Nu 577M in unresolved irregularities from three projects

Audit: The Royal Audit Authority (RAA) found irregularities worth Nu 577 million (M) while auditing the three hydropower projects of Mangdechhu, Phunatshangchhu-I and Punatsangchhu-II last year.

However, these observations include only the audit observations issued by the RAA as the audit observations issued by the director general of audit, Kolkata is being followed up separately.

There were 15 observations involving Nu 396.8M from the Mangdechhu project, of which eight observations amounting to Nu 57.3M were resolved. The project has Nu 339.5M irregularities unresolved.

Irregularities involving Nu 306.7M pertains to Punatshangchhu-I. However, seven observations amounting to Nu 242.8M were resolved. Irregularities involving Nu 63.8M remains unresolved.

The RAA has pointed out 12 observations in the Punatsangchhu-II Hydroelectric Project Authority involving Nu 2.29 billion (B). Based on responses received and action taken after issue of draft audit report, 10 observations amounting to Nu 2.11B were resolved, leaving only Nu 174M unresolved.


The RAA in its report pointed out that 19 extra items of works were executed and paid to the Chhukha construction Pvt Ltd at the analysed rates during construction of permanent colony, despite the existence of rates in the Bill of Quantity (BoQ).

The authority found that this was in contradiction to a notification issued by the project management clarifying the criteria and procedures for entertainment of extra items. The payment made on account of extra items at the analysed rates for which the rates already existed in the BOQ had resulted in excess payment of Nu 32.483 million.

In another case, the work for bench development and leveling of sites were carried out in all contract packages ,including disposal of surplus earth within or beyond construction compound. The contractors’ rates were inclusive of lead payment for disposal of surplus earth.

However, it was observed that an additional amount of Nu 20.11M was paid on account of disposal of excavated earth, resulting in illegitimate payment.

The physical verification of site conducted also revealed that inferior quality items being used and supplied while payments were made as per rates quoted resulting into overpayment of Nu 24.26M.

The report also revealed that MHPA management had not levied liquidated damages on various contractors for delay in completion of works within the revised completion dates.

The work on repair and maintenance of a road between Langthil and Chunjapang was awarded to Raven Builders and Company at the tendered amount of Nu 39.23M with the completion period of 10 months. It was observed that the works were completed with a delay of 57 days, for which liquidated damages of Nu 2.807 million were not levied.

In another case the audit found that despite granting three time extensions, the contractors had failed to complete two separate works in the extended time period.

However, it was observed that the management had failed to take any actions on the contractor. Further, it was also observed that Jachung Builders had not completed the construction of the office building as of date of the audit.


The Phunatshangchu-I Hydroelectric Project Authority had not recovered 13 percent interest amounting to Nu 24.91M from a contractor in deviation to the contract document.

The project authority had also made over payment of Nu 38.57M on account of five percent contractor’s overhead and profit, which was not in line with the Central Water Commission’s guidelines. The review of analysed rates revealed that the overhead and contractor’s profit was fixed at 25 percent instead of 20 percent as allowed by the guidelines.

The RAA has also found an excess payment of Nu 0.411M made to the officials on account of stipend during training in India, which was not in line with service rules of PHPA-I. The officials were paid DSA rates instead of stipend.


The Punatshangchhu-II also overpaid Nu 172.98M to the contractor as the contractor claimed 5 percent extra overhead in contradiction to the guidelines.

The RAA pointed out that the project authority had made payment of additional project handling allowances amounting to Nu 1.11M to the staff of PHPA-I as the management for PHPA-I & II were same and stationed at Thimphu.

However, with the shifting of project offices to Bjimethangka where there is a separate offices for PHPA- I & II and almost all the vacant posts in PHPA-II being occupied, the audit observed that the service of PHPA-I office is no more required. “Yet the officials of PHPA-I are still being paid the additional project handling allowances, which is not justifiable,” the audit report stated.

Tshering Dorji