Mangdechhu hydroelectric project and Punatsangchhu 1 hydroelectric project recorded unresolved irregularities amounting to around Nu 380.6 M in 2019. The Royal Audit Authority carried out a joint audit of the two hydroelectric projects as per Standard Operating Procedures signed between the Authority and the Controller and Auditor General of India, and projects agreement signed between the governments of Bhutan and India.
The RAA issued one audit report against MHP in 2019 and made eight observations, which were not resolved as of 31st January 2020. The project’s significant unresolved irregularities amount to almost Nu 232 M under two categories of non-compliance to laws and rules and shortfalls, lapse and deficiencies.
Two cases of non-compliance to laws and rules incurred irregularities amounting to more than Nu 208 M. Two contractors with the project furnished bank guarantee of Nu 748.5 M against the required amount of close to Nu 950 M as required by the provisions of the General Condition of Contract. The bank guarantee was short by around Nu 201 M.
The project management made excess payment of close to Nu 7 M to a contractor due to the application of higher cost in rate analysis of Rock Bolt items in a contract package. The project failed to analyze the correct rate which resulted in excess payment.
In the shortfalls, lapses and deficiencies case, the project made excess payment of close to Nu 24 M to a contractor.
The RAA also issued one audit report for PHPA-I and made 10 observations amounting to Nu 148.7 M, which were not resolved as of 31st January.
Non-compliance to laws and rules and shortfalls, lapses and deficiencies resulted in the project’s Nu 148.7 M irregularities.
Termination and re-awarding of contract works resulted in irregularities amounting to close to Nu 21 M. The project terminated a contract to construct a Water Treatment Plant due to the inability of the former contractor to complete the works despite extending completion time. The contract was re-awarded to another contractor but the project had not recovered the risk and cost from the former contractor. A similar case of termination and re-awarding of contract for construction of a colony resulted in a loss of more than Nu 16 M for the project.
Avoidable payment on price escalation to two contractors for the construction of a Primary school and hospital incurred the Project, a loss of around Nu 12 M.
Shortfalls, lapses and deficiencies cost the project irregularities amounting to almost Nu 116 M. PHPA-I made irregular reimbursement of accommodation charges of Nu 1.6 M to employees of WAPCOS working at the site. As the payment of human resource allowance to employees of WAPCOS was already included in the Man-Month rate calculations as per agreement between the project and WAPCOS, a separate reimbursement was found irregular.
The PHPA-I also made irregular payment of Bhutan Compensatory Allowance and applied unjustified rates for man-month calculations. At the same time, the project made overpayment due to incorrect computation of ownership cost with respect to machine hour rate, It made the excess payment due to incorrect rate analysis for cement, and made incorrect computation of labour wages on account of indirect charges as well.
Phub Gyem
