weaknesses, inadequate project planning, and implementation failures across the full lifecycle of BITS 1.0 - from initial design through procurement, execution, and the eventual move to successor systems. The transition to BITS 2.0 and the Bhutan Integrated Revenue Management System indicates that Bhutan's tax digitalization agenda continued, but the audit examined how the original programme arrived at that point at considerable cost.
For public finances and governance in Bhutan, the findings carry direct implications. The loss of Nu. 587.54 million from a project meant to modernize tax collection represents a substantial setback. The BITS 1.0 initiative was designed as a cornerstone of digital reform in revenue administration, and its failure means that funds committed to systemic modernization produced limited durable results while the country transitioned to replacement systems.
Parliament's directive ordering the audit signals active institutional scrutiny of how large public technology contracts are managed. The report's release following that directive underscores that elected oversight bodies are examining how development expenditure is allocated to digital infrastructure projects. Details remain unconfirmed regarding what remedial steps, if any, authorities plan to take in response to the published findings.
Druk Holding and Investments Limited, the state-owned investment arm at the centre of the procurement findings, received the BITS 1.0 contract through its subsidiary. The Royal Audit Authority's report does not establish whether the outcome would have differed under competitive bidding, but it concludes that the approach adopted reduced transparency and limited government assurance of value for money - findings that typically prompt review of procurement policy and oversight procedures.
The audit report is now a matter of public record following its March 2026 release. What further action responsible authorities will take in response to the Royal Audit Authority's conclusions has not been confirmed
