McKinsey and Co. was awarded consultancy works worth Nu 443M, which constituted nine percent of the government’s expenditure (Nu 4.6B), incurred in procuring consultancy services in the last five years.

The previous government that hired the international consultancy firm said they were “satisfied” with the services it provided for the ‘accelerated Bhutan’s socio economic development (ABSD)’ program.

RAA report stated some of the targets under the ABSD initiatives were either revised or deferred,

while a few were not met.  Inadequate administration and undefined objectives had led to breaching of the contract agreement, according to the report. “Moreover, the agreement did not even specify the liability of the consultant for breaching the terms and conditions.”

One of the “under-achieved” targets, according to the authority, is the government to citizen (G2C) services, as the success of the G2C services was undermined by lack of adequate awareness programs. “Most rural people aren’t aware of all the services that can be availed from the G2C service centres,” the report stated.

The G2C services were initially targeted for all 205 gewogs and in 15 different agencies, including the ministries, by 2013 through establishment of community information centres (CIC).  However, the revised target in the 11th Plan indicated establishment of only 185 CICs, of which 131 are online.

The authority found the CICs were established without pre-requisites, such as optical fibre services and manpower, because of which the facilities remain under used.  To date, applications for G2C services have been availed from only 10 CICs.

However, an official from the information and communications ministry, who was involved in the CIC initiative, said the target could not be achieved because of budget constraints.  He said, without optical fibre network and “limited bandwidth” in the dzongkhags, “some” CICs are currently offline.

He said, about 20 CICs remained as spillover from the previous Plan. “That’s because it wasn’t feasible to build CICs without electricity, transportation and budget,” he said.

Another official from the ministry said he was unaware how McKinsey was monitoring the projects, because the consultants were working with higher authorities. “I could only remember undergoing a training McKinsey provided,” he said.

As against the target of generating substantial portion of the 90,000 jobs required in the 10th Plan, as mentioned in the agreement signed between the government and McKinsey, the ABSD initiatives target reflected only 30,000 jobs, the audit authority pointed out.

It also stated that, initially, McKinsey also agreed to deliver in propelling the country to “top 50 nations in the ‘ease of doing business’ index of the World Bank.”  Bhutan’s ranking, however, plummeted from 119th in 2008 to 148th in 2013 among 185 countries.

The authority pointed out the target was neither realistic, nor the mechanism to achieve the target were well defined.

Some of the outcomes like minimum percentage of students supported by the government, percentage employability within three months of graduation, schools above 70 percent on GNH index, the audit stated, were simply listed in the compact without adequate assessment and feasibility study.

Under the ABSD initiatives, the target to establish 500 farmers group was later revised to 300, while the aim to construct 125km of irrigation channel was revised to 97km, the report highlighted.  Renovation of 278km of irrigation channel was deferred to the 11th Plan.

Development of an irrigation master plan, another initiative, was later dropped, because the work was outsourced to Jain Irrigation in India, which was found incompetent.

“McKinsey and Co. introduced Jain Irrigation that specialises in manufacturing pipes to the government, but it was found that Jain Irrigation lacked field expertise, which wasted resources,” the report states.

To enhance rice productivity, the ABSD initiative targeted 8,500 hectares of area to be covered under rice commercialisation.  However, only 4,529 hectares could be covered in the last five years.

McKinsey had also proposed to assess the forest resource but, due to inability to mobilise resources, this was dropped from the compact, the report stated.

Audit found that no research and groundwork were done in introducing new programs at the Royal University of Bhutan. “The University is implementing its activities on a trial-and-error methodology, suggesting the ineffectiveness of the consultants,” the report states.  Twelve programs were found to be behind schedule in implementation.

RAA recommends the government to reconsider the policy intent of outsourcing consultancy services.  RAA also raised concerns over the private sector growth, where a major chunk of the budget was given to consultants abroad.

Meanwhile, the audit report stated that the Gross National Happiness Commission (GNHC), with whom McKinsey had signed the contract, did not respond to the audit memos.

Senior members of the opposition, including former ministers, said they had yet to go through the audit findings to be able to comment.

By Tshering Dorji

28 November 2013