Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Bhutan based on a desk review. The review applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective GPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.

The Factsheet is intended to be a living document to promote knowledge sharing and support training activities at ADB. It will be revised and improved as new information is uncovered and advances are made. If you have new information, please contact ychu@adb.org.

Public procurement accounts for around 60 - 70 % of the annual government budget or roughly about 21 % of the GDP. The Royal Government of Bhutan recognizes the importance of using public procurement to shift towards sustainable consumption and production across society. Dedicated programs to advance Green Public Procurement (GPP) have been in place since 2014. Since then, several studies, guidelines and recommendations have been made to advance GPP in the country. A major milestone is the adoption of a new 2023 Procurement Rules and Regulations that contain provisions that encourage sustainable procurement practices.

Bhutan has pledged to remain carbon neutral in perpetuity and aims to reach net zero by 2030. This commitment aligns with the country’s Gross National Happiness (GNH) Index, a challenge to the Gross Domestic Product (GDB) as a measure of economic and development health. The GNH signals the country’s More than 70% of the country is covered in trees making the country a carbon sink. It is also a net exporter of renewable hydro-electric power.

>> Visual snapshot of Sustainable Procurement Maturity Level

Official procurement website: https://www.mof.gov.bt/departments/department-of-national-properties/

E-procurement Portal: https://www.egp.gov.bt/

Key Achievements

• 2023 update to the Procurement Rules and Regulations sets out clear legal basis for Sustainable Public Procurement
  
• Many examples of green public procurements for electric vehicles, construction, LED lightbulbs and agriculture
  
• GPP Handbooks with environmental criteria available for procurement of goods, services and works
  
• High level political commitment to maintaining carbon negative status and achieving net zero by 2030
  

Potential Pathways Forward

• Explore approaches to mainstream GPP practices, including through mandatory requirements in green sectors with high potential (e.g. local food sourcing, local construction materials)
  
• Launch green business development support programs, dialogues and events
  
• Draft and adopt a green public procurement policy and action plan
  

>> Timeline of Implementation of Sustainable Procurement Activities

2015

2017

2019

2020

2021

2022

2023

2016

2012

2014

Energy National Strategy and Action Plan for Low Carbon Development adopted

GPP Bhutan project launched

National Entrepreneurship Strategy promotes growth of green startups and entrepreneurship

Economic Development Policy creates fiscal incentives for green products and services

Training on GPP for businesses organized

GPP Checklist and GPP Handbook released

E-procurement system launched

National Energy Efficiency & Conservation Policy, and the Energy Efficiency Roadmap 2030

Climate Change Policy sets plan to remain carbon neutral

Nationally Determined Contribution sets out climate mitigation priorities

Green Economy Strategy adopted and calls for sustainable public procurement to achieve its ambitions

Program to Develop Electric Transport adopted to create conditions for EV uptake

Strategy for the Development of a Green Economy in the Republic of Tajikistan for 2023-2037

New Public Procurement Law adopted that promotes “sustainable and social procurement”

Knowledge exchange session on GPP and ecolabels

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

National development vision

The Gross National Happiness Index sets out the Royal Government of Bhutan’s development vision, grounded in four pillars: (i) the promotion of sustainable socio-economic development, (ii) the preservation and promotion of cultural values, (iii) the conservation of the natural environment, and (iv) the establishment of good governance.

The country adopted a National Strategy and Action Plan for Low Carbon Development in 2012. In 2015, it was amongst the first priority countries to commit to and make progress in implementation of the 2030 Agenda for Sustainable Development. The Climate Change Policy of the Kingdom of Bhutan 2020 provides strategic guidance to ensure that Bhutan remains carbon neutral. The second Nationally Determined Contribution released in 2021 sets out several priority actions and targets across sectors that SusPP could contribute to achieving.

Green public procurement

The Royal Government of Bhutan has prioritized the advancement of green public procurement (GPP). The Ministry of Finance recognizes the value of GPP as:

• Enables the public sectors to obtain the best value-for-money and procure low-carbon environmentally-friendly goods, works and services
  
• Ensures efficient use of public finances
  
• Represents opportunities for industries and suppliers to venture into green businesses.
  

A “Checklist for Implementing Green Public Procurement in Bhutan” was developed in 2017 to introduce the concept of GPP and assess the current level of progress based on 19 indicators. The report describes each indicator, summarizes findings from progress in Bhutan and makes recommendations for further action. However, no specific commitment, policy or action plan on GPP has been adopted to date.

Other sectoral policies

Energy Efficiency: The National Energy Efficiency & Conservation Policy, and the Energy Efficiency Roadmap 2030 covering the sectors of buildings, transport and industry were launched in 2019. A Renewables Readiness Assessment (RRA) has been developed in cooperation with the International Renewable Energy Agency with a view to complement the country’s efforts in enabling the wider penetration of various renewable energy technologies.

Green Industry: The Economic Development Policy 2016 offers a 15% tax rebate to businesses adopting environmentally-friendly gradation. Sales and customs duty exemptions are granted for electric and hybrid vehicles, including those that run on renewable energy including spare parts. The 2015 National Entrepreneurship Strategy prioritizes opportunities to support the growth of green start-ups and new businesses across a wide spectrum of activities such as water supply, waste recovery and recycling, habitat protection, eco-tourism, and renewable energy.

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

The Procurement Rules and Regulations (PRR) 2023 governs public procurement in the Kingdom of Bhutan. The PRR emphasizes that “procurement” must consider the whole life cycle from identification of needs, to the end of the useful life and subsequent disposal of an asset [Article 1.1.3.1(hh)].

Value for money

The basis for award under the PRR is “lowest evaluated bid” defined as the bid which offers the best value for money evaluated on the basis of various objective criteria set out in the bidding document. The Rules make clear that this does not necessarily mean the “lowest quoted price.”

Local contracting

The PPR allows the use of domestic preferences in government procurements [Article . Goods of Bhutanese origin may be preferred in any procurement without limitation. Domestic goods and domestic bidders in works contracts can be given a 20% margin of preference on pricing. Procuring entities may also split a procurement into lots, an approach that has been used by procurers to encourage participation of local and smaller enterprises [Article 4.1.1.7].

Procuring entities can award works with an estimated value of not more than Nu. 1.5 million to the local community, as per the Community Contract Protocol [Article 4.2.5]. Government purchase contracts can also include requirements relating to the use of local labor and materials [Article 6.3.4.1.h].

Sustainable criteria

The PRR encourages requirements of goods, equipment or materials which are environmentally friendly where possible in works procurements [Articles 5.2.2.11; 6.3.4.1].

Market dialogue

The PPR specifically requires procuring agencies to conduct market research and analysis to inform the choice of a “fit-for-purpose” procurement approach. Four options are mentioned, including internet research, Request for Information (RFI), previous experience and industry bodies.

Needs assessment

The PPR requires procuring agencies to first assess the need prior to any procurement. This includes a reflection on the true scope and quantity of procurement, efforts to aggregate demand and a check that the need is not artificially created or exaggerated. This provision reflects the sustainability concept that the best SusPP approach is no procurement at all.

Pillar 3: Institutions & Capacity

Procurement agencies

Public procurement in the Royal Government of Bhutan is decentralized, with each government body responsible for appointing a Procuring Agency with a designated Head (HoPA) with powers to manage procurements. Tender Committees are to be constituted to oversee all procurements and ensure compliance with the PRR.

A Procurement Management and Development Division has been created with responsibilities to facilitate policy and professional development in the field of procurement. A Central Procurement Section (CPS) is responsible for managing centralized goods and services and central procurement. The Government Inventory Management System aims to improve asset management, which could lead to more efficient procurement through reduced needs. Another relevant institution is the Engineering Service Division responsible for the routine maintenance and new contribution of government buildings and offices, palaces and royal gardens.

Other institutions that may have responsibilities related to SusPP include:

• Ministry of Infrastructure and Transport
  
• Office of Consumer Protection (OCP)
  
• Bhutan Standards Bureau (BSB)
  

• Department of Procurement & Properties (DPP)
  
• Ministry of Works & Human Settlement (MOWHS)
  
• National Environment Commission (NEC)
  

Capacity Building

A workshop titled ‘Criteria Development for Green Public Procurement and Eco-label in Bhutan’; was organized jointly by GIZ Outreach Office, Thailand and the Office of Consumer Protection from 24th- 26th October, 2022, with resource people from Pollution Control Department, Government of Thailand and the Thailand Environment Institute (TEI). The workshop focused on the development of environmental criteria for cement and steel.

Representatives from the Royal Government of Bhutan participated in a five country knowledge exchange sessions on green public procurement and eco-labelling held in Thailand in August 2023.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

The Bhutan Chamber of Commerce and Industry, the apex body of private sector companies in Bhutan, participated in the GPP Bhutan project from 2014-2017. Training on GPP in 2016 was provided to (GPP Checklist, pp. 36-37):

• 43 participants from hotels and restaurants in the hospitality sector
  
• 23 contractors from the Construction Association of Bhutan
  
• 121 manufacturers, suppliers and small businesses
  

The ecohubmap website offers a directory of 37 green businesses in Bhutan. The capacity of the local market to meet sustainable criteria is anticipated to be low in Bhutan due to the country’s high reliance on imports from mainly India, and also Bangladesh, China and Thailand to a lesser extent. Business development and support programs will be important to expand market capacity.

The Bhutan Association of Women Entrepreneurs supports the growth of women-owned enterprises.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

Procurement Tools

Two volumes of GPP Handbooks were developed as guidance for public procurers and policymakers for procuring green. Volume 1 addresses the procurement of goods and services and offers criteria for eight product categories - office IT equipment, vehicles, indoor lighting, outdoor lighting, paper, air conditioning, furniture and apparel. Volume 2 addresses the procurement of public works with criteria for green infrastructure (e.g. green roads, building and hydropower plants. The handbooks and criteria were the basis material for the training of public procurers at the Royal Institute of Management in 2018.

A central website on GPP was created under the 2014-2017 GPP Bhutan project and is managed by the Royal Institute of Management (RIM). It offers access to awareness raising materials, courses, discussion forums and other training resources on GPP. The last update to the website was in 2018.

No national ecolabels have been created in Bhutan. However, international ecolabels such as the Programme for the Endorsement of Forest Certification (PEFC), TCO Certified and Earthcheck are recognized.

Procurement Practices

The Royal Government of Bhutan purchased 16 electric vehicles (EV) in March 2023, with a total of 19 EVs planned, with financing from the Government of Japan and UNDP. The EV fleet will offset 5,585 kg of CO2 annually and 83,775 kg over the estimated life-span of the EVs over 15 years. This pilot project aims to build public confidence in EV while reducing the country’s fossil fuel dependence. The Bhutan Sustainable Low-Emission Urban Transport System” project funded by the Global Environment Facility and supported by UNDP supported 291 taxi drivers to switch to EVs, creating a pool of green urban mobility.

The GPP Checklist study highlighted several examples of green public procurements. This includes government purchases of LED streetlights along the Thimphu-Babesa expressway and LED bulbs in Food Corporation of Bhutan outlets (GPP Checklist, p. 14). This switch was estimated to save about 2 million units of energy. Another highlighted project was “Green Road” , a public-private partnership project that used plastic waste to build eco-friendly and durable roads by the Department of Roads, Municipality and Green Roads, a private construction company. This project was expected to reduce the amount of plastic waste going to landfills by 30-40% while reducing bitumen imported from India by 40%. The Ministry of Agriculture and Forestry negotiated a Framework Agreement with local farmer groups for supply of summer vegetables to public schools and institutions. Over 2,500 farming households increased their income from 5-15% in 2014.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

The Electronic Government Procurement (e-GP) system provides a portal as the single point of access for information on procurements made across various Procuring Agencies in the Royal Government of Bhutan.

Procurement monitoring is decentralized. The Construction Development Board maintains an online evaluation, monitoring and reporting system and a ciNet system through which data is maintained for Construction works contracts. Most Procuring Agencies have on their own initiative maintained such data on procurement of goods, works and services (PEFA 2016, p. 89). The Procurement Management and Development Division compiles reports from individual Procuring Agencies and is responsible for submitting annual reports to the Secretary, Ministry of Finance on the functioning of the national procurement system. No monitoring system is in place to track SusPP.

Projects Supported by ADB

ADB’s country partnership strategy for Bhutan, 2019–2023 supports efforts to diversify the economy, catalyze private sector growth, improve connectivity, build climate-resilient infrastructure, and strengthen human capital.

Other Initiatives supported by National/International Agencies

The project "Harnessing Nationally Determined Contributions (NDCs) for achieving net-zero emissions and climate-resilient progress in response to the climate emergency," is supporting the purchase of electric vehicles in Thimphu ($1.1 million). The project is supported by the Government of Japan as the next phase of UNDP's Climate Promise: Advancing from Commitment to Real-world Impact. The objective of the project is to support countries in translating their NDC (Nationally Determined Contributions) targets for carbon reduction into tangible outcomes.

Green Public Procurement in Bhutan: A cross-sectoral strategy for sustainable industrial competitiveness (herein GPP Bhutan project) is an EU-funded project under its EuropeAid SWITCH-Asia Programme (2014-2017)

Project SCP Outreach in Asia – The Next Five (SCP Outreach), which is financed by the German Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV) and executed by the DeutscheGesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and implemented by participating countries (Cambodia, Lao PDR, Vietnam, and Bhutan).

References

ADB Member Fact Sheet, 2023. Bhutan.

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2021). Analysis Study: National Green Public Procurement and Environmental Labels in Cambodia, Lao PDR, Myanmar, Vietnam, and Bhutan.

International Institute for Sustainable Development (2017). Procuring Green: A Handbook for Policymakers and Public Procurers. Volume 1: Goods and Services. 2nd edition.

International Institute for Sustainable Development (2017). Procuring Green: A Handbook for Policymakers and Public Procurers. Volume 2: Public Works. 2nd edition.

International Institute for Sustainable Development (2017). Checklist for Implementing Green Public Procurement in Bhutan.

Royal Government of Bhutan, Ministry of Labour and Human Resources (2015). National Entrepreneurship Strategy

Royal Government of Bhutan, Ministry of Finance (2016). Public Financial Management Performance Report.

Royal Government of Bhutan (2021). Second Nationally Determined Contribution.

Royal Government of Bhutan, Ministry of Finance (2023). Procurement Rules and Regulations.

The World Bank. Global Public Procurement Database “Bhutan country profile for 2021”.

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